01/05/2007

By JOHN K. WILEY  / Associated Press

After reaching a breakthrough agreement to pay victims of clergy sex abuse, the Catholic Diocese of Spokane's lengthy Chapter 11 bankruptcy could end as early as this spring, a judge said Friday.

During a two-hour telephone hearing Friday, U.S. Bankruptcy Judge Patricia Williams scheduled an April 24-25 hearing to confirm the diocese's plan of reorganization, a crucial step for ending the case that has stretched over two years.

"I am very pleased the proponents of the plan have managed to agree upon and negotiate the plan's terms," Williams said of the settlement announced Thursday by a federal mediator.

"Even though it will take another three to four months for a final resolution, that is time well spent because the parties have collectively controlled their own destiny, rather than have an appellate court control their destiny," Williams said.

Lawyers for the diocese, which filed for Chapter 11 protection in December 2004 in the face of mounting litigation over claims of clergy sexual abuse, said they will prepare a disclosure statement by Feb. 1.

The statement will include proposals for specific payments to individual creditors — the abuse victims — as well as how much of the $48 million pool will be available to them.

Still to be resolved are millions of dollars in attorneys fees which will be paid before any of the victims are compensated. The victims would then vote whether to accept or reject the proposed payouts.

After six months of mediation, U.S. Bankruptcy Judge Gregg W. Zive of Reno, Nev., announced Thursday that the dozens of lawyers representing victims, insurance companies, parishes and other entities had agreed to the diocese's $48 million offer to settle the sex abuse claims.

"The focus has been to seek to come up with a consensus plan, which we believe we have done," Shaun Cross, a Spokane lawyer representing the diocese, told the teleconference participants.

A key to gaining approval from victims likely will be nine provisions that require Spokane Bishop William Skylstad to support legislation abolishing the statute of limitations on child sex abuse crimes and allowing victims to publicly address parishes where they were abused.

Skylstad, who is president of the U.S. Conference of Catholic Bishops, already has instituted some of the provisions as part of the diocese's sex abuse prevention and reporting campaign.

The diocese filed for bankruptcy protection in December 2004, citing claims by abuse victims of about $81.3 million against assets of about $11 million.

Under the mediated plan, the diocese would raise the money to pay victims from insurance settlements; sales of the bishop's downtown office building and other properties; contributions from Catholic entities, such as cemeteries; a capital campaign; and payments by 82 parishes.

The diocese, which serves about 90,000 Catholics in 13 Eastern Washington counties, is among four nationwide that have sought bankruptcy protection against growing claims of clergy sexual abuse.