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Accusers: Archdiocese of Santa Fe is shielding assets with bankruptcy filing

December 3, 2018

In a way, the Archdiocese of Santa Fe has been getting ready for years to file for bankruptcy.

“We’ve [consulted with] a bankruptcy attorney for the last four or five years because we could see where this is all leading,” Archbishop John C. Wester said Thursday during a stunning news conference in which he announced the archdiocese is seeking bankruptcy protection.

In the wake of one sexual abuse lawsuit after another, the archdiocese has been taking steps that advocates for survivors say are meant to protect its property and other assets from potential claimants.

In recent years, the archdiocese has incorporated individual parishes as separate nonprofit organizations and set up a corporation to hold some of its real estate.

After the bankruptcy papers are filed sometime next week, the church will have to provide an accounting of its finances. But the process is likely to prompt plenty of questions about these moves, precisely what the archdiocese really owns and what it can use to pay off survivors of sexual abuse.

“Catholic dioceses are not ordinary debtors,” Penn State Law professor Marie T. Reilly wrote in a recent paper on the bankruptcies of church organizations.

Bankruptcy raises issues not only about who exactly controls the various properties of what are often sprawling, historic institutions but also questions about constitutional liberty and the extent to which a court can wade into the affairs of a religious organization.

And the steps the archdiocese already has taken are familiar to residents of other dioceses that have also faced big financial liabilities and bankruptcy in the fallout of the Roman Catholic Church’s sex abuse scandals.

For example, the archdiocese announced in 2012 it had started incorporating its more than 90 parishes as separate nonprofit organizations, potentially walling each off from legal liabilities of other parishes and church officials.

The Archdiocese of Santa Fe has long been structured as what is known as a corporation sole. That is, the archbishop is the only officer of the corporation.

Under this process, parishes were incorporated separately with a small group of officers and the pastor serving as president.

On page 8 of the archdiocese’s December 2012 newsletter, then-Archbishop Michael J. Sheehan said the move would emphasize in a legal way the “canonical uniqueness” of each parish.

He noted other dioceses have already taken similar steps.

But church officials elsewhere have also been clear that such a move is intended to protect parishes in the face of mounting lawsuits against their dioceses.

The Diocese of Tucson, for example, told parishioners that by becoming a separate nonprofit, each parish would gain “protection from liability for the acts of the Diocese or for the acts of the other parishes.”

In 2012, the Archdiocese of Santa Fe also established a separate real estate trust to control much of its property. The Santa Fe County Assessor’s Office, for example, lists the Archdiocese of Santa Fe Real Estate Corporation as owning several churches as well as the land around some parishes.

Lawyers for survivors of sexual abuse by priests have raised concerns about these measures, though.

“The purpose of transferring these substantial assets to the newly incorporated parishes and the [archdiocese] Real Estate Corporation was to shield the assets from possible future creditors, including victims of sexual abuse,” lawyer Brad Hall wrote in a 2016 lawsuit.

In a response to that filing, the archdiocese’s lawyers said the trust was created to hold title to real estate belonging to its parishes and denied Hall’s allegations.

Representing a man who said he was sexually assaulted by a priest at a Catholic school in New Mexico, Hall argued the archdiocese’s steps at reorganization were very clearly meant to limit the financial damage the church faces in a state that was long a dumping ground for predatory clergy.

Wester said Thursday the church had resolved hundreds of cases for millions of dollars.

The archdiocese already has had to undertake large fundraising campaigns and sell off property around Albuquerque after a wave of sexual abuse lawsuits in the 1990s.

Now going to bankruptcy, the question will be how much the archdiocese will have to pay. Or can.

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