Stockton Catholic Diocese to File for Chapter 11 after Decades of Child-Sex Court Losses

Wednesday, January 15, 2014

The Roman Catholic Diocese of Stockton is filing for Chapter 11 bankruptcy protection following adverse court decisions regarding two decades worth of child-sex abuse.

Although insurance companies paid out $18 million on behalf of the Catholic Church, the diocese has had to pony up $14 million of its own money in settlements and judgments, and at least $1 million more in legal fees. To date, damages have been awarded in 38 local clergy sexual-abuse cases and more cases are pending.

A statement by Bishop Stephen E. Blaire came right to the point. “Very simply, we are in this situation because of those priests in our diocese who perpetrated grave, evil acts of child sexual abuse,” he said. “We can never forget that these evil acts, not the victims of the abuse, are responsible for the financial difficulties we now face.”

Stockton becomes the 10th diocese to file for bankruptcy, including one in San Diego. The San Diego diocese filed in February 2007 and in September of that year agreed to pay $198.1 million to settle 144 claims of clergy abuse.

The Stockton diocese paid $3.75 million in damages for the actions of Michael Kelly, a defrocked priest who fled to Ireland in 2012 after 39 years in local parishes. He was accused of raping a former altar boy in the 1980s. A Calaveras County grand jury indicted him Monday on charges he molested a 10-year-old boy, the latest in a series of allegations against him that began in 2007. Extradition from Ireland is being sought.

A central claim in many of the bankruptcies filed by other diocese is that they are independent of the individual parishes and ministries and thus not liable for their missteps. Bishop Blaire said the parishes were separately incorporated in 2002 and argued, “Why should one parish bear the responsibility for what happens in another parish?”

John Manly, an attorney who has been involved in some of the lawsuits, told the Modesto Bee that defense has been tried by other dioceses and it didn’t work. “It just defies logic to think that the bishop doesn’t control the parishes,” he said. “Can the parish leave the diocese? The answer is no. And every parish priest is appointed by the bishop.”

Bishop Blaire said the diocese, which covers the counties of San Joaquin, Stanislaus, Calaveras, Tuolumne, Alpine and Mono, has assets of $15 million and liabilities of $17 million. The diocese serves a Catholic community of 250,000 (around 20% of the population) with 88 priests in 35 parishes and 14 missions.

In addition to potentially sheltering the parishes from liability, bankruptcy may reduce the overall outlay by the diocese in civil cases and put a time limit on the filing of new abuse claims.

The best known of Stockton’s abusive clergy is Oliver O’Grady. The immigrant from Ireland (as is Kelly) was convicted in 1993 on four counts of “lewd and lascivious acts” on two young brothers, and was sentenced to 14 years in prison. He got out in 2000 and later confessed to having molested 25 children in Northern California.

O’Grady’s bishop was Roger Mahony, who arrived in Stockton in 1980. Mahony left in 1985 to become archbishop of Los Angeles and, eventually, a cardinal. O’Grady was the subject of a documentary, “Deliver Us from Evil,” that explored how the Church has covered up abuse by the clergy. He was convicted of possessing child porn in Ireland in 2012 and sentenced to three years in prison.

The bankruptcy is expected to take a year or two to complete.    

–Ken Broder


To Learn More:

Diocese to File For Bankruptcy (by Kevin Parrish, Stockton Record)

Stockton Catholic Diocese to File for Chapter 11 Protection (by Sue Nowicki, Modesto Bee)

Diocese of Stockton to File for Chapter 11 Bankruptcy (by Stephanie Gleason and Alejandro Lazo, Wall Stree Journal)

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