January 17, 2024 at 10:59 a.m.

DIOCESAN UPDATE

Bishop’s deposition and other developments since Diocese of Albany filed for reorganization last March.


By MIKE MATVEY | Comments: 0 | Leave a comment

During a proceeding related to the Diocese of Albany’s voluntary Chapter 11 reorganization, Bishop Edward B. Scharfenberger provided sworn testimony and again reiterated his support for survivors of sexual abuse, saying, “Survivors come first.” 

Bishop Scharfenberger made those comments during his nearly seven-hour examination on Jan. 8 with attorneys representing Child Victims Act (CVA) claimants and other creditors, including those representing the St. Clare’s pensioners, at the Leo O’Brien Federal Building in Albany. 

The examination is part of the ongoing discovery process that started almost immediately after the Diocese — which is facing over 400 lawsuits related to the CVA — filed for voluntary Chapter 11 protection March 15, 2023. Six of the eight dioceses in New York State — Albany, Buffalo, Ogdensburg, Rochester, Rockville Centre and Syracuse — have filed for voluntary Chapter 11 protection after being inundated with CVA claims. The discovery process will lead to mediation between the two sides. On Nov. 28, the Bankruptcy Court granted the Diocese’s request to proceed with mediation and the parties are in the process of scheduling initial meetings with the court-approved mediators to decide what the Diocese and its related entities and insurers will pay toward a global settlement fund for abuse victims.

Bishop Scharfenberger emphasized in his deposition that he has always been willing to talk with and hear from survivors of abuse, which he has done repeatedly in his tenure as Bishop of Albany. When asked by the attorney with the tort committee, which represents the CVA claimants and who led the questioning on Jan. 8, how survivors can reach him, Bishop Scharfenberger said, “Call me … I am very accessible. I will speak to anybody and listen … whatever is necessary for the healing, whatever step is needed.” 

Although he was mandated at the age of 75 to submit his retirement to the Vatican, which he did May 29, 2023, Bishop Scharfenberger said he does not want to retire and is not leaving the Diocese of Albany any time soon. “Every survivor wants to be taken seriously, heard and believed,” he said. “And that is what I am going to do for the rest of my life.”

The majority of the examination, however, was related to questions involving diocesan assets such as investment funds, the value of relics and reliquaries (some of which can’t be sold under canon law), real estate and parish assessments. The last hour or so was taken up by questions from the attorney who represents the unsecured creditors — mainly St. Clare’s pensioners — with claims against the Diocese. 

Bishop’s examination came days after the Diocese held a pair of staff meetings at the Pastoral Center on Jan. 4 to update employees on what has happened since the voluntary filing last March. The meeting was led by Bonni Shippee, diocesan COO, and Father Robert Longobucco, vicar general. The following are the key elements of that meeting: 

DISCOVERY PROCESS

Since filing for voluntary Chapter 11, the Diocese has provided information to the committees regarding its assets and liabilities and that process will play a part in determining what the Diocese can contribute to a global settlement fund. The groups that will pay into the fund will be the Diocese, which is also known as the debtor, and non-debtor entities, known as the “Catholic Family,” which includes parishes and schools, several of which have pending CVA claims, and insurance companies that provided insurance coverage to the Diocese and Catholic Family.  

Representatives of the Diocese have been previously examined — much like Bishop Scharfenberger was on Jan. 8 — and documents have been requested by two groups: the tort committee, which is made up of the CVA claimants, and the unsecured creditors’ committee, which comprises vendors and individuals owed money by the Diocese, but is mostly made up of St. Clare’s pensioners. Shippee added that each committee has legal representation and the Diocese is responsible for paying the fees of the committees’ professionals. 

The Diocese also files monthly operating reports — including banking and investment account statements and information regarding any money received or paid out, which are filed with the Bankruptcy Court by the diocesan finance department. The Diocese has retained Donlin Recano & Co., Inc. to collect claims filed against the Diocese and provide access to documents filed with the Bankruptcy Court. These documents are publicly available for view on the Donlin Recano website (donlinrecano.com/Clients/rcda/Dockets). The discovery process also has included examinations of Father Longobucco, Shippee, diocesan comptroller Barbara Murin, and others. 

PARISH STEERING COMMITTEE 

In the summer, a Parish Steering Committee was established and Father James Walsh, pastor at St. Pius X Church in Loudon­ville, was appointed the chair. Father Walsh put together the group that will represent the parishes and the schools. They are: Father Scott VanDerveer, pastor at St. Mary’s Church in Glens Falls, Father James Belogi, pastor at St. Madeleine Sophie and St. Gabriel the Archangel in Schenectady, Deacon Richard Thiesen, parish life director at Christ Our Light in Loudonville and parish administrator at St. Clare’s in Colonie, Allison Harwich and Gail Moore, accountants and bookkeepers for numerous parishes throughout the Diocese, and Matt Trainor, attorney and parishioner at Holy Spirit in Gloversville.

The job of the parish steering committee is to assist parishes and schools through the bankruptcy proceedings. The group is being represented by separate law firms both with extensive experience representing similar committees in the Syracuse, Rochester and Buffalo dioceses. Since the parishes are separate corporations from the Diocese, they must split the legal fees; to date, each parish has paid $1,000.

During the staff meeting, it was asked what if a parish that currently was not named in a lawsuit decided it didn’t want to contribute to a settlement fund. Besides the potential “to scuttle” the global settlement as Father Longobucco said, by contributing to a global settlement each parish or other Catholic entity would be legally covered from any claims of abuse that may have occurred up to March 15, 2023 under a “channeling injunction.” This agreement relieves the debtor and its non-debtor entities from continuing liability.  

The Catholic Sun from the Diocese of Syracuse notes in a “Frequently Asked Questions” section of its website that parishes that currently don’t have claims against them nevertheless contribute to any settlement because “by contributing, each entity is protected from any claims of abuse that may have occurred up to (the date reorganization was announced) that may be filed if another legal window is opened in NYS. Sixteen states are already looking to entirely do away with the civil statute of limitations for sexual abuse.” 

SETTLEMENT NUMBERS 

Although Shippee said, “at this time, we don’t know what the settlement amount will look like,” a look at Syracuse and Rochester could provide some framework. 

The Diocese of Syracuse and its “Catholic Family” entities which filed for protection in June 2020, agreed to pay $100 million last June to all survivors of sexual abuse, which involved 411 claims. The diocese will pay $50 million, 119 parishes will pay $45 million with $5 million coming from other diocesan entities. Although none of the insurers providing coverage to the diocese and its parishes are currently proposing to provide additional funds for payments to survivors, the diocese’s proposed plan includes terms for such payments by any insurers that agree to participate in funding the plan or for the assignment of the insurance policies to a trust created to hold settlement funds and pay claims. Any payments by the insurers will provide additional funds to pay survivors’ claims.

The Diocese of Rochester, which filed its Chapter 11 petition in 2019, has proposed a plan funded by $55 million paid by the diocese and parishes and $71.35 million paid by certain insurers for a total of $126.35 million, plus the assignment of the diocese’s claims under insurance policies issued by Continental Insurance Co., which is expected to increase the total amount of funds to pay survivors’ claims. Reuters reported in September that Continental has proposed a competing plan offering a $201.53 million settlement involving 470 claims with the Diocese of Rochester contributing $55 million to the trust with funds from other insurers as well, but that also caps Continental’s ­liability for claims under its policies. Court hearings to consider approving either of the proposed plans are expected to be held over the next several months.

ST. CLARE’S PENSIONERS

When the Diocese of Albany filed for voluntary Chapter 11, all legal actions — including lawsuits involving the St. Clare’s pensioners, who allege they lost their retirement benefits because of actions by the Diocese — stopped. In May, attorneys for the pensioners filed a motion to lift the bankruptcy stay to allow the case to proceed, which the Diocese agreed to. In June 2023, the motion was granted and the lawsuit moved forward before the New York State Supreme Court in Schenectady County. 

Shippee said having a resolution from the lawsuit is key. 

“It is important that we know the outcome of that lawsuit because we need to know if we have financial liability,” she said. “The diocesan assets available for the global settlement fund for the CVA claimants are the same assets that would fund a settlement for the St. Clare’s pensioners.”

Counsel for the Diocese has put forth a request to mediate the case to the Supreme Court in Schenectady County. After a hearing two weeks ago, the matter was adjourned until Jan. 29.

NEXT STEPS

On Dec. 29, 2023, the bankruptcy court appointed as co-mediators Roger Kramer, an experienced mediation attorney from Minnesota who is involved in the Diocese of Syracuse case, and Paul Van Osselaer, who is also an experienced mediation attorney known for his work with insurance companies and has been appointed as a mediator in the Diocese of Rockville Centre and the Diocese of Syracuse cases.  

The mediators will work with all parties — the Diocese as the debtor, non-debtor “Catholic Family” entities (including parishes and schools), the insurers that were in place over the years, and the tort and creditors’ committees — to come up with an agreement as part of the reorganization plan. Shippee said, “The plan will include the funding of the settlement, the payment terms and will also include non-monetary terms. The basis of the filing is to resolve the CVA claims. Non-monetary terms include implementation, reorganization, or enhancements of current processes that we have in place for reporting and responding to sexual abuse claims.” 

“We are anxious to move forward and we are ready to take the next steps toward a reorganization plan,” Shippee added. “I believe going through this process is making us a better, stronger Diocese.” 


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