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Bankruptcy hint clouds church talks

Lawyers warn of halting bid for settlement

By Walter V. Robinson and Michael S. Rosenwald, Globe Staff, 12/2/2002

wo lawyers whose firm represents 219 alleged victims of sexual abuse by Boston archdiocesan priests said yesterday that they will walk away from settlement talks unless they receive assurances today that the archdiocese does not plan to file for bankruptcy.

''They should either go ahead and declare bankruptcy or stop talking about it,'' Jeffrey A. Newman of the law firm Greenberg Traurig said in an interview.

Newman, along with his partner, Roderick MacLeish Jr., said it makes no sense to continue a time-consuming mediation unless church lawyers promise there will be no bankruptcy filing.

Their firm represents about half the estimated 450 people who have hired lawyers this year to press sexual abuse claims against the archdiocese.

MacLeish and Newman, along with lawyers for other victims, were reacting to the disclosure in yesterday's Globe that the archdiocese, which faces claims that could exceed $100 million, is prepared to file for protection in US Bankruptcy Court unless the flagging prospects for a mediated settlement improve.

News that the archdiocese might take such a drastic step prompted a range of responses yesterday. Some victims said bankruptcy would give the church a way to avoid its responsibility, while shielding Cardinal Bernard F. Law from questions about his oversight of known molesters who were allowed continued access to children.

''Enron is Enron alone. But no one can argue that the Boston Archdiocese is a church unto itself,'' said David Clohessy, the national director of the Survivors Network of Those Abused by Priests.

If the archdiocese is financially unable to settle the claims, Clohessy said, the Catholic Church's ''shared culpability'' for the crimes of its priests demands that the Vatican and other dioceses contribute to a resolution of the crisis in Boston.

Officially, Donna M. Morrissey, the archdiocese's spokeswoman, denied there is any timetable for deciding whether to file for bankruptcy. Morrissey told reporters that the church remains committed to mediation and that church officials are ''optimistic'' that the cases can be settled ''fairly, equitably, and expeditiously.''

She added: ''That being said, we have to consider all of our options. ... We want to support the victims while continuing the good works of the church.''

Law, during his homily yesterday at the Cathedral of the Holy Cross, said, ''We pray for the victims of this crime, this sin.''

Later, after Newman pointed out that Law and other church officials are named as defendants in many of the lawsuits, a source close to the archdiocese said in response that the church expects the individual defendants, including Law, to contribute a portion of their assets to the settlement.

Although Morrissey called the Globe report premature, two sources close to the archdiocese and a senior church official said Law's senior advisers agree that seeking protection under Chapter 11 of the bankruptcy code will ultimately prove to be the church's best option. The alternative, they said, would be years of costly and damaging litigation.

The sources declined to be identified by name or title.

A bankruptcy filing would give the church some benefits: All action in the civil cases in Suffolk Superior Court would cease; no new lawsuits could be filed; the bankruptcy court would set a deadline for the filing of new claims; and lumping all 450 claimants together in one class would increase the chances for a settlement that could be negotiated quickly.

Whether or not bankruptcy is in the offing, lawyers who represent claimants said the willingness of the archdiocese to acknowledge publicly they are considering such an unprecedented action suggests the church is trying to pressure victims into rushing to settle claims.

''At the very least, it's rank intimidation. No amount of manipulation or grandstanding will affect what we do,'' Newman said.

Sylvia Demarest, a Dallas attorney who has represented numerous people who were abused by priests, said she believes the Boston Archdiocese may be planning to use the possibility of financial catastrophe to create sympathy for the church and a backlash against victims.

In 1997, Demarest and another attorney won a $119.6 million jury verdict from the Dallas Diocese for 11 victims of the Rev. Rudolph Kos. But after the diocese threatened to file for bankruptcy, the case was settled for $31 million.

''Our dispute was not with the people in the pews. Bankruptcy was not something we wanted to see,'' Demarest said of the decision to settle. A bankruptcy filing in Dallas, she said, ''would have been a public relations nightmare for the victims.''

But Boston is different - Demarest called it a ''mess.'' Even with the avalanche of claims, church officials are not arguing that the much larger Boston Archdiocese would be driven to insolvency by the claims it faces. According to a Globe analysis, the archdiocese's real estate holdings have an assessed value that exceeds $1.3 billion; the actual value of the property is believed to be much higher.

In interviews last week, archdiocesan sources said they have every intention of settling the cases for an amount that the victims will find acceptable. The church's insurers have yet to agree how much of the settlement they will cover, but lawyers on both sides believe the archdiocese's share of the cost will be tens of millions of dollars.

But if the claims are negotiated before a federal bankruptcy judge, even a fair settlement will leave everyone a loser, according to Demarest. The bankruptcy process, she said, ''will stop the drip-drip of negative publicity. When it gets into the bureaucratic bankruptcy process, the discussion will be about assets, and public interest in the issue will diminish. So there are a lot of reasons for the archdiocese to take this step.''

Wendy Murphy, a former prosecutor who now represents victims of sexual abuse, said she believes that civil court trials offer all the parties the best opportunity to learn about the institutional failings that helped perpetuate the abuse.

''Bankruptcy is a discreet legal and mechanical option that treats victims purely as numbers on a spreadsheet,'' Murphy said. ''This case is about lives damaged and destroyed by systemic abuses and we will only learn why these things happened and reach some moral accountability if the truth comes out through trials.''

Stephen Kurkjian and Michael Rezendes of the Globe Staff contributed to this report. Walter Robinson can be reached at wrobinson@globe.com. Michael S. Rosenwald can be reached at mrosenwald@globe.com.