Twin Cities Archdiocese files plan to settle with abuse victims

The Archdiocese of St. Paul and Minneapolis filed its financial reorganization plan in U.S. Bankruptcy Court Thursday, offering a strategy for regaining financial stability while compensating an expected 400 clergy abuse claims.

The plan calls for the creation of a $65 million trust fund for victims, which could increase in size if further insurance settlements are reached, as well as a $500,000 counseling fund for victims and new protocols to prevent future abuse.

"We filed our plan today — after 16 months — because victims/survivors cannot be compensated until a plan of reorganization is finalized and approved," Archbishop Bernard Hebda said at a news conference Thursday afternoon. "The longer the process lasts, more money is spent on attorneys' fees and bankruptcy expenses, and … less money is available for them."

Hebda acknowledged that the plan may face objections, but said that the archdiocese is committed to finding a "fair, just and timely resolution."

Victims' attorney Jeff Anderson blasted the plan at a news conference of his own, arguing that the archdiocese is protecting more than $1 billion in assets from liability and shielding itself from future abuse claims.

The plan contains provisions that would prevent any current official of the archdiocese, parishes or other Catholic entity from being sued for clergy abuse forever.

"These actions have proved the archdiocese's pledge to put survivors first to be hollow," Anderson said.

The archdiocese filed for Chapter 11 bankruptcy in January 2015 in response to a surge of clergy sex abuse claims stemming from a new law that opened a three-year window for older cases of child sex abuse to be heard in court.

It's one of more than a dozen dioceses and archdioceses nationally to file for Chapter 11 bankruptcy over recent years.

The case immediately moved to mediation, and its progress — or lack of progress — has not been made public.

The archdiocese plan, like others in church bankruptcy cases, creates a victims' trust fund. It would be overseen by a court-appointed trustee and have the authority to pay victims' claims.

A key question over the past year has been how much the archdiocese's insurance carriers will contribute. Just three of the 20-some insurance carriers of the archdiocese have settled so far, said Charlie Rogers, an archdiocese bankruptcy attorney. Under the plan, the victims' trust would take control of the insurance issue, he said, and have the right to recover any claims involving the remaining insurers.

Rogers acknowledged that victims' advocates would prefer holding out for a bigger trust fund.

"Do we take the $65 million and build upon it — or squander it in the next few years on litigation?" he said. "The archdiocese is committed to building on it, and to negotiating a fully consensus plan."

The trust fund includes $33 million from archdiocese insurers, $14 million from parish insurers, $12 million in archdiocese cash raised primarily from the sale of church properties, and $6 million from a general insurance fund, said Rogers.

The $65 million could certainly grow in the months ahead. It's not uncommon for bankruptcy plans to be filed with some nonsettled insurers, said University of Minnesota law Prof. Christopher Soper. In this case, insurers may have been waiting for the three-year lawsuit-filing window to close so they could evaluate their full universe of claims, he said.

But Anderson argued that the victims' trust fund was paltry, providing an average of about $140,000 per claim. That compares with $750,000 in the Wilmington, Del., Diocese, and $1.3 million per claim in the San Diego Diocese — the two other dioceses that declared bankruptcy because of the temporary lift in statutes of limitations.

Rogers, however, said that the award was higher than in most dioceses and archdioceses that have declared bankruptcy.

The court's survivors' committee filed a motion in bankruptcy court Tuesday claiming that the archdiocese's net worth was $1.7 billion, far greater than reported. It asked the court to consolidate the assets of Catholic parishes, schools, cemeteries and various related nonprofits as it moves toward a victims' settlement.

Hebda took issue with the accusation of hiding assets.

"There has been nothing sinister in our actions — the archdiocese has not hidden any assets," Hebda said.

The plan does not include details of how victims would be compensated for the abuse. That would be determined by survivors' representatives in court.

With more than a year of negotiations behind it, the archdiocese acknowledged that it's been a rough road.

"The primary challenge has been to balance the needs of the victims of sex abuse, the needs of parishes, and the needs of the archdiocese to meet its mission moving forward," said Rogers. "We believe this is the best we could do at this time."

The plan also is most certain to be amended in the weeks and months ahead, as the archdiocese and its creditor committee work out differences. Soper described it as the "beginning-of-the-middle'' phase of the bankruptcy process.

"Reorganizations sometimes involve modifying an initial plan," Hebda said. "We are committed to working earnestly with everyone involved to find a fair, just and timely resolution.''

Jean Hopfensperger • 612-673-4511