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Church bankruptcy talk resurfaces

Lawyers for sex-abuse plaintiffs unfazed by archbishop's missive

Local attorneys who have filed dozens of sex-abuse lawsuits against the Archdiocese of Portland aren't fazed by the discussion that the archbishop is having with his parishioners about filing for bankruptcy as a last resort.

'The only thing a bankruptcy filing would do for the archdiocese would be to slow the process down and to forestall the day of reckoning,' said Portland lawyer Kelly Clark, who has eight pending cases and has settled 15 cases.

'I don't think it gets them any relief because I don't think the U.S. Bankruptcy Court is going to buy it,' Clark said.

Archbishop John Vlazny earlier last week sent a Q and A-style letter to parishes in Western Oregon serving 300,000 Roman Catholics, with one question exploring the issue of whether the archdiocese would file for reorganization as a last resort under Chapter 11 of the U.S. Bankruptcy Code.

In the last three years, the archdiocese has been hit with more than 85 lawsuits alleging that at least 30 priests sexually abused victims most of them male and now in their 30s, 40s and 50s when they were children. Damages are estimated to reach upward of $500 million.

On June 9, Salem attorney Dan Gatti filed a $28 million lawsuit against the archdiocese and the state on behalf of seven men, claiming that they were sexually abused by a priest nearly 30 years ago while held at MacLaren School for Boys in Salem.

The suit comes less than two weeks after the archdiocese settled more than half of the 100 sex-abuse lawsuits against several priests, the terms of which have not been made public. Several dozen are pending.

'A very last resort'

Last week, Vlazny addressed the issue in the letter to Catholics to keep them informed so they wouldn't have to filter the events through the media, according to his chancellor, Mary Jo Tully.

'Declaring bankruptcy will be a very last resort,' Vlazny wrote. 'Nonetheless, if it is the only prudent way to manage its chaotic financial situation and to preserve the ability of the archdiocese to fulfill its missions, I may have little choice but to take this step.'

Tully said Vlazny sent a similar message to parishes under his jurisdiction in late February. The Archdiocese of Portland encompasses 121 parishes and schools in Multnomah and 17 other counties.

The issue of bankruptcy arose in December, when the Tribune reported that the archbishop would consider the action as a last resort. No Catholic archdiocese in the United States has filed bankruptcy, and local attorneys at that time as well as now do not expect it to happen.

'We believe there are other funds they have ready access to that they are simply refusing to use because they're trying to posture themselves as being less able to meet their obligations than they really are,' said Portland lawyer David Slader, who has 15 clients with pending cases against the archdiocese and another handful that have been settled.

Not enough money

Bud Bunce, director of communications for the archdiocese, disputes such interpretations of Vlazny's message.

'That may be the opinion of one or a couple of attorneys,' Bunce said. 'I don't believe that's the opinion of all the attorneys involved. When we started these settlements, I think the amounts were well over $500 million. The archbishop simply says we don't have $500 million. That's just, flat-out, we don't have that much that we can use.'

So why would Vlazny raise the issue again? In Clark's opinion, the archdiocese 'didn't quite get as many cases settled as they wanted to,' he said. 'And I think they probably paid more than they were hoping to pay to get these cases settled. That, combined with the new cases that Gatti has filed É does have them a little bit nervous.'

Attorneys could not disclose precise financial figures about the archdiocese's assets, citing confidentiality agreements. But Clark said the archdiocese has $400 million in real estate assets.

The decision to file for bankruptcy, Vlazny said, depends on whether the archdiocese can settle the remaining claims for 'reasonable amounts' and whether the archdiocese can recover funds from its insurance companies.

Vlazny said in the letter that he has received the consent of the two church bodies required under canon law to file bankruptcy. Consent from the Vatican, which is also required, has not been sought.

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