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New Lawsuits Threaten SR Diocese

Church Officials Seek To Protect Financial Assets From Potential Multimillion-Dollar Judgments


Santa Rosa's Catholic Diocese, hit by two new sex abuse lawsuits and bracing for more, faces the prospect of multimillion-dollar judgments that could once again financially drain the diocese.

Still recovering from decades of sexual and financial misconduct that plunged it deeply into debt just three years ago, the diocese is vulnerable to claims that victims' lawyers say could run into tens of millions of dollars.

Church officials are searching for ways to protect Sunday collection plate cash and an ongoing $20 million fund-raising campaign from the reach of plaintiffs' attorneys.

But with a new law exposing all California dioceses to greater legal liability and with wary local parishioners already curbing their contributions, officials admit the diocese is in a precarious position.

Bishop Daniel Walsh said Friday in a written statement that he is attempting "to balance the just needs of victims with a respect for the resources entrusted to us" to carry out the church's mission.

The bishop acknowledged concerns about the potential cost of the new civil litigation in a letter earlier this month to priests and deacons.

"It's a very serious threat," said Dan Galvin, the diocese's attorney.

Galvin declined to say how much insurance the church carries, or what other funds could be applied to any large judgment.

Big cash settlements have forced other U.S. dioceses to the brink of bankruptcy, prompting bishops to sell property and appeal for donations.

Jim Dillon, a retired banker and diocesan finance council member, said bankruptcy was considered in 1999 in Santa Rosa, when the 140,000-member North Coast diocese confronted the $16 million debt attributed to former Bishop G. Patrick Ziemann's mismanagement.

The diocese has paid $7.4 million to about 40 victims of former priests whose crimes or misconduct date back to the 1970s.

The Santa Rosa Diocese has a pending $5.1 million property sale, received a bank loan for an additional $5 million (since repaid) and gained financial help from other dioceses and from parishioners to cope with its debt.

The filing of two lawsuits in the past month and renewed appeals by attorneys and victims' advocates urging sex abuse victims to come forward have deepened the struggle to rebuild faith, reputation and financial stability.

Some rank-and-file Catholics are unsympathetic to the diocese's financial difficulty, saying the church's moral blindness contributed to a history of child abuse.

"Let them sell a little artwork. Let them sell a little land," said Nancy Brier of Petaluma. She said a close relative of hers was molested by a priest 25 years ago in Missouri.

Brier, who renounced her faith a decade ago, wants Catholics to withhold their donations every third Sunday, calling it "victims' day," to send the church a message.

But Ken Manz, who converted to Catholicism 30 years ago, questioned why lawyers continue to sue the diocese, which has overhauled its policies for handling sex abuse and promised to report new cases to police.

"It's not going to accomplish anything," he said.

There has been a "modest drop" in Sunday collection plate revenue since July 1, and the $20 million capital campaign is going more slowly than expected, Dillon said.

The diocese is "financially fragile," he said, with a $9 million internal debt funds the diocese owes to parishes and schools to be paid off by capital campaign proceeds.

The diocese also received loans from 130 other dioceses around the country and hopes all or most will be forgiven, Dillon said.

In a letter to priests and deacons two weeks ago, Walsh said the diocese "will continue to seek to care for the needs of those who have suffered from clergy sexual abuse."

The bishop, who came to Santa Rosa in 2000 when the diocese was in fiscal shambles, also said the diocese "will do everything within its power" to prevent campaign donations from being used to pay legal settlements.

The diocese is building "fire walls" to protect parishioners' donations, said Deirdre Frontczak, the bishop's spokeswoman.

For example, donations earmarked for some sources, like a school endowment or the priests' retirement fund, are "beyond the reach" of a court settlement, Dillon said.

But in a worst-case scenario, if the church's insurance became exhausted by legal claims, there is no guarantee that diocesan or even parish assets would be immune, Frontczak said.

The stakes were raised by a new law that gives sex abuse victims a one-year window, starting in January, to file suits against the church no matter how long ago the alleged abuse occurred.

The suit filed anonymously last week by a 46-year-old Amador County man alleges he was repeatedly molested from 1968 to 1972 by a Calistoga priest who died 11 years ago.

One of the man's lawyers, Larry Drivon of Stockton, helped write the law sponsored by state Sen. John Burton, D-San Francisco that erased the statute of limitations for a year.

Drivon and his colleague, Jeffrey Anderson of St. Paul, Minn., say they know of a dozen or more other victims who could file claims against the diocese.

"The times have changed," Dillon said. "There are lawyers out there encouraging victims to seek financial recompense."

Don Hoard of Petaluma, a victims' advocate, said previous civil lawsuits and the criminal convictions of two Santa Rosa priests: Gary Timmons and Don Kimball lay a foundation for lawyers to file new suits. "They don't have to reinvent the wheel," he said.

Hoard said he is sending e-mails to more than 30 victims, advising them of their right to sue within the coming year.

Hoard, a Catholic, said he regrets the potential cost of the victims' lawsuits, which could crimp Catholic social programs. But he said the diocese's losses were "completely self-inflicted" by the failure of past bishops to discipline known child molesters.

Dillon and Walsh said a constitutional challenge to the Burton bill is possible, and would, if successful, significantly reduce the diocese's liability.

But attorney Anderson and other advocates justify the lawsuits as necessary to keep the pressure on the church to change.

Anderson said he has handled more than 600 claims against the church nationwide, winning more than $70 million in settlements. He takes cases on a contingency basis, charging his clients nothing, and collects 25 percent to 40 percent of a settlement.

If the case is lost, he gets nothing.

Anderson said he makes "no apology for the fact we occasionally get paid."

"I represent people who have been harmed by powerful institutions," he said. "The courts and juries are the only way the scales of justice can be balanced."

Manz, the Petaluma Catholic, said he sympathizes with the plight of sex abuse victims, but the lawsuits are based on a history that no one can change. "The people who are paying for it are people who didn't have anything to do with it," he said.

"It doesn't seem fair."

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