Diocese assailed over bankruptcy plan

Tuesday, November 23, 2004

Diocese assailed over bankruptcy plan
Action skirts financial duty to sex abuse victims, lawyers contend

By NICHOLAS K. GERANIOS
THE ASSOCIATED PRESS

SPOKANE -- Lawyers for victims of sexual abuse by priests contend the Roman Catholic Diocese of Spokane is shirking its financial duty to the victims through its plan to file for bankruptcy protection.

Attorneys Michael Pfau and Timothy Kosnoff, who represent dozens of victims, said in a letter to Spokane Bishop William Skylstad that victims of abuse have the same right to the financial resources of the diocese as parishes and schools.

Skylstad has said that he wants to maintain the operation of parishes, schools and the church during the bankruptcy process.

"Your public pronouncements to side with the parishes and schools in this impending dispute are a breach of your fiduciary duty," the letter said, citing bankruptcy court case law.

But Shaun Cross, a lawyer for the diocese, said yesterday that the victims' lawyers are misapplying bankruptcy law.

The bishop has said that filing for Chapter 11 bankruptcy protection is the best way to ensure that all parties in the dispute are treated fairly. The filing would protect the rights of victims who have made abuse claims, as well as those who have not come forward yet, Skylstad has said.

Cross said that only the Diocese of Spokane will be filing for bankruptcy protection Dec. 6.

In their letter, the victims' lawyers said Skystad's comments indicating the diocese does not have the money to pay all the claims indicates the diocese is insolvent or in the "zone of insolvency."

Even though Skylstad has said the diocese has a "sacred responsibility to preserve the mission and ministry of the Catholic Church in the Eastern District of Washington," the diocese has the same fiduciary responsibility to treat the victims as creditors, the letter said.

Earlier this month, Skylstad said the diocese must file for reorganization under federal bankruptcy laws because of lawsuits seeking tens of millions of dollars on claims of sexual abuse by priests.

By seeking court protection, the diocese will have to surrender its financial records and place its future in the hands of a judge.

Assets could include 81 parish churches and nearly 20 parish schools, as well as cemeteries, hospitals, orphanages and even real estate bequeathed to the church.

A bankruptcy judge will determine which assets can be used to pay claims.

Add P-I Local headlines to