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Catholic Church Moves Funds Around to Shield $2 Billion in Assets from Abuse Victim Settlements

Clergy members attend the Holy Mass held by Pope Francis at the National Stadium in Bangkok, Thailand, November 21, 2019. (Jorge Silva/Reuters)

The Catholic Church in the U.S. has moved around more than $2 billion in assets in order to prevent the funds from going to alleged abuse victims who sued the Church.

As more victims of sexual abuse by priests sued various dioceses around the country, churches began transferring and reclassifying assets, and filing for bankruptcy, according to a Bloomberg Businessweek review of court filings by lawyers representing churches and victims over the last 15 years.

Filing for Chapter 11 bankruptcy has allowed the dioceses to reach universal settle­ments and protected them from further victim claims. Dioceses have chosen the bankruptcy option more than 20 times since 2004.

A spokeswoman for the U.S. Conference of Catholic Bishops stated that the “decision on whether to seek Chapter 11 protection in a given case is the diocese’s alone.”

However, in some cases the Vatican has signed off on an archdiocese’s financial reorganization before that archdiocese filed for bankruptcy.

In 2015, St. Paul and Minneapolis filed Chapter 11 bankruptcy, claiming only $50 million in assets, while lawyers for victims estimated the archdiocese’s worth at about $1.7 billion. The Twin Cities archdiocese subsequently reached the largest bankruptcy settlement by an archdiocese.

In New Mexico, the Archdiocese of Santa Fe, which has had dozens of abuse lawsuits filed against it, has taken a particularly aggressive tack to shielding its assets from victim claims, distancing itself since 2012 from about $178 million to protect the funds from the settlements.

The state attorney general opened an investigation in 2018 into the Sante Fe Archdiocese and executed a search warrant to obtain records on at least two former priests accused of abusing children. The archdiocese said it “worked cooperatively” with the state.

“The bankruptcy code should not be used to revictimize victims,” said New Mexico attorney general Hector Balderas. “They are really just trying to shield assets.”

The New Mexico bankruptcy court last year set a June 17 deadline for filing sex abuse claims against the archdiocese, riling the lawyers of victims, who argue the move leaves behind victims who were still too ashamed to come forward by the deadline. The victims’ lawyers began mediation in September with the archdiocese.

“We realize that nothing can ever adequately compensate those who have been victims of this terrible crime,” Santa Fe Archbishop John C. Wester said in November, 2018. “Nonetheless, we seek to do all we can by way of publicly acknowledging their pain, offering apologies and providing financial compensation.”

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