The Portland Archdiocese has filed for bankruptcy because of the steep costs from clergy sex abuse lawsuits, an unprecedented step that could open the Roman Catholic archdiocese to new levels of court scrutiny.
No other US diocese has filed for bankruptcy, though Boston threatened to do so at the height of the abuse crisis that began there two years ago. The Diocese of Tucson, Arizona, has said it will decide whether to seek court protection before an abuse trial there in September.
Portland's Chapter 11 bankruptcy filing on Tuesday halted the trial of a lawsuit against the late Reverend Maurice Grammond, who was accused of molesting more than 50 boys in the 1980s. Grammond died in 2002.
Plaintiffs in the two lawsuits involving Grammond have sought a total of more than US$160 million.
The archdiocese and its insurers already have paid more than US$53 million to settle over 130 claims dating back to 1950 by people who say they were abused by priests. Most of those lawsuits have been filed since 1999.
The bankruptcy filing includes claims against the diocese from 20 pending priest abuse lawsuits, ranging in amounts from US$5.1 million to US$135 million. It also includes what appears to be a US$22.3 million bank loan.
The filing did not include a list of the archdiocese's assets, which will be filed at a later date.
Bud Bunce, spokesman for the 356,000-member archdiocese, said church operations will continue as usual.
But the filing is far from everyday business -- and raises concerns about secular oversight of church affairs.
"For a diocese to give up control like this, control over a lot of important decisions, a lot of spending decisions -- it's totally uncharted," said Chuck Zech, an economics professor at Villanova University who specializes in Catholic church finances.
Chapter 11 bankruptcy frees an organization from the threat of creditors' lawsuits while it reorganizes. However, it could also open church records to public scrutiny, and could require church leaders to cede some financial control to the courts.
A judge would likely have to approve major archdiocesan expenditures as plaintiffs vie with each other for a share of its assets, said Fred Naffziger, a business law professor at Indiana University. It would be up to the judge to approve how much money creditors receive and which assets should be sold; the judge could also act as a mediator in any settlement talks.
Archbishop John Vlazny said the archdiocese tried to settle with the plaintiffs, but could not afford their offer.
"The pot of gold is pretty much empty right now," Vlazny said.
Plaintiffs' attorney David Slader countered that the church was simply trying to avoid the details of the lawsuits coming out in court. "The bishop hasn't begun to touch his pot. He is lying," Slader said.
"The archdiocese is one of the wealthiest corporations in Oregon," Slader said. Bunce declined to disclose the value of church assets.
Grammond served as a priest throughout the state from 1950 to 1985. Allegations of sexual abuse against Grammond were first reported in 1991, but the charges didn't become public until 1999 when a former altar boy sued him and the archdiocese.
In a deposition taken before his death, Grammond said, "I'd say these children abused me. They'd dive in my lap to get sexual excitement."
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