Makeup of diocese committee in dispute

Amid the numerous questions fired at Spokane’s Catholic bishop during a special creditors’ meeting Wednesday, attorneys representing clergy abuse victims focused on two controversial issues: the makeup of the creditors’ committee and the ownership and value of the parishes, schools and other entities in the diocese.

Dozens of creditors – victims and others potentially owed money by the Catholic Diocese of Spokane – filled the third-floor courtroom to learn more about Chapter 11 bankruptcy protection and to ask questions of Bishop William Skylstad, the diocese’s attorneys and other officials.

A number of inquiries pertained specifically to the five-member creditors’ committee, which represents the nearly 130 people who say they were molested as children by clergy.

Of the five members on the board, two men – Mike Shea and Rick Frizzell – have filed lawsuits and are among 58 alleged victims who have taken legal action against the diocese. Another 70 victims have also come forward claiming abuse, but have chosen not to file lawsuits, according to the diocese.

Since U.S. Trustee Ilene Lashinsky appointed the creditors’ committee, victims and their attorneys have been critical of the panel’s composition. Some have asserted that the diocese embedded the committee with victims who are sympathetic to the diocese’s interests – an accusation that diocesan lawyers denied Wednesday.

“Did anyone from the diocese contact anyone to sit on the tort claimants’ committee?” asked John Allison, an attorney representing several abuse victims.

Michael Paukert, counsel for the diocese, declined to answer his question. Paukert also refused to reply when Allison asked when the diocese first contacted the U.S. Trustee’s Office in regard to the bankruptcy. “Not relevant,” Paukert said.

Shaun Cross, Paukert’s co-counsel, responded soon after by stating, “The diocese has not sought people out.” Cross explained that the diocese was caught in a “Catch 22” when it came to the victims who asked for anonymity. To respect their privacy, the bishop sent a letter to those victims who had no legal representation, informing them of the diocese’s bankruptcy filing and the need to give their names to the U.S. Trustee’s Office. Their names have since been put in a file that has been sealed by the court and cannot be viewed by the public.

After the hearing, Cross called the criticisms of Lashinsky’s appointments unfounded.

“To say that somehow there are embedded members on the committee is to assert that the Department of Justice is beholden to the diocese,” he said. “That’s an affront. It’s not true.”

Victims’ attorney Duane Rasmussen said lawyers will challenge the makeup of the creditors’ committee. A motion may be filed by Monday, he said, calling appointments unrepresentative of the claimants.

When asked by Allison if all five of the committee members had filed against the diocese, Cross said, “The definition of ‘claim’ is far broader than your inquiry.”

Cross said that although three didn’t sue the diocese, one had turned in a claim for damages and all three have “submitted claims in the form of counseling,” which were paid by the diocese.

Alleged victims have until April 5 to file claims against the diocese, although Joe Shickich, a newly hired attorney for the creditors’ committee, said he would ask federal bankruptcy Judge Patricia Williams to extend the deadline.

He declined to comment on the committee controversy.

Shea and Frizzell attended the creditors’ meeting, as well as Marjorie Garza, the only woman on the board. Garza, who claims to have been abused by a nun in Spokane more than 30 years ago, has said that the bishop has shown her “tremendous” compassion by offering to pay for her counseling and medication, and once gave her $100 out of his pocket. In a story published in the diocese’s official newspaper, the Inland Register, she claimed Skylstad saved her life.

On Wednesday, however, Garza, for unknown reasons, went into a tirade against the bishop shortly before the five-hour meeting began, crying, screaming obscenities and accusing him of lying to her, according to several people who witnessed the incident. Lashinsky was reportedly present during the outburst. She declined comment, saying it was against U.S. Department of Justice policy.

Another issue brought to the forefront by lawyers was the ownership of parish assets.

Attorney James Stang, working with victims’ lawyers, grilled Skylstad about the diocese’s standing as a corporation sole, which basically means the diocese does not own Catholic churches, schools and investments, but rather holds the assets in trust.

Without the parish assets, the diocese is worth an estimated at $11.1 million, although diocese officials acknowledged that the numbers included outdated assessments and appraisals.

If parish property is included, the value of the diocese could swell to more than $81 million.

Stang dug into the diocese court filings and policy handbooks. He also revisited old court cases that seemingly contradicted the diocese’s claim that parishes are independent.

Victims’ lawyers hoped Stang would be hired to represent the creditors’ committee. His application was rejected, however, and Shickich was hired.

Determining the ownership of the 81 parishes, 16 schools and other entities will be the central issue of the Chapter 11 case.

As he quizzed the bishop and other officials, often sprinkling in his own comments, Stang brought up the issue that three of the priests accused of abuse are still receiving financial support from the diocese.

Although removed from ministry, James O’Malley, Arthur Mertens and Theodore Bradley receive monthly retirement checks of $1,250 to as much as $1,703 each, according to the diocese’s statement of financial affairs.

“You don’t push someone out in the street, even a criminal,” Skylstad said, noting that all three are over the age of 80. “Because they are human beings, they deserve some support.”

In a related matter, conflict of interest concerns regarding the Paine Hamblen law firm have been dismissed by Williams. The firm, of which Cross and Paukert are partners, was at one time owed money by the diocese, but Williams concluded that would not prevent it from representing the diocese.