Catholic Diocese of Spokane to file for bankruptcy

By Jonathan Martin and Janet I. Tu
Seattle Times staff reporters

William Skylstad: "We are not a wealthy diocese."

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SPOKANE — The Roman Catholic Diocese of Spokane announced yesterday it would file for bankruptcy, making it the third diocese in the country to do so and throwing into question whether its bishop, the Most Rev. William Skylstad, will be elected president of a national bishops organization next week.

The diocese intends to file for Chapter 11 bankruptcy on or before Nov. 29, the date a trial is expected to begin in the case of the Rev. Patrick O'Donnell, a former Spokane priest and former roommate of Skylstad's who has been accused of molesting dozens of boys.

Settlement talks involving 28 plaintiffs in the O'Donnell cases broke down Friday. A bankruptcy filing would halt the trial and protect the diocese from its creditors while allowing it to develop a reorganization plan.

Such a step is the only "fair, just and equitable mechanism for the payment of valid claims against the Catholic Diocese of Spokane, while allowing us to maintain the historic mission of the Catholic Church in Eastern Washington," Skylstad said at a news conference yesterday afternoon.

Although the diocese has paid only about $272,500 in settlements to five victims over the past five years, church officials say it's the pending and potential lawsuits that drove them to file for bankruptcy.

The diocese knows of 125 people, half of whom have lawyers, who say they were abused by priests in Eastern Washington. Church officials say they want to make sure they could pay them and others who have already filed suits.

"We are not a wealthy diocese," said Skylstad, who characterized the total amount sought by plaintiffs as in the "tens of millions of dollars. That far exceeds the net worth of the diocese."

But some victims contend the main reason Skylstad — and the bishops in Portland and Tucson, Ariz., before him — filed for bankruptcy was to stop potentially damaging trials.

The Portland Archdiocese declared bankruptcy July 6, the date a trial was to start in the case of a now-deceased priest accused of molesting more than 50 boys. The Tucson Diocese filed for bankruptcy Sept. 20, nine days before a trial was scheduled to start.

"Bankruptcy prevents the victims from having their day in court and bishops testifying under oath and church cover-ups being revealed," said David Clohessy, executive director of Survivors Network of those Abused by Priests (SNAP). "That's the single common denominator [in the three dioceses]. Each one happened on the eve of a potentially very embarrassing civil trial."
 
Neither Skylstad nor plaintiffs' attorneys gave the exact dollar amount under discussion in the O'Donnell talks.

But Timothy Kosnoff, an attorney for the plaintiffs, said one settlement offer would have had minimal impact on the diocese. The diocese has between $15 million and $19 million in insurance coverage related to the O'Donnell claims, Kosnoff said.

"We're deeply disappointed and troubled by the filing," said Michael Pfau, another of the plaintiffs' attorneys. "These cases could have and should have been settled."

The diocese has coverage from six insurers for the period of the abuse claims. Some, but not all, have been cooperative; 60 to 70 percent of the diocese's legal costs have been paid by the insurers, according to Shaun Cross, a Spokane attorney representing the diocese in the bankruptcy.

Cross holds out a slight hope a settlement could be reached before Nov. 29.

At yesterday's news conference, Skylstad said he hoped to protect the diocese's 81 parishes and 17 schools, and that they would continue to operate as usual.

But he did not rule out that money from parishioners ultimately could be used to help pay claims. "We're a diocese family, and everyone will be involved in the effort to resolve claims by payment," he said.

To Michael Corrigan, one of those suing O'Donnell for abuse, that sounded like a threat. "He's trying to drive a wedge between us and the Catholics in the pews," said Corrigan. His brother, Tim Corrigan, committed suicide the day he told his wife about being abused by O'Donnell. "He's trying to scare them, and make us out to be money-grubbers. It's another betrayal."

Questions on Skylstad

The announcement yesterday also intensifies questions about Skylstad's suitability to ascend to the presidency of the U.S. Conference of Catholic Bishops (USCCB). As the organization's vice president, he is expected to be elected president at the semiannual bishops meeting starting Monday in Washington, D.C.

The president, elected to a three-year term, would have one of the church's most powerful voices and would play a key role in how the church handles sexual abuse by clergy. He would also be the main spokesperson in restoring the bishops' credibility. Only twice in the history of the organization has the vice president failed to ascend to the presidency.

Even before yesterday's bankruptcy announcement, Skylstad was being dogged with questions from Spokane parishioners and victims about whether he has the ability to lead the nation's approximately 300 bishops, given his own failure to deal firmly with sexual-abuse allegations in the past.

In his deposition, O'Donnell admitted to abusing at least 30 boys during his priesthood. According to his own statements, O'Donnell's most abusive period was 1974-76, when he lived in a tiny North Spokane rectory with Skylstad, who was his supervising priest.

Skylstad's failure to stop O'Donnell, even after receiving parishioners' complaints, is a key allegation in the five lawsuits against Skylstad, O'Donnell and the diocese.

For that reason alone, said Clohessy, the SNAP director, "it would send a terribly depressing signal to Catholics and victims" if Skylstad were to be elected president. "I think he lacks the moral credibility and clout to move the bishops forward on this issue. He can't say: 'Look, I know this is tough. I cleaned house years ago in my diocese.' He can't credibly say that."

Skylstad declined to speak about his candidacy at yesterday's conference, or whether he might withdraw his name from consideration, saying only that the presidency "is for others to decide, not me."

Russell Shaw, a Washington correspondent for the Catholic publication Our Sunday Visitor and a former press secretary for the USCCB, said Skylstad's failings in the O'Donnell case, by themselves, probably wouldn't prevent the bishops from electing him USCCB president. "They'll think: 'There but for the grace of God go I.' "

But yesterday's announcement raises a serious practical question, "given the very serious problem in his diocese: Will he have the time and energy left over to do the job of president of the conference?" Shaw said.

"Being bishop of a diocese is a full-time job, and being president of the conference is a full-time job. And now, with this situation, I think bishops will be asking themselves questions like that. He may still be elected, but this new development certainly reduces his chances."

Others are more optimistic. The Rev. Thomas Reese, editor of the Jesuit magazine America, said he thinks Skylstad will prevail. "The bishops know these things are out of his control.

"I wouldn't have any problem with the president being the head of a diocese that's in bankruptcy," Reese said. "It would send a clear signal to everyone in the country that these lawsuits have financial consequences."

Consulting other dioceses

Skylstad said yesterday he made the decision to file for bankruptcy after consulting with the Tucson and Portland dioceses, but "we did not seek guidance from the Vatican."

Experts in Catholic Church finances said they weren't surprised that another diocese would seek bankruptcy protection. But they were surprised by how quickly it happened.

"I thought the bishops would sit back and see how smoothly Portland's went before they also went into bankruptcy," said Fred Naffziger, professor of business law at Indiana University, South Bend.

Charles Zech, a professor of economics at Villanova University in Pennsylvania, said recent bankruptcy filings have raised a troubling question for the church: Who owns parish properties?

Under Catholic Church law, facilities and assets of an individual parish belong to the parish. As a result, diocesan officials usually contend they have no authority to seize parish property to help pay off claims.

But once dioceses file for bankruptcy, that gives civil courts the authority to determine whom parish assets belong to. In Portland and Tucson, parishes have banded together to protect their assets — something Skylstad said is happening in Spokane as well.

"If a diocese says they don't own parish assets, then who does? If the conclusion is the parishioners, that will change how the church operates," said Zech. "It's a dangerous precedent for them to be setting, given they are a hierarchical church."

Seattle Times staff reporter Alicia Mundy contributed to this report.

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com

Jonathan Martin: 206-464-2605 or jmartin@seattletimes.com