The St. Paul-Minneapolis archdiocese filed for bankruptcy Friday morning in response to pending lawsuits related to the sexual abuse of minors by clergy.
The Associated Press first reported the development, long expected in a region gripped for more than a year by a sexual abuse scandal that has seen trust deteriorate in the local church. It is the 12th U.S. diocese to file for bankruptcy.
The filing of Chapter 11 reorganization came in the U.S. Bankruptcy Court of the District of Minnesota. The archdiocese pointedly stated its current situation is “because of the scourge of sexual abuse of minors.”
The archdiocese described bankruptcy as “the fairest way” to resolve existing and future claims of sexual abuse while at the same time continuing its ministries within the local church.
In its court filing, the archdiocese estimated assets between $10 million and $50 million, and liabilities between $50 million and $100 million. It listed its number of creditors between 200 and 1,000, with clients of attorney Jeff Anderson representing 9 of the 20 with the largest unsecured claims*.
In November, the archdiocese released its 2014 fiscal year financial statements that showed a $9 million deficit in operating activities, net assets down $8.9 million and total cash dropping 60 percent, from $9.5 million to $3.8 million.
At the time, Twin Cities Archbishop John Nienstedt repeatedly used the word “trouble” to describe what the documents detailed. His chief financial officer also allowed for the possibility of bankruptcy as one possible path.
In a letter on the archdiocese’s website Friday, Nienstedt said the reorganization filing “marks another important step on our way forward as a local church.”
He reiterated the archdiocese’s stance that the move is “the fairest and most helpful recourse” for an equitable distribution of its “finite resources” among victims of sexual abuse who have brought forth claims.
“It must be pointed out that this action will not in any way avoid our responsibilities to those who have been affected by clerical sexual abuse. This is not an attempt to silence victims or deny them justice in court. On the contrary, we want to respond positively in compensating them for their suffering. Plaintiffs’ attorneys and I are in agreement that priority should be given to providing resources for the victims/survivors,” he wrote.
At a press conference Friday, Anderson said his firm has been working for months to determine the fairest way to compensate victims. Past bankruptcies have seen average payouts from $42,000 (Helena, Mont.), to $750,000 (Wilmington, Del.), to $1.4 million (San Diego), the lawyer said, though it's uncommon for claimants to receive equal shares and numerous variables determine how much is paid and to whom.
He estimated a two-year timeframe for the proceedings, a timeline shorter by at least a year than what he saw a trial route requiring. And he repeatedly said he did not forsee the Twin Cities becoming another Milwaukee, where proceedings for that archdiocese have carried into five years with no end in sight in what Anderson described as "a sad, horrendous, nightmare."
Since the historically adversarial sides formed a partnership in October as part of the settlement of the John Doe 1 case, Anderson has received access to priest files, which he has disclosed semi-regularly, the six latest made public Wednesday. Bankruptcy will put on hold cases filed against the archdiocese, including three set for trial Jan. 26. Two involve Anderson, whose firm has filed 16 total claims, in addition to another 112 notices of claims on behalf of alleged abuse victims.
“It is our belief that this action taken today is necessary,” Anderson said.
A review of the bankruptcy filings indicated the archdiocese lacks ability to satisfy its obligations to survivors, Anderson said, but he expressed a “high level of confidence” that insurance funds from policies dating back to the 1950s will be available. Pre-bankruptcy negotiations with insurance companies proved unsuccessful, and the archdiocese in November filed a federal lawsuit to force coverage.
The 30-year veteran of abuse litigation struck an optimistic chord for how the bankruptcy process will proceed, using the word “harmonious” and saying it will be done “in a way that has never been done before” -- one that brings about healing and compensation for survivors of sexual abuse but without the contentiousness common in past diocesan reorganizations.
“We will fight if we have to, but we don’t believe we have to here. We have to work together,” said Anderson, who responded to several questions skeptical of his newfound confidence in the archdiocese.
The Survivors Network of those Abused by Priests, who in July awarded Anderson an inaugural Pioneer Award, put forth a different view, that bankruptcy allows the archdiocese to change the subject from who was responsible for clergy sexual abuse to how will funds be divided.
"Chapter 11 enables a bishop to protect what he cares about most: his own reputation, comfort and secrets. It stops depositions, discovery and clergy sex abuse and cover up trials. It's a smart but selfish legal maneuver that will effectively prevent Catholics from getting key information and victims from getting real justice," said Barbara Dorris, SNAP outreach director, in a statement.
In a rare press conference later Friday, Nienstedt said that the chancery requested permission to pursue reorganization from the Vatican, which must authorize such actions, and received a letter granting it last week.
In taking questions, the archbishop stated succinctly "I do not intend to resign," again likening the relationship between bishop and diocese to a marriage. He declined comment on the investigation exploring alleged misconduct on his part. Auxiliary Bishop Lee Piché, who is heading the investigation, said it is ongoing and declined further comment.
Nienstedt agreed with a question asking if the Anderson partnership was a turning point, but said “certainly we’re not on the same team” before adding that they share a main concern of healing for victims and survivors of abuse.
He also said it was an open question whether insurance payments would satisfy potential settlements, and that it was too soon to know whether the archdiocese would sell off assets, but that it was a possibility.
In his letter, Nienstedt stated that the bankruptcy filing is limited to the chancery corporation and does not include parishes and schools, though both could be indirectly impacted if cuts are made to ministries and programs assisting them. In October, chancery staff were informed of pending layoffs as the archdiocese sought to reduce its budget by $5 million, or 20 percent.
Last week, it was announced that three separate cases alleging sexual abuse of minors by three different priests would all begin Jan. 26. They would be the first cases to reach trial under the Minnesota Child Victims Act after the Doe 1 case was settled.
That case led to the release of numerous documents and depositions of several church officials, including Nienstedt, former vicar generals Fr. Kevin McDonough and Fr. Peter Laird, and current St. Louis Archbishop Robert Carlson.
Editor's Note: A previous version of this story stated Jeff Anderson represented 17 of the 28 largest creditors listed by the archdiocese. In reality, nine of those creditors are consolidated under a single case, bringing the actual number of creditors represented by Anderson to nine and those listed by the archdiocese to 20.