Bankruptcy filing delays church sex abuse case

Sex Abuse Bankrupcy
Bishop W. Francis Malooly described the decision to seek bankruptcy protection as a painful one. But he said the diocese had a "moral obligation" to work toward healing and fair compensations for all victims.Steve Ruark / AP
/ Source: The Associated Press

A bankruptcy filing by the Catholic Diocese of Wilmington was the best way to ensure reconciliation and compensation for all victims of clergy sexual abuse in the diocese, the bishop said Monday.

The diocese filed for bankruptcy protection late Sunday after settlement negotiations failed with 13 alleged victims, including eight whose trials were scheduled to begin. More than 100 other alleged victims were pursuing compensation outside the courts.

"It was clear to us in our negotiations that the amount of money that was being sought by the early victims and the finite amount that we had ... was not going to work," the Rev. W. Francis Malooly, the bishop of the diocese, said at a news conference Monday.

Malooly said an excessive settlement or jury award for a handful of victims who would receive "a much bigger piece of the pie" would have been unfair for other victims.

The bankruptcy filing came on the eve of a trial scheduled to begin Monday that would have been the first under a Delaware law that created a two-year "lookback" window allowing claims of abuse to be brought even if the statute of limitations had expired. More than 100 lawsuits were filed before the window closed this summer, with four being settled.

Priest defrocked last summer
The first eight cases scheduled for trial involve lawsuits against former priest Francis DeLuca. DeLuca served as a priest for 35 years but was defrocked last summer after having been jailed in 2007 in New York for repeatedly molesting his grandnephew.

He is one of about 20 priests against whom the diocese has substantiated allegations of child sexual abuse.

Anthony Flynn, an attorney for the diocese, said he thought a settlement had been reached with the eight plaintiffs, along with five other alleged victims of DeLuca, but the deal unraveled late Sunday.

"We thought we had an agreement, frankly. ... It fell through at the last minute," Flynn said.

Under federal bankruptcy rules, the filing automatically delays all litigation against the diocese. Robert Brady, the diocese bankruptcy attorney, said he expected the plaintiffs to ask a judge to lift that delay.

Diocese representatives said they hope the bankruptcy case results in a uniform process for compensating abuse victims, but Flynn said no decision has been made on a specific plan.

Malooly described the decision to seek bankruptcy protection as a painful one he had hoped never to make. But he said the diocese had a "moral obligation" to work toward healing and fair compensations for all victims.

The Wilmington diocese, which serves about 230,000 Catholics in Delaware and the Eastern Shore of Maryland, is the seventh U.S. Catholic diocese to seek bankruptcy protection since the church abuse scandal erupted seven years ago in Boston.

Millions paid to settle sex abuse claims
Thomas Neuberger, an attorney representing 88 alleged victims in Delaware, described the bankruptcy filing as a "desperate effort to hide the truth from the public and conceal the thousands of pages of scandalous documents."

The diocese has paid more than $6.2 million since 2002 to settle claims of sexual abuse. The bankruptcy filing lists the diocese's assets as being between $50 million and $100 million but said its estimated debt is between $100 million and $500 million. Lawsuit plaintiffs as well as banks and pensions were listed as creditors.

Other dioceses that have sought bankruptcy protection in abuse scandals are Davenport, Iowa; Fairbanks, Alaska; Portland, Oregon; San Diego; Spokane, Washington; and Tucson, Arizona. The San Diego case was dismissed.

At least four bankruptcy cases ended with payments for victims. In May 2008, the Davenport diocese agreed to pay $37 million to more than 150 people. A $50 million settlement in 2007 involving about 175 lawsuits ended a bankruptcy filing by the Portland archdiocese, which set aside another $20 million for future claims.

The Tucson diocese emerged from bankruptcy in 2005 after creating a fund of more than $20 million for people molested by clergy. The Catholic Diocese of Spokane settled by offering to pay victims $48 million that it is raising through sale of assets and by donations.