It’s been somewhat quiet on the outside since Bp. Matano’s letter to the Faithful, but apparently it hasn’t been so quiet on the inside.  An article in the Diocesan Courier for December (p. 4) brings into question again the vulnerability of parish corporations. One interpretation was that being separate corporations (separate from the Diocesan Corporation), and separate from other parish corporations, would protect most parish assets from being lost in a diocesan bankruptcy. While technically true, there is certainly no guarantee. That might have been truer before amalgamating individual parishes into larger legal entities. For example, if one parish had a priest or deacon or lay employee who abused children, amalgamating that parish into a structure with five other ‘clean’ parishes, could put all six at risk. One diocesan employee, moving for years among multiple parishes, could end up tainting dozens of parishes, when the tracks are ultimately followed.

Back to the December Diocesan Courier. Here are some ‘uncomfortable excerpts’  from the very public article regarding the Diocese of Rochester’s election of Chapter 11 bankruptcy:

• “… the Continental Insurance Co. had filed an Oct. 29 motion for relief from the stay of litigation imposed by bankruptcy proceedings.”
• “… on Nov. 14 the diocese lodged an adversary complaint … against Continental and 11 other insurance companies, asserting the insurers are attempting to limit their coverage liability.”
• “[DoR’s attorney] Stephen A. Donato … argued for … settling via mediation the question of insurers’ responsibilities…”
• “Bishop Matano   explained that the diocese would be unable to satisfy numerous claims that were filed after Aug. 14  … [previously ] barred by statutes of limitation.”
• “According to Lisa Passero [CFO] the diocese has approximately $68 million in assets, but more than $100 million in liabilities….”
• The bankruptcy judge “…  asked the parties to develop a plan for mediation by Jan. 14th.”

What seems obvious from the above points is that any expectation of exclusion of parish assets from the bankruptcy is an endangered species. At first it becomes an innocuous discussion about shuttering and selling a church for needed repairs, a school because there is falling attendance and higher tuition. Then there are sales of ancillary buildings which a parish is encouraged to admit it can do without. Then there is ‘repurposing’ of facilities (which needs very close scrutiny of ‘following the money’ as well as the plan and individuals involved and whether there is a true “arms length relationship” for necessary fiduciary purposes.)  Already asset discussions are in progress and even parishioners who have been involved in parish councils and finance councils have been cut out of communications.  There seems to be an expectation of parishes not being left unscathed even when there has been NO accusation of abuse in that parish to date. 

There should be a great sensitivity to risk.  Inexperienced pastors are not the people who should be making ‘deals.’  One can’t have it both ways. Either assets are needed for the perpetuation of the entity and basically exempt in bankruptcies, or they are not. But one should not expect that sales of assets will go anywhere except into mitigating the insurance companies’ exposure. It is the worst of times to liquidate parish assets, because the bankruptcy court will surely see cash on the table as fair game. Sales of assets means they are not needed, so they are fair game for the insurance companies to drag to the mediation table. 

The foregoing is just a personal opinion. I would dearly love to be wrong about the risk to our churches and church properties.

This entry was posted on Wednesday, December 18th, 2019 at 3:04 PM . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.