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US Dioceses: the bankruptcies begin

The US Catholic Diocese of Tucson has announced that it is probable that it will declare bankruptcy in September this year. This follows the decision of the Archdiocese of Portland last week, when it became the first archdiocese in the United States to file for bankruptcy protection ("Chapter 11") because of the large sums it is being asked to pay in sexual-abuse claims.

The Portland Archdiocese announced its intention to file for bankruptcy just as jury selection was to begin in a civil trial. The Archdiocese is being sued for negligence by a man who says it failed to remove a priest accused of having abused more than 50 boys from the 1950s to the 1980s.

The plaintiff was seeking $130 million in damages and said he was determined to have a public hearing of his case against the church. But a Chapter 11 bankruptcy filing means that the trial is immediately suspended.

Although a Chapter 11 filing is not a liquidation, in which everything must be sold, creditors will have the right to scrutinize and possibly interfere with the church's financial affairs, according to bankruptcy experts. The church will have to disclose every asset, from property holdings to bank accounts.

In a filing submitted to United States Bankruptcy Court in Oregon on Monday, the archdiocese said it had no more than $50 million in assets, though a spokesman for the archdiocese clarified that the church was not counting assets like property held by individual parishes in the diocese because church law, or canon law, stipulates that those assets are controlled by individual parishes, not the diocese.

David Slader, a Portland lawyer representing about a dozen plaintiffs with claims against the church, called this position a "fraud on the bankruptcy court" because parishes are simply geographical divisions of the larger diocese.

Mr. Slader said that if the assets of the diocese were tallied under secular law rather than canon law, counting the parishes' assets as part of the total diocese assets, the figure would be closer to a half-billion dollars.

"Canon law has absolutely nothing to do with the State of Oregon," Mr. Slader said.

Bud Bunce, director of communications for the archdiocese, dismissed the suggestion that the church was perpetrating a fraud.

"I would say that David Slader is not a church lawyer and leave it at that," he said. "We believe that the parish assets belong to the parishes." Mr. Bunce would not provide an estimate of the total parish assets within the archdiocese's geographical area.

As in all bankruptcies, the church's finances will become contentious. The first order of business is getting a handle on what assets this particular debtor has; this is where the question of who owns what in the Catholic Church will be critical.

In civil law, the registered owners of the assets of a diocese may be the Trustees of the Diocese. However in canon law, it is a 'public juridic person' (Church-speak for a corporate entity such as a parish) which owns church assets. There are numerous conflicts and inconsistencies between civil legal codes and canon law, which are yet to be played out.

While Mr. Slader said precedents, including a decision by the United States Supreme Court decision, show that canon law is not the controlling law in this case, Mr. Bunce said the question would have to be tested.

"This is totally uncharted waters," he said. "No one has ever made these kinds of decisions yet. That's part of the process we're going to go through."

  • Tucson Citizen.com
  • New York Times
  • Oregon Live
  • Archdiocese of Portland

    see also Brian Doyle's (Sad) Catholic Moment

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