Is the Catholic Church evading justice? Dioceses faced with abuse allegations are declaring bankruptcy

In California, a 2019 law opened a three-year window in which cases would be exempt from statutory limitation, resulting in more than 3,000 lawsuits. The influx of claims has seen at least four of the 12 Roman Catholic dioceses in California file for bankruptcy, or contemplate doing so, to deal with the crisis. In New York, five of the state’s eight dioceses have also recently sought bankruptcy protection.

In a letter to parishioners last month, Oakland Bishop Michael C. Barber said that the Diocese made the filing because it believed that the bankruptcy process is “the best way to support a compassionate and equitable outcome for survivors of abuse”, while ensuring that the church continues to support the community. He warned that the Diocese would be forced to close some of its worship sites, and “re-imagine” how to use others. This was part of the “dual challenge of declining engagement by Catholics”, he explained, citing a 25% decline in priests since 1985 and Mass attendance that has almost halved since 2010.

According to research firm Gallup, between 2000 and 2020 the percentage of self-described Catholics in the United States who were members of a church declined by 18 points (from 76% to 58%) — double the number of Protestants no longer going to church. While the decline in church attendance cannot be solely put down to child sexual abuse scandals — it is occurring to an extent across most Christian denominations, and has been accelerated by pandemic lockdowns — they may explain why it has been particularly precipitous for Catholics.

For those seeking financial redress for these horrific crimes, understanding the true wealth of the Catholic Church is a frustrating pursuit. One estimate suggests its total United States assets are worth $65 billion, but there is no way to prove this figure. Only through individual bankruptcy cases can churches’ true wealth be known. The Oakland Dioceses’ recent petition says that its assets are valued between $100 million and $500 million — and that liabilities from the claims against it are estimated to be in a similar dollar range.

When an organisation files for Chapter 11 bankruptcy protection in the United States, it automatically halts any pending civil lawsuits, while allowing the organisation, in this case the churches, to continue operating. Marie Reilly, a law professor at Penn State Law and practising Catholic, has compiled Chapter 11 bankruptcy data for The Catholic Project, which aims to provide transparency regarding the process. She noticed that filing for bankruptcy was becoming commonplace after the Diocese of Portland first sought the legal protection in 2004: 32 of the country’s 195 dioceses have sought it since. But Reilly believes that media coverage of the practice is often misleading.

“Lawyers for the plaintiffs, who are great at what they do, manage the media extremely well,” she told me. The Church, Reilly added, tends to be unwilling to “publicly push back on some of some of the inflammatory and colourful statements that are made by advocates for survivors of sexual abuse”. She believes that bankruptcy “is a very powerfully charged word” and public perception of it, along with legal complexities, makes the bankruptcy process “seem sinister in a way that in fact, it is not”.

A number of bankruptcy scholars, and lawyers who have no affiliation to the Church, have also come out in support of the bankruptcy strategy as the best way to handle mass sexual abuse claims. (The Boy Scouts of America, facing a similar crisis, is using the same mechanism). The reasoning goes that United States tort law could permit the first few claimants to take the lion’s share of compensation, meaning that subsequent victims could be left fighting for scraps. Reilly says that “the untold story about bankruptcy” is that it provides “an alternative to the winner-take-all race approach to litigation”. If all the claims against the church are resolved “in a single forum”, she says, all the victims “will be treated similarly”.

Victims, however, say that filing for bankruptcy shields the Catholic Church from true justice. Mike McDonnell, a child sexual abuse victim of the Church in Philadelphia and spokesperson for the Survivors Network of those Abused by Priests (SNAP), says that bankruptcy proceedings stop the operations of the Church hierarchy coming to light. Many victims, he explained, are seeking to “unveil how some of these well-known predators within the diocese were allowed to continue their career by being transferred to parish after parish”. He believes that it is not only financial claims that are halted when a bankruptcy petition is filed, but also any deeper inquiries into the systemic cover-up of abuse. “The victim is then prevented from seeing documents that we know the diocese is holding on to,” he says. “We know that the Catholic Church is extremely good at keeping records and taking notes.”

There is only so much the national, and international, Church is willing to do. The Vatican wrote to the president of the United States Conference of Catholic Bishops in 2020, reminding them that dioceses filing for bankruptcy may require consent from the Holy See — when the “alienation of temporal goods” exceeds $7.5 million for dioceses with more than 500,000 members, and $3.5 million for those with smaller numbers. The overarching US Church body, meanwhile, has established a protocol for managing cases — each diocese is supposed to have its own designated Victim Assistance Coordinator, for instance — but it has eschewed responsibility for the financial management of claims. Chieko Noguchi, executive director of public affairs for the US Bishops’ Conference, told UnHerd in a statement that the “financial, legal, structural, and operational matters” of each United States diocese operates separately under the governance of its respective bishop. (She also said that the Church has “made much progress, but we also know that the painful experience of survivors calls us to continual improvement”.)

Marie Reilly agrees that victims deserve restitution, but says that their cause has been hijacked by class action lawyers who advertise on television and “generate a large number of claims” though communicating an “anti-church sentiment”. She suspects that some victims’ groups are funded by “well-organised, extremely sophisticated” donors looking for profit rather than justice.

On that front, she has a case. In 2017, former SNAP fundraiser Gretchen Rachel Hammond filed a whistleblower lawsuit against the Network, alleging that she was fired for confronting the organisation about “colluding with survivors’ attorneys”. Hammond accused SNAP of exploiting victims, stating in her lawsuit that the organisation “routinely accepts financial kickbacks from attorneys in the form of ‘donations’”, and it then “refers survivors as potential clients to attorneys, who then file lawsuits on behalf of the survivors against the Catholic Church.” Mike McDonnell told UnHerd that SNAP will not comment on “that resolved issue”.

Church bankruptcy is the real issue, he says, that needs to be addressed. “It’s not fair, because it still allows the dioceses to steer the proceedings and have a better outcome,” he says. Victims need significant compensation. But the days of “large six figure settlements” for survivors are becoming increasingly rare. “If you really tally up the cost of trauma over the course of an individual’s lifetime, it’s a heck of a lot more than $175,000”, which he says is now roughly the average payout. McDonnell believes that, by refusing to take financial responsibility for that trauma, the Catholic Church is kicking the can down the road, and “revictimising those who have been terribly hard done by”.

Many have pointed to the vast property holdings of the Church as another sign that filing for bankruptcy is a shady tactic. But some dioceses have actually started selling property to contribute to settlements. In 2021, Long Island in New York sold its headquarters for $5.2 million. Last year, the Archdiocese of New Orleans sought court approval to sell off properties as part of its bankruptcy case. So far, it has only sold one former school for $1.9 million — a drop in the ocean of the $243 million in assets, and $139 million in liabilities, that it listed in its bankruptcy petition. (Marie Reilly notes that the Diocese has “layers of financial problems” beyond sexual abuse cases).

And while the Catholic institution’s unpopularity balloons, it appears that an equally despised, albeit secular villain is entering the arena. Reilly says that insurance companies have become increasingly involved in this scandal, on behalf of the Church, and that they are resisting victims’ claims in court. Historical lawsuits without witnesses are notoriously difficult to prosecute, and insurers are beginning to mount more robust legal defences. “Insurers are saying, ‘the dioceses won’t push back, so we’re going to push back — we’re not just going to write the checks anymore’”, she says. This is another way in which bankrupt churches might serve victims better: under bankruptcy law, claims are “batch processed”, with few going to jury trial — a process that is not only traumatic for victims, but also has a less predictable outcome.

Pope Francis has asked victims of clerical sexual abuse for forgiveness, but SNAP says it is up to individuals, and not something that can be granted to the institution. These cases are about redressing failure, and everyone — even insurance companies — recognises that nothing in this world can ever truly compensate for the moral, psychological and spiritual injuries inflicted on untold numbers of young children by an institution that was supposed to love them.

For survivors like Joey Piscitelli, the Church’s request for grace is a step too far. And nothing will persuade him that the legal manoeuvring is not a false pretence to keep perpetrators’ names, and details of their crimes, out of the media. “A bankruptcy court shouldn’t have jurisdiction over the information of what priests did to kids,” he says. “By filing for bankruptcy because they’re being pursued for tens of millions of dollars, Catholic Churches are claiming that they are the victims.”

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Elle Hardy is a freelance journalist who’s reported from North Korea and the former Soviet Union. She is the author of Beyond Belief: How Pentecostal Christianity Is Taking Over the World.

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