December 12, 2004 in Business

Bankruptcy won’t shield diocese from public view

Bert Caldwell The Spokesman-Review
 

On the Net

The Spokane Diocese’s bankruptcy documents are available at www.dioceseofspokane.org

Bankruptcy, nobody’s darling, has an especially bad reputation in Spokane.

Kaiser Aluminum Corp. has used the process to shirk pension and health care obligations to thousands of former employees.

Metropolitan Mortgage & Securities Inc. sought shelter in the court from area investors holding more than $500 million in company securities. The dollars they invested will likely be repaid with nickels and dimes.

And Kaiser retirees and Metropolitan employees can only look on as attorneys charging as much as $500 an hour burn through money that might otherwise be used to repay them something for their sweat and specie.

Bankruptcy has appeared to serve only those trying to avoid taking responsibility for their affairs. And in the cases of Kaiser and Metropolitan, the damages can at least be tallied in dollars and cents. So many medical bills to pay. So much retirement savings lost.

What expectation can there be the U.S. Bankruptcy Court will be able to measure the psychological damage done by years of degradation at the hands of Roman Catholic priests and appropriately assess the church that harbored them for decades? And, what’s more, do so in a way so transparent and public there can be no legitimate claim the court allowed the church to conceal the whole truth?

Well, one thing about bankruptcy, it’s transparent – sometimes excruciatingly so.

In Washington’s Superior Court, defendants must reveal only what the court, at the request of the plaintiffs, compels them to. No request, no disclosure.

In Bankruptcy Court, full disclosure is required. Period. Failure to act in good faith can lead to dismissal of the bankruptcy filing. Concealing assets is a felony. This is not where you go when you have a secret you want kept.

Nor is it the place where plaintiffs will be deprived of their right to a trial, and to have their claims heard by a jury. Bankruptcy allows victims’ individual claims to be resolved in Superior Court or federal District Court. The Bankruptcy Court provides for payment of judgments against the debtor, partial or full depending on the reorganization plan that concludes a Chapter 11 bankruptcy.

Given the position of the Spokane Diocese that its parishes control the bulk of its assets, what resources are at risk represents perhaps the most intriguing of all the issues in play. But, as the initial filings in the case indicate, the value of every church, school, land holding and endowment will be known. Those values can be challenged when there is disagreement.

Because some insurance companies deny their policies cover sexual transgressions by the priests, how much might be available from that source is also unknown.

So how might the plaintiffs secure their own personal measure of justice? The proposed framework for settling claims in the bankruptcy of the Tucson (Ariz.) Diocese might provide a clue.

There, a special master would be appointed to sort into four categories the claims by abused parishioners. A range of settlement amounts would be designated for each category. A trust fund would be set up for paying those claims. A second trust fund would be set up for payment of any future claims. And a third fund would be set up for those who chose to litigate their claims in state or federal court.

If the aggrieved are more intent on probing the culpability of Bishop William Skylstad, they can ask the Bankruptcy Court to put him on the stand.

The process is similar to that set up to resolve claims stemming from the Sept. 11, 2001, terror attacks. Families could accept settlements determined by special master Kenneth Feinberg or litigate their claims of negligence against the airlines and World Trade Center owners.

Whatever structure for sorting out claims against the diocese, the process of getting there will be public. The scrutiny in this case will be especially intense. The court is not some kind of black box, nor its deliberations some kind of black magic.

The victims, parishioners and public will have every chance to monitor the proceedings.

Attorney Ian Ledlin, who is involved in the Metropolitan bankruptcy, says bankruptcies are best resolved when debtors and creditors can cooperate with each other. Given the profound alienation and hostility many of those abused feel toward the church, there is little probability that will be the case in this tragedy.

But Bankruptcy Court and the bankruptcy process, slow and costly as it is, should not be on trial here.


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