Church told to defend bankruptcy

SAN DIEGO -- The Catholic Diocese of San Diego, which filed for bankruptcy protection rather than face sexual-abuse lawsuits, has failed to disclose all of its assets and has not reported the fair market value of other property, a federal bankruptcy judge said Friday.

Judge Louise De Carl Adler ordered the diocese to explain at a hearing next month why she should not throw out the bankruptcy filing. The diocese, she said, has been “lax, ineffective or indifferent” in its oversight of parishes.

“Some parishes are actively and deliberately hiding assets from the diocese or inappropriately designating donations as restricted to circumvent or evade the direction of the diocese and/or the court,” the judge wrote, citing the findings of a court-appointed financial expert who reviewed the diocese’s financial records.

The diocese faces lawsuits from more than 140 people who allege that they were sexually abused by priests. It filed for bankruptcy protection in February, one day before the first court case was set to begin.

Attorneys and advocates for the alleged victims said the ruling bolsters their claims that the diocese is misusing bankruptcy laws to avoid litigation. Some victims believe that Bishop Robert Brom wants to avoid testifying in the case.

“I am pleased that the court is seeing the same thing we have been seeing over the last five years, which is that the diocese won’t follow the state law, didn’t protect children according to the law, and now won’t follow the bankruptcy law,” said Venus Soltan, an attorney who represents 20 of the alleged victims.

A diocese attorney was not available for comment.

Brom, in a statement earlier this year, said that if the cases went to trial, monetary awards for those whose cases were first could “so deplete diocesan and insurance resources that there would be nothing left for other victims.”

In court filings, the diocese valued its assets at more than $100 million. Lawyers for the accusers say the diocese’s true worth is at least $500 million.

Friday’s ruling came one week after the court-appointed expert reported an array of financial irregularities. According to his audit, diocese land is not accounted for on the books of the diocese, bank accounts have not been fully disclosed, and the diocese has reported its assets at assessed valuations instead of fair market value.

Lawyers for the alleged victims claim that Brom, who has been bishop since 1990, had long known that parishioners were being sexually abused by priests and had done little or nothing about it until five years ago, when the issue exploded on the national scene.

Some of the cases that would have gone to trial without the bankruptcy filing involve allegations that the diocese moved “predator priests” from parish to parish as victims came forward. The suits also allege that church officials often told victims that they were alone in their accusations, even though officials knew about other allegations.

The San Diego Diocese has 98 churches and 275 priests in San Diego and Imperial counties.

The judge scheduled the hearing for Sept. 6.

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richard.marosi@latimes.com

Times staff writer Tami Abdollah contributed to this report.