State 1, Chapter 11

Faced with 133 unresolved sex-abuse suits after a two-year "window" law suspended the civil statute of limitations, the diocese of Wilmington announced its intent to file for Chapter 11 bankruptcy protection tonight, hours before the first cases were scheduled to go to trial.

Home to 220,000 Catholics, the local church comprising all of Delaware and Maryland's Eastern Shore becomes the seventh US diocese to initiate the reorganization process, but the first to do so east of the Mississippi.

Following is the announcement of the move, released in a letter to the diocese from Wilmington Bishop Fran Malooly:

My Dear People:

I am today announcing that the Catholic Diocese of Wilmington Inc. has filed for Chapter 11 reorganization under the U.S. Bankruptcy Code. This is a painful decision, one that I had hoped and prayed I would never have to make. However, after careful consideration and after consultation with my close advisors and counselors, I believe we have no other choice, and that filing for Chapter 11 offers the best opportunity, given finite resources, to provide the fairest possible treatment of all victims of sexual abuse by priests of our Diocese. Our hope is that Chapter 11 proceedings will enable us to fairly compensate all victims through a single process established by the Bankruptcy Court.

It has always been my and my predecessor, Bishop Saltarelli’s, highest hope and fervent desire to settle all claims against the Diocese of Wilmington through a mediation process. Our past record as detailed in my May 7, 2009, letter outlines the number of past cases we have settled and the aggregate amount of money the Diocese has paid in settlements. Some months ago, we petitioned the Superior Court to order an Alternative Dispute Resolution process so that a global, equitable settlement for all 142 claimants would be negotiated with the assistance of a court-appointed mediator. On October 6 the court ordered such an ADR process for all cases without long-standing trial dates. Thirty of the 131cases filed against the Diocese have been scheduled for trial, with a set of eight cases to begin trial on Monday, October 19. As has been our policy, we were engaged in negotiations, with the assistance of a mediator, to settle these eight cases. These negotiations continued until today, but we were unable to achieve a settlement. Our concern throughout the negotiations was that too large a settlement with these eight victims would leave us with inadequate resources to fairly compensate the other 133 claimants, and continue our ministry. It is our obligation to ensure that all victims of abuse by our priests are fairly compensated, not just those fortunate enough to secure earlier trial dates.

The Chapter 11 filing is in no way intended to dodge responsibility for past criminal misconduct by clergy – or for mistakes made by Diocesan authorities. Nor does the bankruptcy process enable the Diocese to avoid or minimize its responsibility to victims of abuse. Instead, the Chapter 11 filing will enable the Diocese to meet its obligations head-on and fulfill its responsibility to all victims.

The Diocese of Wilmington is committed to pursuing the truth because truth heals. Three years ago Bishop Saltarelli, whom we buried here last week, released the names of 18 Diocesan priests who had admitted, corroborated or otherwise substantiated allegations of abuse of minors. It was one of the most detailed voluntary disclosures of its kind in the United States. In all of those cases, the Diocese shared information about abuse allegations with law-enforcement authorities. All eight of the priests who were living at the time of Bishop Saltarelli’s announcement previously had been removed from any ministerial duties, and for all eight priests, the Diocese has initiated or completed the process of laicization, or removal from the priesthood – the harshest punishment that the Church can impose on a priest, short of excommunication.

Moreover, the Diocese has never sought to seal depositions of priests accused of sexual abuse, and it consistently has supported the unsealing of such records. The Diocese also has never sought to seal the priest files it has produced in discovery in the lawsuits. The Diocese itself has publicly corroborated many of the incidents of abuse, and has provided more details about what actions were taken – or, sometimes tragically, not taken – by our officials. All such information is in the court records of the cases scheduled for trial on October 19, and we believe that no significant new facts would have emerged at trial.

My decision to file for Chapter 11 reorganization also was agonizing because it meant that, apart from the psychological and spiritual toll on the abuse victims, there will be significant financial losses for creditors who have faithfully supported us for years. The possibility of such losses has been present from the time that the scope of the claims against us first became clear, but the filing unfortunately makes it a certainty.

As regards the parishes and other institutions of the Diocese: It is only the Catholic Diocese of Wilmington Inc. that is seeking reorganization under Chapter 11, not parishes, schools or related church entities which have their own corporate identities. Parishes in the Diocese of Wilmington are set up civilly and by state statute as separate corporations.

It is our moral obligation to make reparations and otherwise see to the healing of legitimate abuse victims and to try to restore the faith that in many cases has tragically been lost. But our moral obligations do not end there. We also are obliged to continue our charitable, educational and spiritual missions and the ministries associated with them. In order to do that, this Diocese must survive. Some see a tension between the claims of those victims who have suffered so greatly at the hands of people in whom they had placed their trust and the need of the Diocese to continue its other necessary works. We believe not only that both goals are compatible but that, with God’s help and yours, they will be achieved.

The diocese will hold a press conference to discuss the filing tomorrow morning.

Prior to tonight's announcement, plaintiffs' attorneys had called a presser for an unspecified "major announcement"... ostensibly in expectation of a settlement which didn't come.

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