Tuesday, February 20, 2007

Countdown to Bankrup -- Er, Reorganization?

As a final decision on either a "very, very painful" abuse settlement or declaring Chapter 11 bankruptcy protection looms over the diocese of San Diego, the clergy of the Southern California see met in plenary assembly yesterday with Bishop Robert Brom and the diocesan lawyers.

Later today, Brom, his vicar-general, attorneys from both sides, representatives of the insurance provider Catholic Mutual and a judge overseeing the diocese's 143 unresolved claims will sit for a final meeting. The session's result will dictate whether the diocese can settle the suits or becomes the fifth US local church to enter into a court-supervised reorganization of its finances. Word of the impending decision, shared with parishioners at Sunday Masses in the 950,000-member diocese, was first reported here earlier in the weekend.

Although the potential still exists for a settlement which could end up being the largest a US diocese has signed to date, the clergy present "seemed to understand" that Chapter 11 would be the more likely course of action, according to a priest present at the session who briefed Whispers on condition of anonymity. Attendees were given forms in preparation for a "possible" bankruptcy filing -- and, given the word's negative connotation, diocesan officials have sought to banish it from the local church's vocabulary, with "reorganization" being the chancery's term of choice.

As quilt-bearing representatives of the Survivors' Network of Those Abused by Priests (SNAP) and a horde of TV cameras lingered outside the diocesan offices, the afternoon gathering was addressed by lead defense counsel Mike Webb and Chapter 11 attorney Susan Boswell of Tucson, who aided the Arizona diocese with its reorganization. Boswell has been named as a "special counsel" to the San Diego curia in the event of a bankruptcy filing there.

While settlement was described as being "by far" the optimal scenario, the officials said that the bankruptcy alternative is being eyed as a remedy to ensure the "most just and equitable solution" for abuse survivors, as litigation would disproportionately benefit those with early trials and leave later cases with few remaining funds to spare. Over two years of settlement negotiations between the diocese and attorneys representing victim-survivors have led to no resolution, with the diocese offering what's been termed a "really significant amount" that would break the diocese of Orange's US record of $100 million and plaintiffs' counsel countering with a figure so high that one official reportedly described it at yesterday's gathering as "ludicrous." The impression seemed clear to attendees that a settlement would only come to pass "by some miracle."

If filed, the cost of a San Diego Chapter 11 would be sizable even before its payment. Tuscon's bankruptcy fees alone were in the range of $2 million, with the archdiocese of Portland in Oregon's reorganization costs said to run close to $16 million. Among the process' added "pains," the priests were warned to prepare for a future of consolidated or "twinned" parishes. Were a settlement to be struck, the diocese would be obliged to refer parish requests for financial aid to affluent parishes, as the chancery would be unable to provide such assistance.

The single biggest issue in the fiscal puzzle remains that of the diocese's "restricted funds." While officials estimated the pool of unrestricted assets at $15-20 million, the potential that the diocese's designated resources, said to be in the $100 million range, could be judged in court not as a separate trust but as an asset of the corporation sole is believed by some to be a key element behind the last-minute push to avoid trial.

Originally scheduled as a pre-Lenten day of reflection, the priests' assembly began with Daytime Prayer from the Liturgy of the Hours and the singing of "O God, Our Help in Ages Past."

Whether its selection was a nod to the gathering's subtext remained unclear at press time.