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California diocese weighs bankruptcy over sex-abuse claims

By Ronnie Cohen

SAN FRANCISCO (Reuters) - The Roman Catholic Diocese of Stockton, California, is contemplating filing for bankruptcy protection after nearly depleting church funds available to settle sex-abuse claims brought against its clergy, the bishop said on Friday.

The diocese, comprising 250,000 parishioners from California's Central Valley, is in line to become the 10th U.S. Catholic district to file for Chapter 11 reorganization under the weight of child molestation cases against priests.

"We have exhausted our resources," Bishop Stephen Blaire told Reuters. "We face three lawsuits and a potential fourth. We have really no money at this time to provide any kind of compensation."

Child sex-abuse litigation has cost the U.S. Catholic Church some $3 billion in settlements since the scandal surfaced in Boston in 1992 and has driven eight dioceses into bankruptcy since 2004. The diocese of Gallup, New Mexico, has said it plans to become the ninth to file for bankruptcy later this month.

The Stockton diocese paid $3.75 million last year to settle a lawsuit after a civil jury found priest Michael Kelly abused a student during the 1980s, and it paid $1.75 million in June to settle a second suit involving defrocked priest Oliver O'Grady.

John Manly, the attorney who represented the victims in both cases, said he sees filing for bankruptcy as part of the church's effort to bury the truth about its pedophile priests. Chapter 11 generally stops or at least temporarily halts pending litigation.

Manly is scheduled to depose Bishop James Wall of Gallup on September 18 and believes the New Mexico diocese decided to seek Chapter 11 protection to spare Wall from that proceeding.

Bishop Blaire said he expected his diocese to make a decision about bankruptcy in the next few months. Both he and Wall said bankruptcy appears to offer the best route for compensating the church's sex-abuse victims.

David Clohessy, director of Chicago-based Survivors Network of those Abused by Priests, or SNAP, is a victim himself and disagrees.

"Church bankruptcies are about protecting secrets, not assets," he said. "Church officials seek bankruptcy only when they're facing a very embarrassing civil trial at which top staff will be asked questions about how much they knew about predator priests."

Blaire said his California diocese had spent $15 million on legal fees, court costs and settlements and was running out of money.

Manly accused Blaire of having tried to protect Kelly, who worked in the Stockton diocese from the 1970s until last year, when he fled to his native Ireland following the civil jury verdict against him.

"Now the diocese is saying, ‘Our priests raped your kids, we've ruined your families, we stole your faith, but because we're financially savvy, we've moved our assets. I'm sorry victims - you don't get any,'" Manly said.

(Reporting by Ronnie Cohen; Editing by Steve Gorman and Lisa Shumaker)

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