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Parishes unsure about payout

Sat., March 4, 2006

Catholic parishioners are studying a $45.7 million offer to settle 75 sexual-abuse claims amid fears that the proposal could wipe out ministries and financially cripple the church for decades.

Parishes are faced with a difficult choice: Trust Bishop William Skylstad’s move, or withhold support and seek a better settlement.

So far, the parishes have refused to endorse the settlement as concerns mount that it could cost the cash-strapped Catholic churches of Eastern Washington more than $80 million.

A coalition of leaders and priests from all 82 congregations, called the Association of Parishes, or AOP, meets again Sunday to talk about the settlement and legal strategy. They want more information before signing onto a deal that envisions using parish property as collateral.

“The AOP and the parishes are in the process of analyzing whether or not this particular settlement is feasible,” said Robert P. Hailey, who co-chairs the association along with the Rev. Michael Savelesky, pastor of Assumption parish. The meeting Sunday will take place at Our Lady of Fatima on the South Hill.

The crux of the problem is this: Bishop Skylstad has asked the parishes to serve as an unlimited guarantor.

“I tell my law school students that no rational person would ever sign a guarantee of someone else’s debt if they don’t even know what that debt is,” said Ford Elsaesser, a bankruptcy attorney representing the parish association. “We need to understand what our obligations are.”

Shaun Cross, attorney for the diocese, said, “We’re asking the Catholic community to follow their bishop. His decision to settle is a wise one. This has been weighing on him for four years and he has been careful and deliberate.”

More claims continue to be filed as the March 10 deadline draws near.

In the meantime, the possible financial obligation of the parishes isn’t easy to ascertain.

The diocese and its liability insurers are in a legal fight over the scope of policies the diocese purchased decades ago. The sides continue to talk and remain hopeful a resolution can be reached before a scheduled trial in front of senior U.S. District Judge Justin Quackenbush.

The diocese initially said insurers may be expected to pay between $10 million and $15 million. More recently, diocese attorneys say insurers will be forced to pay in excess of $25 million.

Attorneys for the insurers declined to talk about the case.

That variation is unacceptable to the parish association, which published a “run sheet” to provide examples of how much money parishes would be expected to pay under different scenarios.

Their greatest fear is that the $45.7 million is just a starting point.

If dozens of other claims hold merit, that number alone could swell to $70 million or more. Then add legal and accounting fees and other costs and the total approaches $80 million.

That cost would come on top of the ongoing operations of the parishes.

“There simply are too many unknown factors, which are fraught with enormous risk to the parishes,” according to a written summary of the AOP’s Feb. 12 general meeting.

Cross said the same calculus cannot be used to value every claim, notably the 40-plus claims that have been filed by alleged victims since the settlement was first announced. Those people had not yet come forward, had not hired lawyers and were not included in the settlement, Cross said.

“We have done a careful analysis of the seriousness of the claims included in the settlement and believe we were able to reach an acceptable number,” he said.

An appraiser has been hired to value diocese property, including parishes. That process will cost about $300,000.

The disagreements are the latest twist in this unusual Chapter 11 bankruptcy case.

John Munding, an attorney working for the parish association, said the current offer has not been endorsed.

To support it would be to endanger the mission of ministry each parish strives to uphold, he said.

“We want settlement but we don’t want parishes to disappear,” he said, saying that it’s not about buildings, but rather ministry.

Cross said the diocese is working hard to cement the numbers.

“We’re getting there so we don’t have an open-ended number (for the parishes),” he said.

The parish association does not want an adversarial relationship with the diocese. Yet, according to the summary of the earlier AOP meeting, “it must resist proposed solutions to the sexual abuse litigation that impose greater financial burdens than the faithful and their descendants can reasonably bear, not to mention solutions which pose an unreasonable danger of liquidation and loss of churches and ministries (like schools), which are essential to the continuation of parish life.” Especially worrisome to the parishes is the $10 million owed by the end of this year under the current settlement proposal, followed by a $27 million balloon payment due in October 2007. If insurance fails to cover those costs, the diocese could be in default, and that translates into foreclosure on parish properties.

The diocese intends to file a motion in the next several days asking U.S. Bankruptcy Court Judge Patricia Williams to approve the settlement. The parish association is expected to object to the settlement.

No one anticipates an acrimonious court fight, but there are arguments that may need vetting before a judge.

Among other concerns raised by the parish association is that the settlement talks were directly handled by Cross and attorney James Stang, who represents victims in the bankruptcy. No one else was privy to the discussions until the very end.

Elsaesser wants mediation rather than the settlement.

“Let’s all agree to mediate right now. Quit the litigation and get a plan together right now,” Elsaesser said.

Spokesman-Review staff writer Virginia de Leon contributed to this report.

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