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  Home :: 2007 January :: Spokane diocese reaches settlement
http://insurancenewsnet.com/article.asp?n=1&neID=200701062650.1_43f1002abcd893dc
 
Spokane diocese reaches settlement 
 
Following the collapse of one joint plan, dramatic judicial rulings onthe nature of church property holdings and months of mediation, thebankrupt Catholic diocese of Spokane, Wash., and its abuse victimcreditors reached agreement on a settlement. They filed jointly forreorganization Thursday, Jan. 4.

The consensual plan calls for payment of at least $48 million to abusevictims and a "mechanism for the payment of future claims," accordingto a statement released by Judge Gregg Zive of the U.S. BankruptcyCourt, who has overseen mediation. Zive is chief judge of thebankruptcy court in Reno, Nev.

The reorganization planindicates the debtor will seed the pool for future claims with $1million. Under the plan, $37 million must be paid by Oct. 1, 2007,while $10 million will be due the end of this year. The remainder willbe due Oct. 1, 2009.

To bankroll the settlement, six insurancecarriers will pay $20 million plus interest, the plan details.Diocese-owned assets will be sold, the judge said in his statement.Various Catholic entities within the diocese also will contribute,including Catholic Cemeteries of Spokane and Catholic Charities ofSpokane.
 
Significantly, parishes "will be responsible for raising $10 million,"the judge wrote. In fact, according to the plan, parishes jointly willissue a $10 million note, "payable from time to time" when any parishsells property, but due in full by the end of this year. In addition, asingle parish, Our Lady of Lourdes, will issue its own $1 million notedue Oct. 1, 2009. Collateral for these notes are first liens on parishproperty.

It isn't totally clear how the diocese, the court orthe claimants can enforce this, whether, for example, they can forcesales if parishes can't or won't come up with the funds. The wholemechanism appears tied to the 82 parishes being incorporatedseparately. Under the plan, the diocese will transfer property toindividual parishes. Each parish may form a legal entity that holds itsown assets. In return, it is bound to repay a share of the loan.

No individual parishioner, however, has legal liability.

The debtor has yet to file a disclosure statement that should explainmore fully the quid pro quo between the diocese, the claimants and theparishes. The judge prohibited lawyers from commenting publicly on theplan, one attorney in the case said.

In the past, bankruptdioceses have appeared loath to saddle parishes with settlement costs.In part, that's because the dioceses have steadfastly maintainedparishes are independent entities, even though the dioceses hold allparish property under a unique corporate arrangement called a"corporation sole," in which the office of the bishop is the onlyshareholder. That will change under the Spokane diocese reorganizationplan. But in part, by drawing in parishes, the dioceses could well fearlegal challenges. Individual parishes could argue they shouldn't beresponsible for the actions of the dioceses.

The settlementcovers 76 sex abuse victims. While the list of what each victim willreceive is incomplete and the criteria complex, those settlementsdetailed in the reorganization plan range widely, from $4,000 to$300,000.

In dollar terms, the current plan is only slightlymore than the $45.75 million settlement hammered out in June 2006. U.S.Bankruptcy Court Judge Patricia Williams, who has been hearing the casein the Eastern District of Washington and must approve the new plan,rejected the first settlement on technical grounds, principally that itdidn't cover all potential victims. This settlement rejection came ascourts weighed in on the much thornier issue of parish propertyownership.

Williams in August 2005 had ruled in favor of thetort victims, who maintained the diocese owned all the property. InJune 2006, a district court judge reversed that decision. Theconsensual plan, with its transfer of property to individual parishes,should render that fight moot.

Mediation began in July 2006.

In the current reorganization plan, the diocese is tasked with several"non-monetary undertakings." These include the posting on the diocese'sWeb site for at least nine years all clergy in the area who are"admitted, proven or credibly accused perpetrators." The bishop,William Skylstad, must apologize in writing to victims, publiclysupport elimination of all criminal statutes of limitation for childsex abuse and visit every parish in which children were abused, readinga statement from the pulpit identifying the abusers. Victims must beallowed to speak publicly at their church.


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Pedophilia and sexual abuse of children in Australia