KUNM

Bankruptcy Of The Archdiocese Of Santa Fe: The Basics

Dec 20, 2018

This week, nine people were appointed to a committee to represent survivors of priest sexual abuse in negotiations with the Archdiocese of Santa Fe. It’s an early step in a Chapter 11 bankruptcy reorganization process that’s meant to settle many sexual abuse claims at once. 

When the archdiocese filed for bankruptcy in early December, it said there were about three dozen pending civil cases alleging sexual abuse. The bankruptcy puts those lawsuits on hold.

"In other words, they’re stayed, they can't move forward," explained Meredith Edelman, a Ph.D. student at the Australian National University and former corporate bankruptcy lawyer who's studied many Catholic Church bankruptcies closely. "Everything would be funneled through the bankruptcy court."

The whole purpose of a bankruptcy, Edelman said, is to get a clear idea of what assets an organization has in order to distribute money fairly to creditors. And right away, things can get complicated.

In its bankruptcy filing, the archdiocese lists properties it owns all over New Mexico, many of which were gifted or willed to the church years ago. Some of these donated properties have an "assessed value" of just a few hundred dollars. 

"We don’t really know what its actual value is [of those properties]," said Edelman. "So if I were a creditor of the archdiocese, I would be interested in having someone come in and do an appraisal of these various properties."

The tallying-up of assets gets even trickier because the archdiocese has split off various parishes into separate non-profit entities in recent years. Edelman says it’s unclear from court filings when this happened and what it means for the assets involved.

“The reason this is important is because certain kinds of transactions can be undone by the bankruptcy court," Edelman explained. "So if the debtor, in the years before bankruptcy, is giving away assets, then there’s a potential for the bankruptcy court to claw some of those transactions back.”

Each of these decisions – how to value and sell off property, how to divvy up the money – will be negotiated between the archdiocese, its insurance companies, and the creditors’ committee made up of survivors.

"When you become a committee member, it’s a huge responsibility," said Prudence Jones of Gallup. She was on the creditor’s committee for the Diocese of Gallup after it filed for bankruptcy in 2013.

The committee members were mostly on the same page about what they wanted in the settlement, Jones said. The only big sticking point was whether the diocese should have to publicly disclose files on abusive priests.

"I wanted the files to be public," said Jones. "There are very important things in those files that tell us patterns, behaviors of these priests, and possibly more locations of victims that we don’t know about that were left in their wake."

The Gallup bankruptcy took about three years – a relatively long and contentious process, compared to other dioceses'. And Jones never got the transparency she wanted from the diocese.  

"It was devastating to me. I really fought hard for those files," Jones said. "I didn’t want to walk away from what I saw as the one and only chance to get them."

It’s uncertain if the Archdiocese of Santa Fe's bankruptcy will provide any more transparency.

Ford Elsaesser is an attorney for the archdiocese who’s worked on over a dozen church bankruptcies before. He says the creditors' committee will come up with a system for an impartial adjudicator to use to decide how much to award each survivor.

"If the adjudicator says claim X should be either disallowed or awarded a smaller amount, and claim Y was extremely severe and should be awarded the maximum amount, that will not be made public," explained Elsaesser, "unless the claimant decides they want to make it public."

Before filing for bankruptcy, the Archdiocese of Santa Fe had settled about 300 claims for about $52 million. The archdiocese has refused multiple requests for an interview with Archbishop John Wester.

Elsaesser says the archdiocese is committed to a fair and transparent bankruptcy process. "From my experience, what most abuse survivors want is an acknowledgment, an apology, and fair compensation for what they went through," he said, "and I think this provides the best opportunity to achieve that."

Survivors still have about five months to file claims of sexual abuse that will be settled through this bankruptcy.

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