Judge warns San Diego Diocese of contempt in bankruptcy case

The federal jurist says lawyers and priests apparently lied to parishes about the court's orders.
By Tony Perry Times Staff Writer
Los Angeles Times

April 10, 2007

SAN DIEGO — A federal bankruptcy judge on Monday ordered three lawyers and two priests from the local Catholic diocese to explain why they should not be held in contempt for allegedly moving to transfer money as well as other actions that were prohibited while the diocese's bankruptcy case is pending.

Judge Louise DeCarl Adler ordered the lawyers and priests to appear in U.S. Bankruptcy Court on Wednesday to explain their actions. The Diocese of San Diego filed for bankruptcy protection in late February in the face of lawsuits by more than 150 individuals who allege that they were sexually abused by priests.

In a bluntly worded five-page order, Adler wrote that the lawyers appear to have lied to the court and that the priests have apparently lied to the parishes about the Bankruptcy Court's orders.

Diocese and parish lawyers could not be reached for comment. The diocese office is closed for Easter.

Among the material misrepresentations, Adler wrote, is a letter by Msgr. Michael Gallagher, pastor of Our Lady of Grace Catholic Church in El Cajon, saying the court ruled that contributions to the Annual Catholic Appeal, supporting Catholic schools and social services, are not part of the bankruptcy proceeding and cannot be used to pay judgments to the people accusing priests of misconduct.

Bishop Robert H. Brom asserted in a letter to parishioners months before the bankruptcy action was filed that individual contributions from parishioners would not be used in any court settlement. In other diocese bankruptcies, the complex question of whether bank accounts of individual parishes and social service programs are part of the diocese's bank account is one of the most hotly contested issues.

Adler also wrote that Father Bruce Orsborn, on behalf of the newly formed Organization of Parishes of the Roman Catholic Diocese of San Diego, urged parishes to get new taxpayer identification numbers and immediately transfer funds to new accounts. The judge said that the lawyers for the Organization of Parishes have conspired with the diocese and its counsel to violate her ruling against transferring the diocese's assets while the bankruptcy case is in court.

"He represents that this action should be undertaken on advice of counsel for the parishes and with the concurrence of this court," Adler wrote.

The diocese filed for Chapter 11 reorganization in Bankruptcy Court hours before the first of the abuse cases was to begin trial in San Diego County Superior Court. The bankruptcy filing puts those cases in abeyance.

With nearly 1 million Catholics and 99 parishes in San Diego and Imperial counties, the diocese is the largest in the nation to file for bankruptcy.

Three weeks after the filing, the diocese released the names of 38 priests against whom "credible allegations" had been made. None is currently active in the diocese.

In a filing in Bankruptcy Court, the diocese offered a settlement of about $95 million, but plaintiffs' lawyers have rejected it.

This is not the first time the diocese has been accused of shifting its assets to keep money away from abuse claimants. In 2004, a similar claim was made by lawyers for the plaintiffs but was rejected by a Superior Court judge on technical grounds.
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Judge Says Church Hid Money From Sex Lawsuits
Diocese, Lawyers Ordered To Explain New Bank Accounts

SAN DIEGO -- A federal judge threatened to cite attorneys and church officials for contempt for allegedly trying to shelter money from the Dioceses of San Diego's bankruptcy, according to a published report.

Judge Louise DeCarl Adler ordered Susan Boswell, the lead bankruptcy lawyer for the diocese, and diocese officials to appear in court Wednesday. She ordered them to explain why they should not be sanctioned for allegedly conspiring to illegally create new bank accounts separate from the diocese, according to the San Diego Union-Tribune.

Adler said church officials sent a memo to 98 parishes in San Diego and Imperial counties, which falsely stated that she authorized them to move their funds to the new accounts, the paper reported.

The diocese filed for Chapter 11 bankruptcy protection Feb. 27. The bankruptcy filing came after settlement talks broke down between the church and 27 people who are suing the diocese for alleged sexual abuse by priests. Bishop Robert Brom has said the diocese filed for bankruptcy in an effort to continue the church's ministry while fairly compensating abuse victims