September 14, 2006 in Business

Diocese begins final talks

By The Spokesman-Review
 

Coming up

“Mediation in the Spokane Catholic Diocese bankruptcy resumes today in Reno, Nev.

“If mediation fails, the U.S. Bankruptcy Court judge overseeing the case wants a quick resolution of the bankruptcy, with a plan of reorganization signed by Jan. 2.

“Attorneys in the case have said a reorganization plan likely would include a sale of property held by the diocese, combined with insurance settlements.

“Victims’ lawyers also have said they would sue individual parishes in pursuit of settlements.

A final attempt to end the Spokane Catholic Diocese bankruptcy unfolds today in Reno, Nev.

It is the third and last scheduled mediation with a federal judge. Those close to the case say this is the best chance yet to reach a settlement, though considerable financial concessions – such as victims willing to accept less than the average of $600,000 per person originally pledged by Bishop William Skylstad, and parishes willing to pay millions of dollars – are necessary.

U.S. Bankruptcy Court Judge Gregg Zive has asked all involved in the mediation to keep quiet, effectively sending the case into hiding for the past month.

In preparation for the mediation, surveys were distributed to Catholic churchgoers this past weekend.

The questions regarded a willingness to donate a sum each year for the next four years to assist with a settlement.

If the negotiations fail, the case will be put on a tight timeline. The federal judge in Spokane overseeing the entire case, U.S. Bankruptcy Court Judge Patricia Williams, plans to hold final hearings the week after Christmas and sign off on a plan of reorganization by Jan. 2.

That plan would outline the diocese’s strategy to exit from Bankruptcy Court protection and detail how sex abuse victims – called creditors in the bankruptcy – would be paid.

A probable scenario is that property and cash held by the diocese would be sold and paid to law firms that have worked on the case, and the rest put into a trust that would be tapped to pay sex abuse victims as their claims are approved, lawyers have said.

Victims’ attorneys also have said they would sue the parishes directly for decades of sexual abuse by priests, since parishes operate as unincorporated associations outside the financial control of Bishop Skylstad. How much money would be collected is uncertain.

The diocese estimates it can collect between $30 million and $35 million. About $20 million of that, however, is from insurance settlements contingent upon the complete resolution of all claims.

Since parishes assert they are insured under the diocese policies, they would turn to the insurers to fund defense and settlement costs, thus unraveling the diocese settlements.

That’s among the layers of complexities lawyers face as they attempt to reach a solution.

Meanwhile, the diocese has been collecting money from property sales and insurance settlements, while at the same time trying to lower its financial exposure by reaching agreements with many victims and objecting to the claims of many others.

In a court filing, diocese attorney Shaun Cross said the bishop has objected to 35 claims of the more than about 180 filed. Among those are claims concerning Jesuits and Catholic clergy who were not working on behalf of the Spokane Diocese. Other contested claims are duplicates, did not include names, or perhaps were received after the March 10 deadline to file a bankruptcy claim.

In corporate bankruptcy reorganizations, senior executives are often fired or resign immediately, especially if there’s a whiff of scandal or obvious incompetence.

Some abuse victims have said they want Bishop Skylstad and his executive team dismissed as part of any reorganization strategy.

But Jim Stang, an attorney representing the largest group of victims in the bankruptcy, said his group won’t call for Skylstad’s resignation.

“Our attitude about the bishop is that his staying in power is irrelevant,” Stang said. “We’ve never asked for his resignation and don’t intend to.”


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