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For Boston Archdiocese,
Bankruptcy Would Have Drawbacks

By Pam Belluck and Adam Liptak
in the New York Times

For officials of Boston's Roman Catholic Archdiocese, bankruptcy has emerged as a potentially attractive strategy for dealing with the hundreds of lawsuits it faces over sexual abuse by priests. But the move would open up the archdiocese's tightly held financial records and give a federal judge control over whether any of its multimillion-dollar holdings would be sold to pay to the plaintiffs.

And in a city simmering with outrage over the clergy sex abuse scandal that erupted here, the archdiocese would be likely to face the unflattering image that it was trying to escape from fully compensating abuse victims for their suffering, plaintiffs' lawyers say.

These are just a few of the considerations church officials, their financial advisers and their lawyers are weighing as they decide whether to use bankruptcy protections to deal with an onslaught of lawsuits from people who say they were molested by priests over the past four decades.

It was unclear today how much of that consideration would be pragmatic, emotional and strategic.

A member of the archdiocese's finance council, a mostly lay advisory group to Cardinal Bernard F. Law, said today, "To me it sounds more like a negotiating ploy" to influence settlement negotiations.

Lawyers for many of the plaintiffs in the lawsuits said today that they would stop participating in settlement negotiations unless the archdiocese promised not to seek bankruptcy protection, at least for a period of 90 days or more.

"We are not going to spend our time and energy in settlement negotiations if they're going to prove fruitless because the archdiocese is intent on filing bankruptcy," said Robert A. Sherman, a lawyer for Greenberg Traurig, the firm representing more than 200 plaintiffs in abuse cases.

The archdiocese has been considering the possibility of filing for bankruptcy since as far back as February, just a month after the scandal broke. Since then, the archdiocese was able to reach a $10 million settlement with 86 victims of the Rev. John J. Geoghan, and has been negotiating fitfully with about 40 lawyers involved in about 450 cases concerning other priests.

But sources close to the archdiocese said that in recent weeks, the church's lawyers had become disappointed with those negotiations. Among other things, church lawyers have expressed frustration with some of the plaintiffs' lawyers, accusing them of showmanship in their public airing of documents in the case.

The archdiocese has also lost several court battles before the Superior Court judge who is handling all the abuse cases. Last week, the judge, Constance M. Sweeney, assailed the church for trying to delay the release of records concerning priests accused of abuse.

An archdiocese spokeswoman, Donna M. Morrissey, reiterated a statement that she issued on Sunday, saying: "We are considering all of our options. No decision has been made yet on bankruptcy."

And a source close to the archdiocese, who asked not to be named, said that while a final decision on whether to declare bankruptcy was "not by any means imminent," it would be highly unlikely that the archdiocese's lawyers would agree to take the possibility off the table.

The archdiocese may hope that by filing for bankruptcy, it will get a fresh start with a new judge with a different philosophy about the desirability of open proceedings. But there is no particular reason to think that bankruptcy court would in most respects be more secretive than state court.

The finance council member said there would be little financial incentive to file for bankruptcy if the plaintiffs' monetary demands were in line with the awards in the Geoghan case.

"If the settlement figures are double the size," the finance council member said, "then you have that kind of an issue."

But bankruptcy would not necessarily mean that the archdiocese would have to pay less to plaintiffs over all. It is, however, a notoriously slow process, which would work in the archdiocese's favor. And it might mean that payments would be spread more evenly among the plaintiffs. In addition, the bankruptcy law would set a deadline for the filing of all claims, allowing the archdiocese to assess its total liability.

Legal experts said today that they doubted the archdiocese would go through with its threat to file for bankruptcy.

"For a nonprofit to file for bankruptcy is not unusual," said Jay L. Westbrook, an expert in bankruptcy law at the University of Texas. "For the Archdiocese of Boston to do so would be stunning."

In any bankruptcy filing, a judge would probably choose to exercise little control over the archdiocese's day-to-day affairs, out of reluctance to get too involved in the religious work of the church. But the judge and a trustee would retain final authority over major financial decisions, such as what land, buildings and other assets the archdiocese might sell.

Some experts said even this level of control might be unacceptable to church officials. "It would be, just knowing Cardinal Law's management style, hard for me to believe that the Cardinal would essentially give up control to a bankruptcy judge," said Patrick J. Schiltz, a law professor at the University of Saint Thomas School of Law in St. Paul. "But then, it's also hard for me to believe that the Vatican would allow one of its crown jewels to go into bankruptcy."

Vatican officials said today that they were unaware of any discussions about bankruptcy between the Boston archdiocese and Rome, and they said that such consultations would be unlikely before the archdiocese had come up with a detailed plan.

"Normally, the Holy See doesn't get into those things until they have made, locally, some decision," said a canon lawyer in Rome who advises the Vatican. Referring to Cardinal Law, the lawyer added, "It wouldn't be simply him going to the Vatican with something out of his pocket it would be something not only formal and definite but something he would have talked it over first in the diocese."

The lawyer said it was not clear exactly what aspects of the process the Vatican would have to approve, although approval is generally required when a diocese plans to sell valuable assets.

The closest a diocese has come to filing for bankruptcy occurred in 1998, when the Diocese of Dallas threatened to take such action in the face of a $119 million jury award in a sex abuse case. The threat played a significant role in driving down the ultimate settlement in the case to $30 million, said Sylvia Demarest, the plaintiffs' lawyer in the case.

But Ms. Demarest said she saw little financial similarity between the church's financial crises in Dallas and Boston, which has about $100 million in insurance and extensive real estate holdings.

"Boston has no legitimate reason to declare bankruptcy, because they have plenty of property and assets to do the right thing by these plaintiffs," Ms. Demarest said.

Professor Schiltz, who has represented religious institutions of several denominations in sexual abuse lawsuits, said the threat of a bankruptcy filing in Boston was almost certainly a bluff.

"It's conceivable, even likely, that some diocese somewhere will declare bankruptcy," he said. "It won't be New York, and it won't be Boston. It will be a small diocese with many claims and few assets."