Bankruptcy judge rules Buffalo diocese will not pay for retired bishops’ lawyers

Buffalo, N.Y., Mar 9, 2021 / 16:41 pm

A bankruptcy judge ruled this month that the Diocese of Buffalo has “no obligation” to retain a law firm on behalf of two retired bishops, whom the state attorney general is suing for alleged cover-up of sexual abuse. 

U.S. Bankruptcy Judge Carl Bucki ruled Feb. 23 that the two bishops, Emeritus Richard Malone and retired auxiliary Bishop Edward Grosz, must pay their own legal fees, but may still have the right to seek reimbursement from the diocese’s insurers for their legal costs, the Buffalo News reported. 

The diocese is required under bankruptcy rules to have expenses such as the hiring of lawyers approved by a court. The diocese had argued that it was obligated under its bylaws to pay the bishops’ legal fees, but the judge disagreed. 

The bankruptcy judge did allow the diocese itself to hire Jones Day, a large law firm, as its own special counsel against the lawsuit. 

The Buffalo diocese has been embroiled in scandal since November 2018, when Bishop Malone’s former assistant leaked records reportedly showing that the diocese worked with lawyers to conceal credible abuse allegations from the public.

While the diocese had reported the names of some priests credibly accused of abuse, it had not reported others, the records appeared to show. Bishop Malone denied claims that he had covered up abuse.

New York’s Attorney General Letitia James filed a lawsuit during November 2020 in the state’s supreme court against the diocese. The state also named Bishops Malone and Grosz and Buffalo’s apostolic administrator at the time, Bishop Edward Scharfenberger of Albany, in the lawsuit.

The state alleges that the diocese, Malone, and Grosz failed to properly investigate claims of clergy sex abuse. The state also claims diocesan leadership did not “refer unassignable priests to the Vatican,” monitor priests with credible accusations, or take necessary action against diocesan priests credibly accused of child sex abuse. 

The state is seeking a court order for the diocese to comply with its own policies and procedures on clergy sex abuse, and for the appointment of an auditor to investigate the diocese’s compliance. In addition, the state is seeking restitution from Malone and Grosz, and a ban on their serving “a secular fiduciary role in a nonprofit or charitable organization” in the state.

A spokesman for the Diocese of Buffalo told CNA at the time that “we wish to reiterate that there is zero tolerance for sexual abuse of a minor or of sexual harassment of an adult in the Diocese of Buffalo by any member of the clergy, employee or volunteer.”

Bishop Malone, who had led the diocese since 2012, resigned in December 2019 following a Vatican-ordered investigation of the diocese.

Malone has apologized for his handling of the case of Fr. Art Smith, a diocesan priest who faced repeated accusations of abuse and misconduct with minors.

Bishop Malone had written to the Vatican in 2015, in a letter later reported in the press, asking that Fr. Smith be kept in active ministry. He admitted in the same letter that Smith had groomed a young boy, had been accused of inappropriate touching, and refused to stay in a treatment center. Smith was eventually suspended in 2018 after the diocese received a new substantiated allegation of sexual abuse of a minor. 

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In August of 2019, the diocese was named in a RICO lawsuit alleging that its handling of clerical sex abuse was akin to that of an organized crime syndicate.

In September 2019, Bishop Malone’s former secretary leaked audio of conversations where Malone appeared to acknowledge the legitimacy of sexual harassment accusations made against a diocesan priest months before the priest was removed from active ministry.

The diocese filed for bankruptcy during February 2020, by which time Bishops Malone and Grosz had already retired.