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Boston Archdiocese Moves Closer To Possible Bankruptcy

Dec 6, 2002 | AP

The Boston Archdiocese, struggling to contend with a flurry of sex abuse lawsuits, has moved a step closer to a remedy usually associated with troubled businesses and people buried in debt: a bankruptcy filing.

A financial panel of the archdiocese gave Cardinal Bernard Law permission Wednesday to file for bankruptcy, a move that would give a secular court control over its finances and open it up to unprecedented scrutiny.

No Roman Catholic archdiocese in the United States has ever filed for bankruptcy, which requires approval from the Vatican.

The step toward bankruptcy troubled some lawyers of alleged abuse victims who are negotiating with the archdiocese toward possible settlements. Attorney Mitchell Garabedian said archdiocese leaders were bluffing in an attempt to gain leverage in the talks.

Attorney Jeff Newman, whose firm represents more than 200 alleged victims, said the threat of bankruptcy could jeopardize negotiations.

"What we're seeking from the cardinal is a clear statement that they'll come to the settlement table and give it ample opportunity to succeed, and during that time, they won't file bankruptcy," Newman said.

The archdiocese has been at the center of the abuse scandal that has engulfed the U.S. church since January. It is negotiating with attorneys for some 400 alleged victims.

"We believe a mediated resolution would be preferable to seeking Chapter 11 protection and remain hopeful that this process currently under way will be successful," archdiocese spokeswoman Donna Morrissey said.

"However, we feel it is also necessary to carefully consider the alternative or complementary approach of a Chapter 11 reorganization."

Morrissey said she did not know when Law will make a decision.

A bankruptcy filing would put litigation against the archdiocese on hold. It could also help the archdiocese get a better handle on what it will owe alleged victims, which could in turn assuage donors who have yanked support from the church because of the abuse scandal.

But it would transfer financial control of church assets to a bankruptcy judge.

The decision by the archdiocese's Finance Committee came one day after hundreds of pages of archdiocese personnel files were released concerning priests facing allegations of sexual abuse, drug use and other misconduct.

Many of the priests involved are not targeted in the lawsuits. However, the plaintiffs' attorneys hope the documents show a pattern of transferring priests to other parishes even after accusations of child abuse.

Earlier this year, the finance council rejected a proposed settlement worth up to $30 million for 86 victims of defrocked priest John Geoghan. Garabedian was forced to renegotiate and the two sides agreed on a $10 million settlement.

Plaintiffs' lawyers have called the archdiocese's consideration of a bankruptcy filing "intimidation" and "grandstanding." Garabedian said he doubts that "a religious entity would surrender its power to a civil entity."

No U.S. diocese is known to have filed for bankruptcy, though dioceses in Dallas and Santa Fe, New Mexico, were brought to the brink in the 1990s. Dallas reached a $30 million settlement in the case of pedophile and former priest Rudy Kos. And Santa Fe church officials had to borrow from parish savings accounts to pay more than $50 million to settle 40 abuse cases.

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