Judge in Harrisburg Diocese bankruptcy case makes it harder for church to protect assets from liability

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A federal judge in a bankruptcy case involving the Roman Catholic Diocese of Harrisburg has ruled that church officials cannot shield assets such as $50 million in Harrisburg real estate, including the residence, from liability. of Bishop Ronald Gainer and the Priests’ Retirement Home. Other assets include eight cemeteries and seven secondary schools.

Advocates for victims of clergy sex abuse applaud Chief Bankruptcy Judge Henry W. Van Eck’s decision as a sign the court is ready to challenge the veil of secrecy that Catholic officials have long used to protect assets.

In the Feb. 17 decision, Van Eck ruled that the court had found enough claims of fraud allegations against the diocese, and that attorneys representing survivors of sexual abuse could explore allegations of fraud by Catholic officials.

The plaintiffs seek judgment against assets estimated at $95 million that the diocese transferred behind two different trusts. The judge’s decision designates these assets to the bankruptcy estate of the diocese.

“It’s hopeful for the victims simply because the judge is not neglecting the defense blocking other assets,” said Mike McDonnell, spokesperson for SNAP, the network that represents survivors of sexual abuse in the clergy.

“In other words, he’s basically saying the door is now open and you can explore what you think are hidden assets of the diocese.”

The Diocese of Harrisburg in 2020 sought Chapter 11 protection following a statewide grand jury investigation that found priests in the diocese and five others in Pennsylvania sexually assaulted generations of minors.

The 15-county Diocese of Harrisburg was named to the state’s 40th inquest grand jury led by Attorney General Josh Shapiro, which found church leaders covered up the crimes for decades .

In addition to real estate assets, the court ruled that $45 million in furniture and appliances, cash and securities, religious artifacts and objects, vehicles, notes, records and books were also responsible for the bankruptcy suit, according to documents filed with US Bankruptcy. Court of the Intermediate District of Pennsylvania.

The Diocese of Harrisburg in 2020 became the first diocese implicated in the statewide grand jury investigation into clergy sex abuse to file for bankruptcy. The investigation, led by Pennsylvania Attorney General Josh Shapiro, uncovered systemic and widespread sexual abuse of minors at the hands of priests.

Following the landmark 2002 investigation into clergy sex abuse in the Archdiocese of Boston, the Catholic Church attempted to reduce the damage caused by pedophile priests by resorting to bankruptcy, not only for the relative ease of mass establishment, but for the possibility of protecting millions of dollars of assets by transferring and reclassifying them.

According to BishopAccountability, the Catholic Church has protected some $2 billion in assets over more than a decade since the Boston case. BishopResponsibility maintains a database of abusive priests and church officials.

Courts have increasingly made it harder for the church to reduce the pot of money liable in bankruptcy cases.

In 2015, for example, the Archdiocese of St. Paul and Minneapolis filed for Chapter 11 bankruptcy, claiming only $50 million in assets. Lawyers for the victims estimated the value of the archdiocese at around $1.7 billion. In 2018, the Archdiocese reached the largest bankruptcy settlement by an archdiocese: a $210 million settlement.

Lawyers said the court’s decision was on the side of victims of clergy abuse, transparency, accountability and redress.

“We’ve seen these tactics in dioceses across the country,” said McDonnell, who was abused by two priests in the Archdiocese of Philadelphia when he was between 11 and 12 years old. “It allows plaintiffs’ attorneys to take deeper dives. It gives hope to victims that the judge does not side with every request the diocese makes to protect its reputation as well as its assets.

The Diocese of Harrisburg becomes the first Catholic diocese in Pennsylvania to file for bankruptcy.

Bankruptcy means dozens of victims who are hit with a statute of limitations because they missed the statute of limitations are now eligible to seek compensation in a bankruptcy settlement. Almost all of the abuse cases documented by the grand jury investigation fell outside the law.

Victims of clergy sex abuse in Pennsylvania have for years faced a series of setbacks in their attempts to reform the statute of limitations. An election referendum is set to be put on the ballot next year to allow state residents to decide whether the constitution should be changed to allow victims to bring cases to court even if they are well past the statute of limitations. .

Meanwhile, the bankruptcy case makes its way through the court.

“That’s good news,” McDonnell said. “It’s a step in the right direction and certainly in a process that is a slow train.”

McDonnell said the ruling will lead lawyers to take “deeper dives” into the diocese’s attempts to protect assets.

“They’re not just going to take away the bishop’s residence and the high school and say, ‘Boom, those are the trump cards,'” he said. “They’re going to take a deeper dive that could go back years of deed transfers.”

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