The Catholic Diocese of San Diego's key contention in bankruptcy court that it does not own or control tens of millions of dollars worth of parish assets is at odds with portrayals previously made to its auditors, banks and investors, according to a financial expert's report filed late Monday night.The parish-ownership issue has been at the center of the contentious legal stand-off between the Roman Catholic diocese and attorneys representing about 150 victims of child sexual abuse by priests.
The 175-page report, filed by court-appointed financial expert R. Todd Neilson, found no overarching and consistent accounting system. “As a result (church officials) are often woefully unaware of the specific financial operations of the individual parishes,” it said.
The report, which is not yet complete, also found that new accounts have been opened since the diocse filed for bankruptcy on Feb. 27 and that several churches are keeping their money, rather than sending it to the diocese's banking system, as they are supposed to do.
Among key findings, however, is that financial statements filed by Bishop Robert Brom and other church officers made “no disclosure of a trust relationship” between the diocese and its 98 parishes.
The diocese has insisted to the the U.S. Bankruptcy Court the parishes are not part of its assets.
Under Catholic church law, officials said, the parishes are held in trust by the diocese.
Victims' attorneys disagree, arguing that parish assets legally belong to the diocese and are more than ample to settle pending lawsuits. The report says $165 million flows through the diocese annually.
Advertisement Diocese attorney Micheal Webb on Tuesday downplayed Neilson's findings.
“Given that our diocese and the parishes are not businesses, it is not surprising that Mr. Neilson found some room for improvement,” he said in a written statement. He urged Catholics and the rest of the public “to listen to and rely only on the comments of Mr. Neilson himself.”
But attorney Jim Stang, who represents the committee of abuse victims in the bankruptcy case, said Neilson's findings is evidence that church officials “have gotten caught up in their own lies.”
“Either they are lying to the bankruptcy court or they are lying to the public” about whether the diocese or the parishes owns the assets, said Stang, who characterized the expert's report as “scathing.”
“Lies, secrecy and hubris are at the heart of the diocese's failure to address the rape and molestation of Catholic children in San Diego,” he said. “Not surprisingly, the system that allow that tragedy countenances a financial system that appears to be equally riddled with lies and secrecy.”
Victims have repeatedly accused the diocese of not being forthcoming about its assets.
“I don't think they (church officials) have played straight all along,” said Diane Williams, who alleges she was raped by a priest in San Diego 35 years ago when she was 14. “It's been kind of a denial from the beginning.”
The judge also has expressed frustration. Six weeks into the case, bankruptcy Judge Louise DeCarl Adler threatened to hold the diocese's lead bankruptcy attorney, two priests and two other lawyers in contempt of court for allegedly conspiring to open new bank accounts.
Adler didn't follow through on her threat, after those involved said it was simply a misunderstanding.
Instead, she decided to appoint Neilson, a nationally recognized expert witness in bankruptcy cases and one-time FBI agent, to examine hundreds of accounts associated with the diocese and parishes.
This is the first time in five Catholic bankruptcy cases across the country that a judge ordered such a financial review.
Adler has set an Aug. 23 hearing in U.S. bankruptcy court on the report, at which time attorneys will be allowed to question Neilson. Attorneys have until Aug. 9 to file written comments.
The bankruptcy petition, which came after four years of unsuccessful settlement negotiations, put on hold the lawsuits filed by men and women who allege they were sexually abused as minors by priests and other church personnel in cases that date back decades.
Bishop Brom told parishioners he welcomed Adler's decision to appoint a financial expert.
The analysis, he wrote in one of his letters updating the proceedings, “cannot be anything but helpful.”
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