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 the Feb. 17 ruling by Chief Bankruptcy Judge Henry W. Van Eck, assets include $50 million in real estate such as the Diocesan Campus, the bishop’s residence and a retirement home for priests, all at Harrisburg, as well as eight cemeteries including All Saints Cemetery 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 a grand jury report unsealed in 2018, 45 officials of the Diocese of Harrisburg have been identified as alleged perpetrators. Many were included in a published church report 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, is representing the Official Committee of Tort Plaintiffs along with his colleague, attorney Edwin Caldie. On Feb. 18, they filed separate new motions asking a federal judge to order the assets in the trusts to be assigned to the diocese’s bankruptcy estate, something Van Eck did not do in his ruling the day before.
The lawyers asked the court to declare that the transfers were fraudulent, creditors are entitled to the assets and trusts are inapplicable. 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.
âIt was part of an overall strategy to deal with emerging sexual abuse issues,â Kugler said of the 2009 transfer on Wednesday. âI’ve been involved in a number of these cases. Transfers and the timing of transfers are remarkably uniform across the country.â
According to Kugler, the victims of violence he represents feel empowered and empowered. Barring a resolution, he expects the pursuit of assets held in trusts could take next year to play out.
As the current pope-appointed bishop, Bishop Ron Gainer is the trustee of each trust for the Diocese of Harrisburg, court records. However, Reverend Kevin C. Most Rhoades was a bishop at the time the trusts were established.
The opinion of Van Eck found that the diocese seems to be both the grantor and the beneficiary of the trusts, “features a self-trust established” that do not protect assets from creditors in the case, according to court records .
In ruling against the defense of the diocese, Van Eck concluded that state law allowed a religious entity unincorporated hold a title and that the limitation period was respected because the plaintiffs could not reasonably have known that assets had been transferred before the bankruptcy.
Rachel Bryson, spokeswoman for the Diocese of Harrisburg, released an official statement on the progress of the bankruptcy case: âThis 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 for the national law firm Janet, Janet & Suggs LLC. He represents some of the survivors of abuse. He said the judge’s ruling allows lawyers to “step out of 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.
As Kugler Serbin said there was evidence elsewhere that the dioceses were trying to hide assets, including in a place like a cemetery. Estimates of the value of the two trusts belonging to the Diocese of Harrisburg could increase or decrease as a result of the discovery permitted by “significant” decision of the judge, he said.
“When creating these trusts, the knowledge that the diocese had the responsibility for the crisis of sexual abuse of children was exposed in court. This discovery will allow us to know what was the purpose in the creation of these trusts. We think we know the goal and that was to hide the money, “said Serbin.