Stockton diocese faces possible bankruptcy over abuse lawsuits

Stockton, Calif., Sep 11, 2013 / 23:02 pm

The bishop of Stockton, California has told his parishioners that all the funds for settling sexual abuse lawsuits have been used, and that bankruptcy may be the only option for financial reorganization.

"We continue to investigate our options, and no final decisions have been reached. I feel, however, that it is important to tell you that options other than filing for bankruptcy protection have not emerged," Bishop Stephen E. Blaire said in a Sept. 6 letter to the diocese.

In the last decade, the diocese has spent nearly 20 million dollars on sex abuse lawsuits.

If Stockton decides to file for bankruptcy, it will be the tenth diocese to do so, after the Diocese of Gallup, N.M., announced last week that it has also decided to do so.

Although no final decision has been made in Stockton, the bishop wanted to make the parishioners aware that filing for bankruptcy is a very real option.

"I want to keep you and the wider community informed as best I can in this process," he said.

Many organizations, such as schools, cemeteries and charities are organized as separate corporations "apart from the Diocese Corporation," he explained, so they would not be part of the bankruptcy filing.

However, these organizations could face claims from creditors of the diocese and could have their separate status challenged.

"Nevertheless, these separate organizations need to have an understanding of the decision-making process and the possible claims that may be made by creditors of the Diocese so they can be prepared in whatever way necessary," he wrote.

In the experience of other dioceses faced with bankruptcy, creditors have challenged the organizations' statuses as separate entities from the diocese.

Bishop Blaire emphasized that the diocese remains committed to finding a way to meet their obligations to victims of abuse, to the poor and needy of their community and to the Catholics who make up the diocese.

"This commitment will guide our decisions as we move forward," he said.

Although no final decision has been made, Bishop Blaire assured his diocese that they "will be well informed" when one is decided.

The Diocese of Stockton includes six counties and is made up of 250,000 Catholics.

Bishop Blaire's announcement comes amid continuing concerns over a bill passed by the California state legislature and currently waiting for the governor's signature or veto.

The bill, known as S.B. 131, would pave the way for additional sex abuse lawsuits against private employers – including Catholic institutions – while exempting public ones.

Critics have warned that other dioceses in the state could face a situation similar to that of Stockton if the bill goes into effect.