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Creditors: Minnesota archdiocese sitting on $1.7 billion

By STEVE KARNOWSKI
Created: 05/24/2016 5:54 PM

ST. PAUL, Minn. (AP) — Attorneys on Tuesday accused a Minnesota archdiocese of sheltering more than $1 billion in assets to avoid big payouts to abuse survivors as part of the church's bankruptcy case.

They say the Archdiocese of St. Paul and Minneapolis has some $1.7 billion in assets — far more than the $49 million it lists in a filing this week. In court papers, they accuse the archdiocese of vastly undervaluing assets such as the St. Paul Cathedral and tucking money away in other corporations to shield it from creditors.

Jeff Anderson, an attorney for hundreds of people claiming sexual abuse by priests, said the church had schemed to defraud creditors and deny fair resolution of claims.

"They are underrepresenting their ability to pay by about 99 percent," Anderson said. "It has been a scheme and a scam that has served them in the past."

Archbishop Bernard Hebda issued a statement saying the archdiocese has been fully cooperating in the bankruptcy case and has disclosed all its assets. He said he welcomed "the scrutiny of the court and all others involved." He also said the archdiocese will file its reorganization plan with the court this week.

"We believe it will show our commitment to a fair, just and timely resolution of all the claims made against us — especially for those who have been hurt by people in the Church," Hebda said.

The archdiocese filed for bankruptcy in January 2015 as it faced an onslaught of new abuse claims after Minnesota lawmakers opened a three-year window for claims that had previously been barred by the statute of limitations. That opening closes Wednesday.

In a motion filed late Monday, the unsecured creditors committee said it estimates the archdiocese and its parishes hold about $1.4 billion in assets, while various other Catholic organizations connected with the archdiocese have at least $300 million worth of additional assets. Those entities include three Catholic high schools in the Twin Cities area, The Catholic Cemeteries and the Catholic Community Foundation of Minnesota.

At a news conference Tuesday, Anderson showed a series of before-and-after photos of signs at several Catholic cemeteries around the Twin Cities area in which the cemetery's affiliation with the archdiocese had been painted over — sometimes sloppily. Similarly, he showed how the cemeteries' website formerly described The Catholic Cemeteries as "a corporation of the Archdiocese" chaired by then-Archbishop John Nienstedt, but was altered to remove that reference.

Anderson also pointed to documents showing that several other entities that formerly were under the direct authority of Nienstedt — such as the Catholic Finance Corp. and Catholic Services Appeal Foundation — were transferred to the control of other entities and officials after Minnesota enacted its three-year exception to the statute of limitations and the first lawsuits were filed, but before the archdiocese filed for bankruptcy.

Mediation efforts between the creditors and the archdiocese have failed, he said.

The committee is asking the bankruptcy court to consolidate the assets and liability of those entities with the assets of the archdiocese so that more money will be available to pay claims of the alleged abuse victims, which the motion says could top $1 billion.

The committee's attorneys argue in their filing that the archdiocese and the other entities still "function as a single, interrelated operation" subject to the direct control of the archbishop.

In an interview, Anderson said they're not accusing Hebda, who was formally installed May 13, of any wrongdoing. But he said they are blaming Nienstedt, who resigned under fire in June 2015.

Anderson said the archdiocese has used 15 different corporations "to transfer out, hide and conceal their true net worth and true ability to pay."

(Copyright 2016 by The Associated Press. All Rights Reserved.)


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