Judge approves first motions in diocese bankruptcy

By Randall Chase, Associated Press Writer

WILMINGTON, DE – (AP) The Catholic Diocese of Wilmington hopes its Chapter 11 bankruptcy case will move quickly and that it will result in fair compensation to victims of clergy sexual abuse, an attorney for the diocese said Wednesday.

James Patton, an attorney for the diocese, told a judge that the bankruptcy was the result of terrible pain inflicted on children by Catholic priests, and the failure of other Church officials to take appropriate action against the abusers.

The diocese filed for Chapter 11 bankruptcy protection late Sunday after settlement talks with about a dozen alleged victims, including eight plaintiffs whose cases were scheduled for a series of trials that were to begin the next day, broke down.

The Most Rev. W. Francis Malooly, the bishop of the diocese said he authorized the bankruptcy filing after it became clear that the diocese did not have the resources to pay the amount of money being sought by the plaintiffs and provide compensation to more than 100 other alleged victims.

"I'm disappointed that the bishop is not here," James Stang, an attorney representing an unofficial committee of abuse survivors, told Judge Christopher Sontchi, saying Malooly was the shepherd of victims abused by his priests.

The diocese was represented at the hearing by its vicar general, Rev. Msgr. Thomas Cini, who signed the declaration in support of the diocese's bankruptcy protection but did not speak.

Stang said the primary goal of the committee of survivors was to ensure that the diocese takes appropriate steps to ensure that no more children are molested by its clergy. The secondary goal, he said, is to achieve fair compensation for victims of past abuse.

A central issue in the case will be determining what assets should be counted in the diocese's bankruptcy estate, particularly those held by parishes and other non-debtors entities but controlled by the bishop, who legally is the sole member of diocese.

Sontchi, who said he was approaching the case with "an open mind," declined to wade too deeply into the complex structure of the diocese. He instead adhered to the typical limited actions of a first-day hearing, authorizing the retention of an agent to handle claims and notices for the diocese, and granting interim approval of the diocese's request to use its existing cash management system and to pay employee wages and benefits.

The judge approved the cash management order after attorneys for the diocese assured him that, without court approval, there would be no deposits into or withdrawals over the next 30 days from a pooled investment account that the diocese shares with parish corporations and other non-debtor entities, and which is maintained by the diocese at the Bank of New York Mellon.

Attorneys for the diocese also assured the judge that the order authorizing payment of wages and benefits would not result in any payments to anyone identified as or even alleged to be an abuser.

The judge scheduled a Nov. 2 hearing on a request by attorneys for one alleged victim who is seriously ill to allow his scheduled November trial to proceed. Attorneys for James Sheehan, 63, who is suffering from congestive heart failure and has been repeatedly hospitalized in the past year, have asked Sontchi to lift the automatic stay of litigation against a debtor who files for bankruptcy protection.

Sontchi said he was mindful of the timing of depositions in cases involving alleged abuse victims who are gravely ill.

Also on the agenda for Nov. 2 will be the diocese's request for a restraining order to prevent lawsuits from proceeding against the diocese's co-defendants in the sexual abuse complaints.