A federal judge has found that there are enough claims of alleged fraud against the Roman Catholic Diocese of Harrisburg and has ruled that attorneys representing survivors of sexual abuse can seek judgment to have approximately $95 million transferred. assets that the diocese transferred behind two different trusts transferred to its bankruptcy estate.
According to Chief Bankruptcy Judge Henry W. Van Eck’s Feb. 17 ruling, assets include $50 million in real estate such as the diocesan campus, bishop’s residence and a nursing home for priests, all in Harrisburg, as well as eight cemeteries including All Saints. Cemetery in Elysburg and seven secondary schools including Our Lady of Lourdes Regional in Coal Township.
$45 million worth of furniture and appliances, cash and securities, religious artifacts and objects, vehicles, notes, records and books, according to documents filed with the U.S. Court of bankruptcies in the Intermediate District of Pennsylvania, are also at risk of being returned to the field of bankruptcy.
In an unsealed grand jury report in 2018, 45 officials from the Diocese of Harrisburg were identified as the alleged attackers. Many were included in a report released by the church released two weeks before naming 71 priests and seminarians accused in parish records of sexual misconduct with children dating back to the 1940s.
The Diocese of Harrisburg filed for Chapter 11 bankruptcy on February 19, 2020. It opened the trusts on November 13, 2009, as allegations mounted around widespread nationwide sexual abuse within the Catholic Church, according to court records.
Van Eck issued a decision in Federal Court granting a motion to the Official Tort Plaintiffs Committee to pursue fraudulent conveyance claims against the Diocese of Harrisburg. Allegations of the diocese’s attempts to defraud creditors through the trusts were “sufficient”, Van Eck concluded.
Attorney Robert Kugler of Stinson LLP, Minneapolis, represents the Official Tort Plaintiffs Committee with fellow attorney Edwin Caldie. On Feb. 18, they filed new, separate motions asking a federal judge to order that the assets of the trusts be earmarked for the diocese’s bankruptcy, something Van Eck did not do in his ruling the day before.
The lawyers are asking the court to declare that the transfers were fraudulent, that the creditors are entitled to the assets and that the trusts are unenforceable. They wrote in legal findings that protecting trust assets has been a strategy pursued by Catholic dioceses in other parts of the United States, including Milwaukee.
“It was part of an overall strategy to deal with emerging sexual abuse issues,” Kugler said Wednesday of the 2009 transfer. “I was involved in a number of these cases. Transfers and the timing of transfers are remarkably consistent across the country. »
According to Kugler, the victims of abuse he represents feel gratified and empowered by the decision. Barring a resolution, he expects the pursuit of assets held in trusts to take next year to materialize.
As the current pope-appointed bishop, Bishop Ron Gainer is the administrator of each trust for the Diocese of Harrisburg, according to court records. However, Bishop Kevin C. Rhoades was a bishop at the time the trusts were established.
Van Eck’s opinion revealed that the diocese appears to be both the settlor and beneficiary of the trusts, “characteristic of a self-established trust” that would not protect the assets of creditors in this case, according to court records. .
Arguing against the Diocese’s defense, Van Eck concluded that state law permitted an unincorporated religious entity to hold title to property and that the statute of limitations was met because the plaintiffs could not reasonably have known that the assets had been transferred prior to the declaration of bankruptcy.
Rachel Bryson, spokeswoman for the Diocese of Harrisburg, released an official statement on the progress of the bankruptcy case: “This decision is a first step in the litigation process between the Survivor Committee and the Diocese regarding these assets. We will continue to work through this process to bring about a just and equitable conclusion to our reorganization, while continuing to offer support and assistance to survivors for their continued healing.
Attorney Richard M. Serbin leads the sexual abuse division of the national law firm Janet, Janet & Suggs LLC. He represents some of the survivors of abuse. He said the judge’s decision allows lawyers to “step into the shoes of the diocese” to determine whether the transfers were made fraudulently in order to escape financial liability. The diocese refused to do it itself, he said.
Like Kugler, Serbin said there was evidence elsewhere of dioceses trying to hide assets, including in a place like a cemetery. Estimates of the value of the two trusts owned by the Diocese of Harrisburg could rise or fall as a result of the discovery authorized by the judge’s “significant” ruling, he said.
“At the time of the creation of these trusts, the knowledge that the diocese had of responsibility for the child sexual abuse crisis was on display in the courts. This discovery will allow us to know what was the purpose of the creation of these trusts. We think we know the purpose and it was to hide the money,” Serbin said.