Sex Abuse Claims Lead to Central California Archdiocese Bankruptcy

By CHANNING JOSEPH | January 17, 2014

A Roman Catholic diocese in Central California filed for bankruptcy protection on Wednesday after paying out millions of dollars to plaintiffs who made sexual abuse allegations during the past two decades.

The Diocese of Stockton, which filed for Chapter 11 protection in U.S. Bankruptcy Court in Sacramento, serves about 250,000 Catholics in a region spanning more than 10,000 square miles. It has paid more than $14 million in settlements and judgments in sexual abuse cases, and its insurance providers have paid an additional $18 million.

“We have, over 20 years, tried to address every sexual abuse allegation that has come forward,” said Bishop Stephen E. Blaire, who leads the diocese.

“While it’s painful and difficult” to declare bankruptcy, he said, “I think it’s the right thing to do,” and “it will allow us to continue our work as a church.”

The diocese’s attorney, Steven Felderstein, said it had roughly $17 million in outstanding debts and its legal fees for the bankruptcy easily could be $1 million or more.

“The diocese would be responsible for not only its attorneys’ fees but for the creditors’ committee’s attorneys’ fees,” Felderstein said.

There are four outstanding sexual abuse cases. Because the diocese is running so low on cash, it’s not in a position to settle those claims, let alone claims of people who might come forward in the future, Blaire said.

Payouts for sexual abuse plaintiffs often are upward of $1.5 million, Blaire said, and a recent one was more than $3 million.

“We just don’t have that kind of money anymore,” he said, adding the diocese has less than $1 million in its reserve fund. He said bankruptcy is the only way to be fair to current and future victims.

Felderstein said that because of the filing, a deadline eventually will be set for additional abuse claims.

In the meantime, Felderstein said he soon will be filing motions with the court to request the authority to make payroll for any wages incurred before the filing; to ask to continue using the diocese’s current cash-management system; and to order utility companies to keep services on.

“We are in this situation because of those priests in our diocese who perpetrated grave, evil acts of child sexual abuse,” Blaire noted in a statement. “We can never forget that these evil acts, not the victims of the abuse, are responsible for the financial difficulties we now face.”

Joelle Casteix, volunteer western regional director of the Survivors Network of Those Abused by Priests, called the bishop’s bankruptcy declaration “extraordinarily troubling” and “a convenient, self-serving dodge.”

“It’s a way to prevent the truth from coming out about clergy sex abuse and cover-ups, while shifting the attention away from crimes to cash,” she said in a statement.

“Despite this irresponsible decision,” she continued, “we hope that others who saw, suspected or suffered clergy sex crimes and cover-ups in Stockton will step forward, call police, expose wrongdoers and protect kids.”

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