12/07/2004

By NICHOLAS K. GERANIOS  / Associated Press

The Roman Catholic Diocese of Spokane filed for bankruptcy protection on Monday, saying it did not have the money to cover lawsuits filed by alleged victims of clergy abuse.

The diocese faces claims that already total some $77 million, and Chapter 11 bankruptcy is the best way to ensure that all victims are treated fairly and that the church continues its mission, Bishop William Skylstad said.

"Demands by plaintiffs continue to be beyond the ability of the diocese to meet," said Skylstad, who was just elected president of the U.S. Conference of Catholic Bishops.

In its filing, the diocese listed assets of $11.1 million and liabilities of $81.3 million — the vast majority of liabilities being sexual abuse claims.

The filing means federal bankruptcy court will determine what assets can be used to pay claims and how much each victim will get. Catholic dioceses in Portland, Ore., and Tucson, Ariz., also recently filed for bankruptcy in the wake of a nationwide scandal involving sexual abuse by clergymen.

Critics denounced the Spokane filing, saying Skylstad was trying to avoid a trial that would expose the lengths to which the church went to hide serial pedophiles.

"Everyone suffers when Skylstad chooses to protect his secrets and his image rather than show courage and compassion," said David Clohessy, national director for Survivors Network of those Abused by Priests. "This is a victory for Skylstad's high-priced bankruptcy lawyers."

Michael Pfau of Seattle, lawyer for some victims, said the bankruptcy filing was unnecessary.

"These cases could have and should have been settled," Pfau said. "The diocese has chosen to file for bankruptcy protection because they think it's in their financial best interests to do that."

The Spokane Diocese serves about 97,000 Catholics in Eastern Washington through 81 parish churches.

According to court papers filed Monday, the diocese so far faces 19 lawsuits involving 58 alleged victims, dating from the 1950s to 1991. Nine diocesan priests and two Jesuits have been accused of sexual abuse in those lawsuits. In all, diocese officials have identified about 125 potential claimants, Skylstad said. The bankruptcy filing suspends civil litigation on those cases.

In the Spokane Diocese, five lawsuits and more than two dozen sexual abuse claims involve former priest Patrick O'Donnell, 62, who served as a priest in Spokane and Seattle until he was removed from ministry in 1986. He has acknowledged he sexually abused boys from the time he was in seminary.

The filing means that any future settlement negotiations must be handled through bankruptcy court, said Shaun Cross, attorney for the diocese. The diocese has settled about six cases in the past week, Cross said.

Lawyers for victims have accused Skylstad of using the threat of bankruptcy to try to force lower settlements. But Skylstad contended the filing puts all victims on a level playing field, ensuring that those who filed claims first do not receive more money than those who file later.

The bankruptcy filing is uncertain legal ground for the diocese, since there are few court precedents and many questions are unresolved.

One of the most important issues is whether parish assets such as buildings and schools are the property of the diocese and therefore available to creditors. The diocese argued in its filing that canon law, or church law, declares that parish assets belong to the individual parishes, not the bishop and the diocese.

"They're not his assets," Cross said.

The Spokane Diocese actually has few assets other than the chancery building, the bishop's house and some other properties, Skylstad said.

The 41 diocese employees will continue to be paid while the case is in court.

Cross also said that bankruptcy creates the possibility of fundamental conflicts in the separation of church and state, especially if the court ends up controlling some church property.

"We are in somewhat uncharted waters in Portland, Tucson and Spokane," Cross said.

Among the uncertainties is how many lawsuits will ultimately be filed, and how many claims will be paid by six different insurance companies that have represented the diocese, Cross said. The $11 million in listed assets does not include any insurance coverage, he said.

Some carriers have sued the diocese, claiming sexual abuse is not a liability covered under the policies.

The Spokane Diocese did not file a reorganization plan because of those questions, Cross said.