Catholic Diocese of Spokane, Washington

From the

Official News Magazine of the Diocese of Spokane

(From the Jan. 13, 2005 edition of the Inland Register)

The Jan. 5 First Meeting of Creditors in the Diocese of Spokane’s Chapter 11 Reorganization filing allowed abuse victims and their legal counsel to question diocesan officials regarding the financial affairs of the Catholic Church in Eastern Washington.

Representing the diocese, and sworn in by the Court, were Bishop Skylstad; Father Steve Dublinski, Vicar General; and Merrilin Fulton, Director of Fiscal Services for the diocese.

Also present were four attorneys: Mike Paukert, Greg Arpin, and Shaun Cross of the Paine Hamblen law firm; and Mike Geraghty, of the law firm of Turner, Stoeve and Gagliardi.

This First Meeting of Creditors – the Section 341 Meeting – happens with each Chapter 11 case.

According to Shaun Cross, the diocese’s Section 341 Meeting was unusual, “in light of the number of creditors participating” in the meeting.

The purpose of the meeting, which was conducted by U.S. Trustee Ilene Lashinsky, was to provide an opportunity for a formal review of the diocese’s financial affairs by the creditors and their counsel.

Questions focused on the diocese’s Deposit and Loan Fund, the relationship of parishes to the diocese, the relationship of priests to the bishop, and the relationship of the diocese to Rome.

Initial estimates were that the meeting might last two-three hours. It lasted five.

For five hours, Bishop Skylstad and others representing the diocese answered questions personally, face-to-face, whether questioned by attorneys or claimants.

Questioners took turns at the microphone during the public meeting. Diocesan representatives answered without a break of any kind during the meeting, until no one present had any further desire to question.

Mike Paukert, one of the attorneys representing the diocese, made an introductory statement, relating some of the history of the diocese and Catholic ministry throughout Eastern Washington for over 150 years. In particular, he detailed many of Bishop Skylstad’s efforts to create a safe environment for children and vulnerable adults; outreach to victims, including public meetings in parishes where abuse has occurred; the positive results of audits of the diocese’s efforts to implement the Charter for the Protection of Children and Young People.

The diocese’s filing for Chapter 11 Reorganization on Dec. 6, 2004, came only after a long period of careful reflection, discussion, consultation with various groups of laity and clergy, and examination of similar situations in the Archdiocese of Portland and the Diocese of Tucson, both of whom filed for Chapter 11 before the Spokane Diocese.

The Reorganization will allow the fair, just, and equitable resolution of valid claims, while allowing the diocese to continue its mission and ministry in Eastern Washington.

Four significant issues need to be resolved:

• Identification of the claims against the diocese.
• A process for addressing those claims.
• The extent of the diocese’s insurance coverage.
Over the years, some diocesan insurance records were damaged and lost. Although a record of coverage (generally from 1958 on) has been reconstructed from secondary sources, there are still periods (primarily prior to 1958) when the diocese cannot definitively prove it had insurance coverage.
• The extent of the property of the estate – the property of the diocese itself. The diocese contends that since it is a Corporation Sole under Washington State law, the parishes and other entities are held in trust by the Bishop of Spokane. The diocese also will be making other arguments to show that parish property is not subject to the claims of creditors.

Many of the attorneys questioning the diocesan representatives attempted to negate that.

Questions mostly addressed the organizational structure of the diocese and its finances: sources of income, internal relationships, relationships of parishes and the diocese.

“Generally, we’re very pleased with the First Meeting of Creditors and the fact that another milestone (in the Chapter 11 Reorganization) has been passed,” said Shaun Cross.