Bankruptcy opens rare window into diocese finances

Church has transferred tens of millions of dollars in real estate in recent years

New Mexico’s largest Catholic diocese has spent hundreds of thousands of dollars in recent months on lawyers to fight claims of clergy sex abuse and to prepare for a potentially lengthy battle in U.S. Bankruptcy Court.

The Archdiocese of Santa Fe’s petition for reorganization provides a rare look into the finances of a religious organization that has for decades been wrestling with the financial and social consequences of a scandal that rocked churches across the country.

Archbishop John Wester describes the filing as an equitable thing to do as church reserves dwindle. He says compensating victims is a top priority.

National watchdog groups and attorneys for victims of clergy sex abuse said this week that the archdiocese’s actions suggest otherwise.

They point to the money spent by the archdiocese on lawyers over the last three months and the tens of millions of dollars in real estate that has been transferred to parishes in recent years, effectively reducing the number of assets held by the archdiocese.

About 20 dioceses and other religious orders around the U.S. have filed for bankruptcy protection as a result of clergy sex abuse claims, and victims’ advocates say there are trends. That includes the shifting of assets to other funds or parishes, a tactic that has been used elsewhere, including dioceses in Minnesota, Wisconsin, Tennessee and Southern California.

In Pennsylvania, documents associated with an August grand jury report that detailed decades of abuse and cover-up included letters between church officials and attorneys that talked about pushing assets around.

In one of the most publicized cases, lawyers for abuse victims accused Cardinal Timothy M. Dolan of New York of creating a trust fund to hide money from their clients when he was archbishop of Milwaukee. Dolan wrote to the Vatican in 2007 that transferring more than $50 million in assets would provide “improved protection of these funds from any legal claim and liability.”

Dolan had dismissed allegations that he was trying to shield church assets, and an appeals court later ruled that the fund was not protected from creditors.

There were also clashes over assets belonging to the Archdiocese of St. Paul and Minneapolis as part of that bankruptcy case.

Terence McKiernan, co-founder of BishopAccountability.org, an online resource of documentation about the scandals, pointed to efforts by church officials there to value a massive granite cathedral at just $1.

“The Catholic Church is real estate wealthy beyond our wildest dreams,” he said. “And it’s a bit of a conundrum — how much is the diocese worth? How do you value ecclesiastic property?”

In its bankruptcy petition, the Archdiocese of Santa Fe claims nearly $50 million in assets, including real estate valued at more than $31 million.

The filing also states that more than $57 million in property is being held in trust for numerous parishes and property transfers worth another $34 million were done over the past two years. State records also show that individual parishes were incorporated as part of an effort that started in 2012 under Wester’s predecessor.

Despite the archdiocese’s efforts to financially separate itself from its parishes, some lawyers say there’s still a connection as the bankruptcy filing shows the archdiocese would be on the hook for indemnifying parishes if they were sued or had to pay out damages of any kind.

“So it really does seem to us to be a shell-game,” McKiernan said of the cases that have already played out. “No one thinks for a moment that the bishop is relinquishing control of these assets. He just hopes the bankruptcy judge won’t consider them assets.”

The New Mexico bankruptcy case came as the state attorney general’s office served a pair of search warrants last week, seeking documents related to two former priests who had been credibly accused of sexually abusing children.

The warrants describe in graphic detail the abuse endured by children years ago at the hands of the two priests.

The tip of the iceberg is how attorney Paul Linnenburger described the warrants. He’s a lawyer with one of the New Mexico firms that has several cases pending against the archdiocese.

The archdiocese has said that $52 million in insurance money and its own funds have gone to settling 300 claims over the years.

Linnenburger said the details of many of those cases have remained secret due to nondisclosure agreements and protective orders. He accused the church of hiding behind those orders and its religious mission to avoid liability for pending and future cases.

“The writing is on the wall now,” he said, “and it’s going to come out, and, once it does, the people of New Mexico are finally going to see and understand just how much damage the church did to them over decades.”