Bankruptcy filing delays church sex abuse case

ANNAPOLIS, Md. — A sex abuse case against Delaware’s Catholic Diocese of Wilmington and a former priest will be delayed after the diocese filed for federal bankruptcy protection on the eve of trial.

The bankruptcy filing late Sunday delays a lawsuit that had been set to start today in Kent County Superior Court, the first of eight consecutive abuse trials scheduled in Delaware.

“This is a painful decision, one that I had hoped and prayed I would never have to make,” the Rev. W. Francis Malooly, the bishop of the diocese, said in a statement on the diocese’s Web site.

Wilmington is the seventh U.S. Catholic diocese to seek Chapter 11 bankruptcy protection since the church abuse scandal erupted seven years ago in the Archdiocese of Boston.

The Wilmington diocese covers Delaware and the Eastern Shore of Maryland and serves about 230,000 Catholics.

Thomas Neuberger, an attorney representing 88 alleged victims, described the bankruptcy filing as a “desperate effort to hide the truth from the public and conceal the thousands of pages of scandalous documents” from being made public in court.

“This filing is the latest, sad chapter in the diocese’s decades long ‘cover-up’ of these despicable crimes, to maintain the secrecy surrounding its responsibility and complicity in the sexual abuse of hundreds of Catholic children,” Neuberger said in a statement.

Malooly said the decision was made “after careful consideration and after consultation with my close advisers and counselors” and that he believed “we have no other choice.” He said “filing for Chapter 11 offers the best opportunity, given finite resources, to provide the fairest possible treatment of all victims of sexual abuse by priests of our diocese.”

“Our hope is that Chapter 11 proceedings will enable us to fairly compensate all victims through a single process established by the Bankruptcy Court,” Malooly said.

Pat Arndt, 61, a bookkeeper, read about the bankruptcy filing in a newspaper this morning before attending Mass at Holy Cross Church in Dover, Del.

“We put full trust in our priests and then we have this happening,” said Arndt, who believes the diocese was wrong to file for bankruptcy and that it was an attempt, in part, to avoid responsibility.

“They’re just prolonging something that’s not right,” she said.

David Balcerak, 70, a member of the Knights of Columbus and a Eucharistic minister who delivers Communion to the homebound, was not aware of the bankruptcy filing but said he could understand the reasons behind it.

“They may not be able to afford it,” he said of the damages that could be awarded in civil lawsuits. “They probably have insurance, but probably not enough to cover what it might be, because the courts award anything.”

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.

Today’s case would have been the first to come to trial under a Delaware law that created a two-year “lookback” window that allowed claims of abuse to be brought regardless of whether the statute of limitations had expired. More than 100 lawsuits were filed before the period ended this summer, with four being settled.

Civil liability is the only recourse for victims of abuse that happened long ago because the U.S. Supreme Court has said states cannot change the statute of limitations for criminal cases.

Under federal bankruptcy rules, a bankruptcy filing results in an automatic stay or halt to all litigation in which the filer is a defendant. The trial would be delayed for the duration of the bankruptcy. However, the lawsuits could move forward if the plaintiffs ask and the request is approved by a judge.

Attorneys negotiated throughout Sunday trying to reach a settlement, but couldn’t.

Before Wilmington, bankruptcy protection was also sought in abuse scandals by dioceses in Davenport, Iowa; Fairbanks, Alaska; Portland, Ore.; San Diego; Spokane, and Tucson, Ariz. The San Diego case was dismissed.

At least three 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 Chapter 11 in 2005 after creating a fund of more than $20 million for people molested by clergy.

More than 20 Delaware plaintiffs have filed lawsuits against former priest Francis DeLuca. DeLuca served for 35 years but was defrocked last summer after having been jailed in 2007 in New York for repeatedly molesting his grandnephew.

The diocese has paid more than $6.2 million since 2002 to settle sexual abuse lawsuits. Like others around the country, it also has paid settlements to alleged victims who did not file lawsuits.