Archdiocese Accused of Moving Funds

An attorney for victims of clergy sex abuse suggested Friday that the Archdiocese of Milwaukee moved as much as $75 million off its books over the last six years in an effort to shield it from sex abuse settlements – allegations denied by the archdiocese.

Attorney Jeffrey Anderson of St. Paul implied the archdiocese engaged in a shell game during a bankruptcy hearing before Assistant U.S. Trustee David Asbach.

Anderson questioned archdiocese chief financial officer John Marek about the whereabouts of a $75 million account that last appeared on the archdiocese’s audited annual financial statements in 2003-’04. And he questioned the transfer of a separate $55 million into a newly created cemetery trust in 2008, a year after the Wisconsin Supreme Court opened the door for victims to sue the archdiocese for fraud.

Marek, who was hired by the archdiocese in 2007, could not answer questions about the $75 million. He said the cemetery funds had previously been in an account under the control of the archbishop but had always been “treated as a trust.”

“We have serious questions about what we’ve seen and heard today,” Anderson said after the hearing at the federal courthouse. He vowed to depose current and past bishops, including New York Archbishop Timothy Dolan, in an effort to get answers.

In an e-mail response to questions from the Journal Sentinel after the hearing, a spokeswoman for the church denied it moved assets to shield them from victims.

“To the contrary, the archdiocese has been liquidating all nonessential assets for years to help pay for the costs of therapy and voluntary settlements,” Julie Wolf said.

Wolf said the $75 million belonged to parishes and was held by the archdiocese in an investment account until 2004, after which it “ceased providing such services.” Archdiocese bankruptcy attorney Daryl Diesing said he believes the money was returned to the parishes.

She quoted the bankruptcy financial statements to explain the cemetery trust, saying it was created in 2007 to “formalize the existing trust relationship” that dated to the early 1900s.

The archdiocese filed for Chapter 11 bankruptcy protection in January, saying it was the best way to equitably compensate victims of clergy sex abuse and maintain the essential missions of the church. Its financial statements, filed with the court this week, list $40.7 million in assets and $24 million in liabilities, including $13.7 million for a health care plan for retired priests.

The church maintains that the vast majority of its assets are in trusts and restricted accounts, leaving only about $7 million for settlements, though it became clear Friday that victims intend to challenge that.

So far, the courts have barred the archdiocese from tapping insurance to fund settlements because the allegations involve fraud, rather than accidents. However that is on appeal to the Wisconsin Supreme Court.

Friday’s meeting was the first opportunity for creditors to question the archdiocese about its finances.

Anderson, who travels the country handling priest abuse cases, and Los Angeles bankruptcy attorney Gillian Brown dominated the hearing with a line of questioning aimed at undermining the archdiocese’s assertions that its parish assets and trusts – including the $105 million Faith in Our Future campaign trust – cannot be used for settlements.

Diesing, the archdiocese’s bankruptcy attorney, objected repeatedly, arguing the questions strayed beyond the scope of the hearing, which is intended to focus on the financial statements. Asbach, who had given Anderson some leeway to proceed, eventually reined him in.

“We’re not turning this into a deposition,” he said.

Brown suggested no asset would be overlooked, asking Marek at one point about the value of bishops’ rings, crosses and other jewelry, which was listed as “unknown.”

Diesing and Marek agreed to provide information about the appraised value of the items, along with several other documents requested by the victims and Asbach.

But Marek suggested the jewelry – which includes the rings of past bishops – has greater sentimental, rather than economic value.

“You’d look at it and say, ‘It’s a nice cross,’ but I wouldn’t give you $10 to wear it to a party tonight.”