Wilmington bankruptcy plan increases settlement amount to $74 million

WILMINGTON, Del. – An amended bankruptcy reorganization plan filed by the Diocese of Wilmington includes the creation of a $74 million trust that church officials say would provide an estimated average payout of $750,000 to survivors of abuse by diocesan priests.

The new plan’s options include a “settlement plan” that increases the average payout to those survivors by approximately $400,000 compared to the plan the diocese submitted in September. That option, the diocese says, provides “the best chance” for promptly resolving its bankruptcy while giving “maximum compensation” to the 150 survivors who have claims against the diocese.

The settlement plan assumes a lower average payout in diocesan cases involving religious-order priests, said diocesan attorney Tony Flynn.

Under the new plan’s settlement option, compensation to survivors would range from about $75,000 to $3 million, depending on the severity of abuse suffered by the survivor-claimants, Flynn said. The average settlement for survivors under the reorganization plan filed last September was about $340,000, Flynn said, which was considered low by survivors’ attorneys.

The new settlement-plan option also provides additional funding to the lay employees’ pension plan so it can continue to meet its obligations.

The amended reorganization plan submitted Jan. 10 includes a second option for survivors and other creditors called the “diocese-only” plan. If creditors choose that option, settlements would be limited to funds available from the assets of the diocese, which could be as low as about $15 million, depending on the outcome of litigation, to be apportioned among all creditors, including survivors and pension beneficiaries, Flynn said. The diocese-only plan could involve years of contested lawsuits and would not settle suits against parishes, he said.

Under both options, all clerical sex abuse claims pending in state court against the diocese or a parish will be removed to the U.S. District Court in Wilmington for disposition as part of a claims estimation and liquidation process, the diocese said.

The major difference from the reorganization plan that the diocese submitted in September is the addition of approximately $69 million in assets from Catholic “nondebtor” entities that are separate corporations from the diocese.

The added funds will come from cash, sale of real estate and other assets of the Catholic Diocese Foundation (which will contribute most of the funds, nearly $53 million), Catholic Cemeteries and other Catholic agencies that are not involved in the sex abuse litigation but are part of the bankruptcy proceedings because they have funds in the diocese’s pooled investment account, which includes approximately $74 million.

The bankruptcy judge ruled last year that the pooled investment account money is part of the diocese’s bankruptcy estate. The diocese is appealing that decision.

Under the settlement-plan option, “We’re all in,” Flynn said. “There’s no more. We’ve tapped every resource and then some. This is all the diocese can amass for the purpose of compensating creditors, including abuse survivors. We’re spending $800,000 a month in this bankruptcy and that’s coming out of money that would otherwise go to survivors and creditors. It’s got to stop.”

Bankruptcy fees paid by the diocese total $8 million to date, according to a summary of the plan from the diocese. Failure to approve the settlement-plan option, the diocese said, “will mean years more of litigation, millions more in dollars to lawyers instead of survivors and an indefinite delay in getting survivors both the help they need and the closure they have long sought.”

In a Jan. 11 statement, Bishop W. Francis Malooly said the settlement-plan option would “entail severe sacrifices in the diocesan family,” including ending the Catholic Diocese Foundation’s history of underwriting diocesan building and other projects. “Property, including the bishop’s home, will be sold, ministries will be curtailed, and some layoffs will be necessary,” he said.

Under the settlement plan, the diocese would contribute its insurance plus all but $3 million in unrestricted funds and all real estate or its value owned by the diocese, including the bishop’s house. Those assets total about $28 million, the diocese said. The $3 million not included would be the working capital of the diocese after the bankruptcy.

The Catholic Diocese Foundation was formed in 1928 by Bishop Edmond J. FitzMaurice to promote the Catholic faith, education and charity in the diocese. The foundation was funded initially with donations from parishioners and a sizable donation from John J. Raskob, a prominent businessman and philanthropist.

The foundation, which is not a defendant in any cases, “is going to end as a result of this,” Flynn said. “To save the parishes the foundation is going to liquidate all its investment assets.”

Catholic Review

Catholic Review

The Catholic Review is the official publication of the Archdiocese of Baltimore.