Wilmington diocese files for bankruptcy on eve of sex-abuse trials

Wilmington diocese files for bankruptcy on eve of sex-abuse trials

WILMINGTON – The Roman Catholic Diocese of Wilmington filed for bankruptcy protection just hours before eight clergy sex-abuse trials were set to begin yesterday – the first wave in dozens of cases against its priests that, by diocesan estimates, could cost it $100 million to $500 million.

In 2007, the Delaware legislature enacted a special two-year moratorium on the statute of limitations, allowing adult victims of sex abuse to sue for assaults perpetrated even decades ago. By the time the moratorium closed last July, 142 plaintiffs had filed lawsuits against the Wilmington diocese, which comprises Delaware and nine counties in eastern Maryland.

The diocese asked for Chapter 11 protection about 8:30 p.m. Sunday. In addition to the eight in Kent County Superior Court, 22 trials were scheduled to start in the weeks ahead. All have been temporarily halted.

In an open letter to the diocese’s 230,000 parishioners, Bishop W. Francis Malooly called bankruptcy a “painful decision” that he had hoped to avoid. However, he wrote, it would ensure that funds will be available for all victims, not just the first who go to trial.

A state bankruptcy court is to decide how much money the diocese must make available for settlements.

In its filing, the diocese claimed assets of $50 million to $100 million.

“It was clear to us in our negotiations that the amount of money that was being sought by the early victims and the finite amount that we had . . . was not going to work,” Malooly said at a news conference yesterday.

Thomas Neuberger, a Wilmington lawyer representing 88 plaintiffs against the diocese and two Catholic high schools, yesterday denounced the filing as a “fraudulent tactic” designed to hide the hierarchy’s “complicity in the sexual abuse of hundreds of Catholic children.”

Several suits also name two religious orders, the Norbertines and the Oblates of St. Francis de Sales, and charge that their members abused students at high schools they operate within the diocese.

Only the Catholic Diocese of Wilmington Inc. is seeking reorganization under Chapter 11. Its parishes are legally distinct corporations under state law, although a state superior court is due to rule on whether parish property can be included as part of the diocese’s assets.

Wilmington is the seventh Roman Catholic diocese in the United States to seek bankruptcy protection this decade in the face of massive numbers of sex-abuse lawsuits. The others are Davenport, Iowa; Fairbanks, Alaska; Portland, Ore.; San Diego; Spokane, Wash.; and Tucson, Ariz.

In those dioceses, cases of clergy sex abuse did proceed to trial. In Spokane and Fairbanks, the lawsuits were settled for an average of $400,000, according to James Stang, a partner in the Los Angeles law firm of Pachulski, Stang, Ziehl & Jones. In San Diego, the average payout was $1.4 million.

Stang, whose firm has worked on behalf of plaintiffs in six of the bankrupt dioceses, said a diocese might file for bankruptcy to “stop a public trial” that could reveal information it wants concealed.

Wilmington, he said, “could have let the trials proceed and filed [for bankruptcy] if they got adverse verdicts.”

Dioceses also file for Chapter 11 so the court will cap current and future abuse claims against it, Stang said. “Then if someone comes forward with a valid claim, the diocese can say, ‘You have to look to this pot of money.’ ”

Although plaintiffs might feel frustrated by the diocese’s decision to file bankruptcy just as their cases were starting to be heard, he said, the proceedings will force the church to reveal “all its assets and liabilities.”

In his letter to parishioners, Malooly wrote that the Wilmington filing was “in no way intended to dodge responsibility for past criminal misconduct by clergy – or for mistakes made by Diocesan authorities” and would not minimize its responsibility to abuse victims.

Bob Krebs, diocesan spokesman, said yesterday that since 2002 the Wilmington diocese had settled eight abuse cases for a total of $6.2 million.

Some Catholics interviewed in Wilmington yesterday said they had misgivings about the bankruptcy.

“It’s wrong to hide stuff,” said Debra Pasquarella, 41. Rosario Serrano, 35, said she believed the church had the financial resources needed to pay abuse victims.

But Anthony Cattermoul, 68, a Welshman who attended Wilmington Friends School and was back for a 50th reunion, said he thought American juries too easily award multimillion-dollar verdicts.

“If the settlements were reasonable, they wouldn’t have to declare bankruptcy,” said Cattermoul, mayor of Mold in North Wales.

Delaware is only the second state to enact a moratorium or “window” on its statute of limitations for child sex-abuse cases. Krebs, the diocesan spokesman, said yesterday that the Wilmington hierarchy was taken “completely by surprise” by the response from plaintiffs.

Proportionally, it exceeds the surge experienced in California. In 2002, the legislature there created a one-year statute window. During 2003, the year of the moratorium, about 1,000 people statewide came forward claiming they had been molested as children; about 850 named priests or religious orders of the Catholic Church.

John Salveson, president of the Philadelphia-based Foundation to Abolish Child Sex Abuse, said yesterday that efforts to enact a similar statute moratorium in Pennsylvania are “nearly stalled” in the Senate Judiciary Committee, but that a similar measure in the New York legislature has “broad support.”