SF archdiocese could declare bankruptcy
The San Francisco archdiocese would be among more than 20 dioceses involved in bankruptcy proceedings.
The Archdiocese of San Francisco could soon declare bankruptcy, after more than 500 lawsuits have been filed against it in the last three years.
In an Aug. 4 letter obtained by The Pillar before its publication, Archbishop Salvatore Cordileone told Catholics that “a Chapter 11 bankruptcy reorganization is very likely” for the archdiocese.
The filing would “allow the Archdiocese to achieve two very important goals. First, Chapter 11 is a process that brings all parties together in one place to resolve difficult claims fairly and equitably under the supervision of the bankruptcy court, allowing the Archdiocese to deal with the hundreds of cases collectively rather than one at a time,” the archbishop wrote.
“That could result in a faster resolution for hundreds of survivors, providing them with fair compensation and finally, hopefully, some peace and closure. Secondly, Chapter 11 would allow the Archdiocese to reorganize its financial affairs to continue its vital ministries to the faithful and to the communities that rely on our services and charity,” he added.
If it files for bankruptcy protection, the archdiocese would join 10 U.S. dioceses with active bankruptcy proceedings, along with 17 which have already been through the bankruptcy process.
The possible bankruptcy comes after a 2019 California law which allowed plaintiffs to file time-barred sexual abuse claims against non-profit organizations, during a three year litigation window.
In his letter, Cordileone said that more than 500 suits had been filed against the archdiocese.
The archbishop said “the vast majority of the alleged abuse occurred in the 1960s, 1970s, and 1980s and involved priests who are deceased or no longer in ministry,” adding that some lawsuits involve claims against unnamed priests, or priests unknown to the archdiocese.
A representative for the archdiocese declined to provide additional detail on the suits.
But the archbishop wrote that only the archdiocesan legal entity would be impacted by a Chapter 11 filing, and that “the operations of our parishes and schools should continue asusual without disruption.”
It is not clear whether parishes and schools are organized as distinct legal entities under civil law in the San Francisco archdiocese.
In some U.S. dioceses, parishes are organized as non-profit corporations — with the pastor, bishop, vicar general, and some lay people serving as board members — or as individual corporations sole, with the pastor as the sole member. In other dioceses, parishes are effectively unincorporated associations, or share in the civil corporate identity of the archdiocese.
The structure of corporate organization can become a factor in bankruptcy proceedings, during which bankruptcy judges or mediators are tasked with meting out which assets belong properly to the diocese, and which are held in trust for parishes.
A spokesman for the archdiocese told The Pillar that parish and school real property is held in “separate support corporations,” meaning that the properties of all parishes are held in a singular corporation, rather than the parishes holding property titles themselves.
That corporation, the “Archdiocese of San Francisco Parish and School Juridic Persons Real Property Support Corporation” was established in 2008 to hold parish and school property, according to archdiocesan financial reports.
Those reports indicate that the property holding company and the archdiocese “are financially interrelated organizations” — the nature of their exact relationship, and archdiocesan control over parish properties — could become relevant in bankruptcy proceedings.
In 1911, the Holy See instructed U.S. dioceses to ensure that parishes were organized in civil law in the manner which most reflects their canonical identity, and to urge legislatures to develop appropriate civil structures to that purpose. Compliance with that direction has varied widely among American dioceses, with some approaches heavily criticized by canonists.
Cordileone, like other bishops who have recently filed or contemplated bankruptcy, argued Aug. 4 that bankruptcy could allow for diocesan assets to be used “equitably” to compensate victims of past abuse, while allowing for the local Church to continue its ministry.
In fact, the bankruptcy process does allow the court to help determine how the diocese’s creditors (including survivors) will be paid, and it can be possible to structure that process to avoid seeing all the available assets going to a few large settlements.
But that doesn’t always happen. And victims’ advocates argue that bankruptcy proceedings pose the risk that many victims will find there is very little help actually available to them.
Advocates for victim-survivors have cautioned that not all victims are able to come forward in the same timeframe — that people process trauma at different paces, and that those who have suffered significant trauma are often the ones who need the most time before they are ready to relive an experience, and to able to bring their account forward for compensation.
An ordinary bankruptcy proceeding can sometimes mean that people who need more time to come forward with their experiences find that when they do, they are at the back of the line for compensation among diocesan creditors, with little or nothing left when their turn comes.
To address that, some dioceses have tried to find alternatives to bankruptcy, in which the same diocesan assets are made available to compensate victims, but in a structured mediation process, which would allow all claimants to be considered, regardless of when and in what order they came forward.
In 2022, the Diocese of Albany, in New York, proposed such a mediation plan with plaintiffs, offering to put substantial diocesan assets, along with insurance money, into a fund for survivors, where compensation would be decided by a third-party.
When he made the approach Albany Bishop Scharfenberger told The Pillar that his approach faced two hurdles.
The first was that victims and their lawyers, would have to accept that there was only so much money in the diocesan coffers, and only so much real estate to sell — meaning that while mediated compensation settlements would arrive relatively quickly, they would likely offer smaller amounts of money than the kinds of massive judgments which might be rendered in court, or if suits are settled one at a time.
The other hurdle to such a plan was trust. Agreeing to alternative mediation plans would require trusting a diocese — not an easy feat for many victims.
Scharfenberger told The Pillar that he was “aware that offending institutions are not owed, and cannot assume, trust in their credibility or even good faith,” and that, as a bishop, his overtures to survivors “are naturally difficult to trust.”
Even with the endorsement of some victims-advocacy groups, Scharfenberger did not overcome those hurdles, and his plan wasn’t accepted by lawyers representing the largest blocks of claimants. Earlier this year, the Albany diocese announced that it would declare bankruptcy.
It is not clear whether Cordileone, or other bishops now contemplating bankruptcy, are also considering the possibility of mediated settlement plans.
While Cordileone did not raise the issue, canon law requires that dioceses must involve the Vatican before they can file for bankruptcy.
The Holy See has reminded bishops in recent years that they’re required to get Vatican approval for “extraordinary acts of administration” which could worsen the financial stability of the diocese, including bankruptcy.
In 2020, then-prefect of the Dicastery for Clergy, Cardinal Beniamino Stella wrote to all U.S. diocesan bishops, noting the rising number of bankruptcy filings and lamenting that while “in most of these cases, the permission of the Holy See was sought, in conformity with the prescripts of law, in some, however, the necessary permission was not requested.”
When permission is requested, the Holy See aims to ensure that the diocese has consulted with the best available financial and legal resources, and with priests and other Catholic advisors, before taking such a drastic step.
Consultation usually involves the question of how the diocese will be able to continue its ministry after a bankruptcy.
It is not clear whether the Holy See has, to date, considered id bankruptcy is the plan in the best interest of the victims of clerical sexual abuse, or whether bankruptcy is most likely to ensure that as many of them are compensated as possible.
For his part, Cordileone urged specific prayers, and fasting, for the victims of clerical sexual abuse.
“While a great majority of these sins were committed many decades ago, it is a sign of Christian solidarity that we join together in praying the rosary daily and at least once a week as a family, spending an hour of adoration of our Lord in the Blessed Sacrament once a week, and fasting on Fridays for the survivors of abuse, for the mission of our Archdiocese, and for the eradication of this shameful crime from our society as a whole,” the archbishop wrote.
“God is pleased by such prayer and penance, and doing so will open our hearts to the blessings He wishes to lavish upon us,” he added.
There are nearly 500,000 Catholics in the Archdiocese of San Francisco, with 92 parishes and almost 200 diocesan priests.
It's a sad situation, but Abp. Cordileone, like many of his confreres, is wisely opting for the least bad option for his diocese. Many of the 500 claims are difficult if not impossible to defend against as they involve alleged abuse that took place 40, 50, 60 years ago by priests who long ago shuffled off this mortal coil.
First came the moral bankruptcy.