Oregon Diocese 1st to File Bankruptcy

The Roman Catholic Archdiocese of Portland, Ore., filed for bankruptcy Tuesday, becoming the first Catholic diocese in the nation to seek financial protection against millions of dollars in potential sexual-abuse claims.

Though Portland is the first, it probably will not be the last of the nation’s 195 dioceses to seek court protection from the scandal’s effects.

The diocese of Tucson is expected to seek bankruptcy protection by mid-September, according to that diocese’s vicar general, Father Van Wagner. Tucson’s Bishop Gerald F. Kicanas has likened the increasing sexual-abuse claims to a monsoon.

Others, particularly smaller dioceses with relatively few assets that can be sold, could follow suit. In doing so, bishops would cross a line where U.S. church leaders until now had hesitated. Although the Roman Catholic Church is theologically and liturgically united, each diocese operates as a separate legal entity.

Major corporations have gone to bankruptcy court in the last few decades to limit payouts in massive lawsuits involving products including asbestos and birth control devices. In a Chapter 11 bankruptcy such as the diocese’s, an institution continues to operate while its debts are reorganized. A judge can limit how much a person who is owed money will get. Plaintiffs who claim injuries must wait in line along with other creditors.

But bankruptcy also means a bishop could lose large portions of his authority over the temporal affairs of his diocese. Diocesan operations would be placed under the scrutiny of a bankruptcy court.

“A bankruptcy judge is suddenly making all the decisions for you,” said Sister Mary Ann Walsh, a spokeswoman in Washington for the U.S. Conference of Catholic Bishops. “This is a completely uncharted area.... It’s certainly not the first solution of choice.”

Portland’s archbishop, John G. Vlazny, announced his decision in a letter to parishes. “Today I am doing something I hoped I would never have to do,” he wrote.

At a news conference later, he told reporters, “The pot of gold is pretty much empty right now.”

Vlazny said the archdiocese wasn’t trying to avoid its responsibility to compensate molestation victims but trying to assure fairness in distributing available funds -- and keep running the day-to-day ministries that serve 350,000 Catholics and others.

The bankruptcy was not expected to affect local parishes, the archdiocese said. Under church law, the archbishop cannot seize parish property or tap assets held in charitable trusts.

The decision to seek Chapter 11 protection emphasized the magnitude of the still unfolding costs of the scandal, which erupted in 2002 in Boston and has spread across the nation. The Los Angeles Archdiocese, the nation’s largest, is facing about 540 sexual-abuse claims. Those cases are under mediation in an effort to avoid trials.

Dozens of dioceses have considered filing for bankruptcy, including the archdioceses of Boston and Dallas. Those two avoided bankruptcy. Boston has closed parishes and sold assets in order to do so. Other bishops with fewer assets at their disposal or less generous insurance coverage say they may not have that choice.

“When a dangerous storm is approaching, you should seek shelter. In its own way, Chapter 11 reorganization represents an option for shelter for our diocese,” Tucson’s Bishop Kicanas said in a recent letter to his parishioners.

Vlazny, who became Portland’s archbishop in 1997, has pointed to a series of factors that led to his decision.

In the last four years, the Portland church has paid more than $53 million to settle more than 130 claims, with insurance picking up about half the total cost. Since then, 25 more claims have been filed, and two plaintiffs had been scheduled to go to court Tuesday. Between them, the two plaintiffs were seeking $155 million, Vlazny wrote.

The bankruptcy proceedings put that trial on hold. “Finally, when it was time for them to face us and be held accountable for the sins of their crimes and the sins of their cover-up, I don’t think they were stand-up enough to come forward,” one of the two plaintiffs, James Devereaux, 51, said in a telephone interview. He said he was molested by his parish priest between the ages of 8 and 13.

In February, the Portland archdiocese released a statement saying the church had already borrowed “substantial sums” to pay claims, had laid off 20 workers at its pastoral center and had cut department budgets by 30% to 50%. On Tuesday, a spokesman declined to disclose how much the archdiocese had borrowed.

Compounding the church’s financial straits was the refusal by insurance companies to shoulder what Vlazny insisted was their share of the costs. “Major insurers have abandoned us and are not paying what they should on the claims,” he wrote in his letter to parishes.

Church officials declined Tuesday to identify the insurance companies. There was no immediate comment from one company, which was identified by a plaintiff’s attorney. But other church officials outside the Portland diocese said part of the problem was that many of the claims involved actions that took place years ago and were covered by insurance policies with dollar limits that were low by current standards.

An attorney who represents a dozen victims in Portland, and David Clohessy, national director of the Survivors Network of those Abused by Priests, said they were skeptical about Vlazny’s claims of lacking money.

“The statement ... about a pot of gold is so repugnant and so insulting. This is a criminal proceeding. We’re dealing with an organization that tolerated the raping of children and covered it up, and now they are acting as if they are the victim. It is reprehensible,” Portland attorney David Slader said in a telephone interview.

Clohessy, reached in Cape Cod, Mass., said that “every diocese” had withheld a detailed accounting of its assets. He said the church lacked credibility to claim poverty.

“We just have to remember the bishops who cry bankruptcy are, by and large, the same men who said things like, ‘No, we don’t have abuse cases in this diocese,’ or, ‘No, we don’t cover them up.’ The onus to show they’re being honest at this point clearly falls on them,” he said.

In New York, Father Thomas Reese, editor of the Jesuit magazine America, said he expected more bankruptcies.

In the past, he said, a troubled diocese could turn to other dioceses for help.

“But everybody’s in trouble. Nobody has any money to spare,” Reese said. “People in the pews are not willing to pony up for this. They’re willing to give money to their parish and Catholic education, but they don’t want to pay to settle these suits, not with their hard-earned money.”