More than $400m of compensation to
American victims of sexual abuse by Catholic priests was paid with loans
and guarantees from Allied Irish Bank, it has ben revealed.
The
funds, in the form of loans, guarantees and lines of credit, were given
specifically to pay clerical abuse victims, and led to AIB being dubbed
the 'Vatican's banking arm' in U.S. legal circles.
The
revelation that a comparatively small Irish bank based on another
continent was used to pay off victims will raise questions about AIB's
links to the church.
One of the payments, of $250m to the
Los Angeles diocese, emerged in a new book entitled 'Render Unto Rome:
The Secret Life of Money in the Catholic Church', by Jason Berry, which
outlines extraordinary links between the bank and the church.
But
an investigation by the MoS has established that in a few short months
in 2007 AIB emerged as the lender behind abuse settlements for four
separate dioceses, and the true figure was almost twice as high.
It
also emerges that while AIB was used to pay the bulk of the Church's
abuse claims, the dioceses were able to hold on to most of their
properties.
Berry also claims that out of
194 Catholic dioceses in America, 45 banked with AIB.
In the book, he
asks: 'Was AIB a pass-through for Vatican funds to help certain dioceses
while others had no such advantage?'
Many
American dioceses, confronted in recent years with compensation cases,
have filed for bankruptcy and negotiated settlements with victims.
But
instead of being funded by the Vatican, which is fighting court cases
by denying any legal responsibility to pay, almost half a billion of the
money paid out in America was borrowed from AIB in Dublin.
Many other agreements may have been made out of court, in secret.
The
MOS has confirmed that all of the loans were agreed by the bank's
headquarters in Dublin, and amount to as much as a quarter of AIB's €2bn
exposure in America the following year.
The
MoS has also discovered that the loans are now being quietly repaid.
In
a revelation that will prompt further questions about whether the
Vatican is behind the international deals, the supposedly-indebted
dioceses have begun to pay off the AIB debts with money from other,
unnamed, institutions.
Just last month a $40m line of credit to the Diocese of Portland in Oregon was taken over by an un-named creditor.
Bob
Krebs, a spokesman for the diocese for many years, declined to name the
new lender.
Asked why AIB had been used to help fund its abuse
compensation cases, he said he did not know who 'found Allied Irish for
us'.
Of the deals, by far
the largest line of credit was for Los Angeles, for $256m.
The diocese
avoided going into court with abuse victims by reaching a settlement in
advance.
It emerged afterwards that AIB loans and guarantees accounted for almost half of total settlement.
The
deal included $175m in cash and another $25m to pay the interest, and
helped Los Angeles avoid selling the bulk of its properties or reveal
the true value of its total assets.
In San Diego AIB gave cash and credit of some $100m, almost half the $198m paid out to 144 victims.
That
diocese filed for bankruptcy on the eve of the first civil trial
against it, a case involving Monsignor Patrick O'Keeffe, originally from
Kilkenny.
The Diocese of Portland, in Oregon, also filed for bankruptcy because of compensation actions.
Of
a $129m settlement for victims $40m came from AIB.
The loan effectively
allowed the diocese to close the bankruptcy proceedings without selling
any assets.
A loan
document obtained by this paper details the loans in Portland.
On AIB
headed paper, it details how the loans were being specifically made to
trusts set up to pay known and future abuse claims for the diocese.
The
letter was written one day before a similar letter giving credit to the
Diocese of Los Angeles, again signed by its LA-based senior vice
president Charles Lydon and London-based vice president John McGrath.
U.S.
lawyer Jim Stang, who sat on nine bankruptcy committees charged with
looking after victim creditors, said: 'We joke that AIB is the bank of
the Catholic Church.'
The bank is still exposed on some of the loans. It is owed almost $10m by the diocese of Wilmington in Delaware.
An AIB spokesman said: 'AIB's business focus in America was in the 'Not for Profit' areas and this included churches.
'Any loans advanced were approved in accordance with AIBGroup policy.'
An AIB source said they were 'standard commercial loans'.
A spokesman for the Archdiocese of Los Angeles said the allegation of Vatican involvement 'is complete rubbish'.
'The
Archdiocese initiated the loan discussions with AIB and other potential
lenders in the summer of 2007. An arrangement was closed with AIB in
November 2007,' he said.
'Settlement
related financing was undertaken as a way to allow an orderly
liquidation of surplus assets by the Archdiocese, and provided time for
the Archdiocese to formulate a post-settlement recovery plan. Financing
arrangements with AIB or any other potential lender had no impact on
the settlement timing or terms. The AIB loan was repaid in full during
the 2011 fiscal year.'