Abuse payout plan is taking shape

The Los Angeles Archdiocese plans to pay its share of a record clergy sexual abuse settlement by liquidating investments, taking out bank loans and selling up to 50 non-parish properties, including its administrative headquarters, according to diocesan representatives.

Many details of the complex financial arrangements were still being worked out, officials said, with the $660-million settlement having been formalized just Monday in a Los Angeles courtroom.

But some elements have emerged, as the archdiocese readies itself to pay at least $250 million and up to $373 million -- its portion of the bill.

Cardinal Roger M. Mahony and others have said the archdiocese, which drained its litigation reserve fund in payouts for a partial clergy-abuse settlement in December, will try to avoid harming “essential ministries” and does not plan to sell any parish or school properties.

Still, the archdiocese, the most populous in the country, “will have to be a much leaner operation than it is now,” church attorney J. Michael Hennigan said. “The liquidity it has comes from investments that produce income that supports diocesan operations.”

In late May, as settlement talks between the archdiocese and plaintiffs’ attorneys accelerated, Mahony traveled to Rome to consult with Vatican officials on financial aspects of the settlement and to receive required approvals for the loans and property sales under consideration, officials said.

The Vatican requires such permission for any transfer of goods -- real estate, cash, investments or loans -- worth more than $10 million, said Mahony’s spokesman, Tod M. Tamberg. But he said Mahony and other archbishops or bishops must also have the consent of local diocesan bodies, including finance councils, before they can proceed with such sales.

The archdiocese promised victims $250 million and agreed to guarantee payment of an additional $123 million in the event a number of religious orders that are not yet part of the agreement do not agree to pay. The church’s insurers will pay $227 million and other religious orders will pay $60 million.

Tamberg and Hennigan said they could not yet give a breakdown for which portions of the bill would be covered by the sale of investments or real estate, or from loans.

The first property to go on the market, however, appeared likely to be a 12-story building at 3424 Wilshire Blvd., which houses offices for the archdiocese’s central administration, ministries and other services.

Mahony announced in May that the headquarters would be sold to help cover the upcoming settlement and said the archdiocese would lease office space back from the buyer or find quarters elsewhere.

Real estate brokers have said the building could bring $40 million or more in the office market. Tamberg said this week that it had not yet been listed.

The archdiocese has drawn up a list of 49 other properties that may be sold, some of them vacant land that had been reserved for future church expansions, including in fast-growing Santa Clarita, Hennigan said.

Both men said the church’s downtown landmark, the Cathedral of Our Lady of the Angels, which cost $189.5 million to build, would not be included in any property sales. Tamberg pointed out that the cathedral is also a parish church and that the archdiocese has promised to protect parish assets in the settlement.

In addition, Hennigan said the cathedral was built with funds raised specifically for that purpose and cannot be used to cover other costs.

The attorney said the sale of stocks, bonds and other investments could provide the most immediate source of funds. “They are the liquid resources we depend on,” he said. “That’s an obvious source for a while, until those funds [can] be replaced through the sale of property.”

Hennigan said, however, that specific choices are yet to come. “I don’t think any of the hard decisions have been made, but there will be no impact on essential ministries. The magic word in that sentence is ‘essential,’ ” he said.

Other church finance experts wondered how the archdiocese could avoid touching parish funds.

“I think the bottom line is that there’s got to be some cutback in programs,” said Charles Zech, an economics professor at Villanova University in Pennsylvania and the head of its Center for the Study of Church Management. “By selling off assets that have been earning some money, clearly there’s going to be a gap in the budget that’s going to have to be made up somehow.”

Jeff Dietrich, a founding member of the Los Angeles Catholic Worker, an independent organization that runs a skid row soup kitchen, said he doubted the cardinal’s assurances that parishes would remain untouched.

“I don’t see where they’re going to get the money unless they close parishes and sell off the property,” Dietrich said.

Zech said that in several other abuse settlements, including those in Spokane, Wash., and Tucson, dioceses have assessed their parishes a certain share of the financial burden. “But I can’t imagine that Cardinal Mahony would have stated so strongly that there would be no sales of parish property or schools unless he was very confident of that,” the professor said.

The effect of such settlements has varied.

Two years ago, the Diocese of Orange paid $100 million to 90 claimants without drastic rollbacks in services, although it had made some cuts in anticipation of the payout.

By contrast, the Boston Archdiocese, which paid $85 million in 2003 to settle allegations of abuse by priests, shut down 80 parishes. The church said the cuts were based on declining attendance, and it disputed suggestions that the massive payout forced the closures.

In San Diego, Bishop Robert Brom this year sought bankruptcy protection for his diocese when faced with the first trial over claims of clergy abuse. In papers recently filed in the case, the diocese revised its net worth upward.

In Los Angeles, some church officials remain confident.

Msgr. David O’Connell said his church, St. Michael in South Los Angeles, is continuing to receive the help it needs to operate effectively.

“The cardinal has said this isn’t going to in any way affect the operation of the parishes,” he said. “I trust him.”

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