Settlements and legal fees escalate for the Kansas City-St. Joseph Diocese

03/13/2014 6:43 PM

03/14/2014 3:10 PM

Six years after a massive settlement closed the curtain on a dark era of priest sexual abuse scandals, the Kansas City-St. Joseph Diocese is spending millions on a new crop of cases.

Settlements last month with two families whose minor daughters were victims of a priest convicted of producing child pornography brought to $6 million the total the diocese has paid out since last May. That doesn’t include $7 million the diocese has spent on legal costs involving those and other sex abuse cases the past two fiscal years.

And the end may not be in sight. With more than two dozen sexual abuse lawsuits pending, along with a breach-of-contract case filed by plaintiffs who settled with the diocese for $10 million in 2008, a number of Catholics are wondering:

Is bankruptcy on the horizon?

“Among the active and retired clergy, there is a genuine and sincere concern of diocesan bankruptcy,” said Jeff Weis, a lifelong Kansas City Catholic who initiated a petition drive seeking the removal of Bishop Robert Finn. “There’s a fear that this diocese is being driven into the ground financially.”

A diocesan spokesman said bankruptcy is not under consideration.

“The diocese is not contemplating or in a position requiring bankruptcy,” said communications director Jack Smith.

That’s not the case in other dioceses across the country. In the past decade, 11 U.S. dioceses and two religious orders have filed for bankruptcy protection, three of them since November.

Those filing for bankruptcy have claimed a financial hardship because of sex abuse lawsuits. Bankruptcy allows a diocese to resolve the litigation and compensate victims in an equitable manner, proponents say.

But critics contend bankruptcy is merely a strategy used by dioceses to protect their assets while delaying jury trials and the disclosure of documents.

“It’s almost always on the eve of one of two things happening,” said Jeff Anderson, a Minnesota lawyer who is representing hundreds of plaintiffs in several of the bankruptcy cases. “Depositions of the top officials that are going to reveal publicly their role in concealing the crime or a trial that is to begin that is going to be public.”

Once a diocese files bankruptcy, Anderson said, everything is put on hold.

“It halts the discovery, it halts the disclosure, it keeps the public from knowing the truth and throws it into kind of a quasi-secret proceeding in bankruptcy court,” he said. “And that’s much more secretive by nature than a public proceeding in a state court or trial.”

While victims in some cases have received settlements comparable to what they may have received in nonbankruptcy cases, the settlements in bankruptcies are typically less, Anderson said.

In January 2011, the Archdiocese of Milwaukee filed for bankruptcy — the eighth diocese in the country to seek protection since the priest sex abuse scandal exploded in Boston in 2002. The archdiocese said it had spent more than $29 million over the past 20 years to cover costs associated with sex abuse cases.

“Since 2002, we have sold property, liquidated savings and investments, and put all available real estate on the market in order to free up resources,” said a statement posted on its website.

During that period, the statement said, the archdiocese had reached settlements with nearly 200 people. But mediation had broken down with alleged victims in recent cases, it said.

“A Chapter 11 reorganization will enable the court to compensate all these individuals in a single process, ensuring that each is treated equitably,” the statement said. The bankruptcy action would basically serve as “a kind of ‘last call’ for financial claims against the archdiocese.”

Three years later, the case is still ensnared in the courts. More than 500 people have come forward with sexual abuse claims, and the plaintiffs have accused the archdiocese of hiding nearly $57 million in a cemetery trust fund to keep it from going to the victims. Last month, the archdiocese filed a reorganization plan offering to set aside $4 million to pay about 125 victims of sex abuse, leaving victims and their advocates outraged.

Jim Stang, an attorney who has represented the creditors’ committees in 10 of the bankruptcy cases involving Catholic dioceses or religious orders, said the number of claims varies from diocese to diocese.

The fewest number of claims has been in Stockton, Calif., he said, where there are seven pending — although more probably will be filed before a deadline shuts the process down. Milwaukee had 17 to begin with, Stang said, but ended up with 575 after the archdiocese sent out a notice alerting people about a deadline to file claims.

Stang said the biggest settlement involving a bankruptcy case has been in San Diego, where the diocese paid out nearly $200 million to 144 victims.

Contrary to what many may believe, Stang said, bankruptcy does not shut down a diocese.

“Gallup (New Mexico) says we’re the poorest diocese in the country; Helena (Montana) says

we’re

the poorest,” he said. “But none of them have closed their doors.”

KC cases

Kansas City area Catholics thought the priest sex abuse issue had finally been put to rest in 2008 when the diocese announced its $10 million settlement with dozens of victims who alleged abuse going back decades. As part of the settlement, the diocese put into place more rigorous policies and procedures to prevent such heinous acts from occurring again.

“Many felt that our diocese had turned the corner,” Weis said, “that our chapter of the sexual abuse scandal in the Catholic Church had come to a close.”

But in December 2010, a computer technician found hundreds of lewd photos of young girls on the Rev. Shawn Ratigan’s laptop computer. A Jackson County judge later found Bishop Finn guilty of failing to report suspicions of child abuse to police or state child welfare authorities after the photographs were discovered. Finn was sentenced to two years of probation for the misdemeanor.

Ratigan pleaded guilty to five child pornography charges and was sentenced to 50 years in prison. His case triggered a whole new wave of litigation saying church leaders had again covered up sexual abuse by priests in the diocese.

Only a half dozen of the latest round of lawsuits have been settled, but the cost to the diocese has been significant. Last month, the diocese paid settlements totaling $1.8 million to two families whose daughters were victimized by Ratigan. Two other families received settlements last year totaling an additional $1.9 million in cases involving Ratigan.

And last summer the diocese settled for $2.25 million with a couple who said their son took his life three decades ago after repeated sexual abuse by a monsignor who has been the subject of dozens of lawsuits. Another case, filed against a priest, his religious order and the diocese, was settled in December for $130,000.

The diocese still faces about 30 other civil lawsuits alleging sexual abuse, as well as the breach-of-contract case. In that case, filed in 2011, the plaintiffs say the diocese and Finn failed to live up to some of the 2008 settlement’s critical terms — among them a pledge to follow mandatory state reporting requirements and diocesan guidelines to report suspected sexual abuse of minors to law enforcement. A judge granted the plaintiffs’ request for arbitration, and that process is underway.

Beyond the settlements, the diocese has amassed hefty legal costs associated with the lawsuits and criminal case against Finn.

The diocese spent $4.6 million in fiscal years 2012 and 2013 on claims involving priests that were alleged to have occurred from the 1960s through 1980s, according to diocesan financial reports. Those fiscal years ran from July 1, 2011, to June 30, 2013.

The costs for civil actions against the diocese involving Ratigan were $944,296 during that period, the reports showed. The diocese said it did not, however, pay for Ratigan’s personal defense.

The diocese also spent $1.7 million on legal costs for the grand jury and criminal proceedings involving the diocese and Finn, and $67,576 on legal proceedings regarding the breach-of-contract lawsuit.

Weis and other local Catholics expressed their concerns about the diocese’s finances in letters they recently wrote to Pope Francis. The letters were included as part of a formal request that the pope remove Finn as bishop because of his handling of the Ratigan case.

Some said parishioners had stopped giving money to the diocese.

“In my own parish, several longstanding parishioners have ceased all financial contributions to the parish because they do not want a cent of their gift to go to the diocese,” wrote John Veal. “… Many of our parishes are struggling financially. … More such suits are pending. The scandal is far from over.”

Smith, the diocese’s spokesman, said it was difficult to tell whether contributions had decreased because the diocese is in the midst of a capital campaign that includes plans for a new high school.

“The diocese has suspended the Bishop’s Annual Appeal while it is conducting a capital campaign, so there are no apple-to-apple comparisons for giving to the diocese,” he said. “Giving to the capital campaign is significantly more than regular annual giving through the appeal. Money given to the capital campaign is restricted to the goals identified by the campaign.”

He did say, however, that “contributions to parishes overall are flat compared to last year.”

The cost of the settlements themselves have been covered by the diocese’s insurance carrier, he said.

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