A federal bankruptcy judge has appointed a nationally recognized business-turnaround expert to review the soaring costs of the Roman Catholic archdiocese of New Orleans’s Chapter 11 reorganization, and to file a public report within 60 days about whether the local church can afford to pay about 500 claimants of clergy molestation.
Just a day after the judge Meredith Grabill told attorneys in the archdiocese’s contentious, complex bankruptcy case that she needed outside help, she appointed Mo Meghji, the managing partner of New York-based M3 Partners, as the court’s expert witness.
Meghji has more than 30 years of experience helping major corporations emerge from financial distress, according to M3’s website. He recently led major restructuring efforts for Sears and Barneys, among other companies, his official biography says.
His pay for two months of work will be capped at $350,000, with $100,000 paid in the first 10 days, Grabill’s order says.
Meghji did not immediately respond to requests for comment.
Grabill ordered the archdiocese, its attorneys and professional advisers, as well as the lawyers and professionals representing the church’s affiliates, insurance companies and major creditors – primarily about 500 survivors of sexual abuse at the hands of clergymen – to answer any requests from Meghji and his team as they do their work over the next 45 days.
The judge ordered Meghji to finish his assessment by 9 October and file a public report on his findings by 23 October.
She specifically directed Meghji to find out the status of two competing restructuring plans being promised by the church and its creditors; to review about $40m in costs already incurred in the bankruptcy since its filing in 2020; and to determine whether the church has the “financial wherewithal” to “reorganize and continue as a going concern”.
Grabill also asked Meghji to assess the archdiocese’s current management structure and processes, a key issue now that some of the abuse survivors have filed a motion asking the court to appoint a trustee to take control of the archdiocese’s finances away from the archbishop, Gregory Aymond.
As WWL Louisiana and the Guardian reported exclusively, Aymond’s designee in charge of the bankruptcy, Lee Eagan, testified in a series of depositions – including in July – that he was approving legal fees instead of the archdiocese’s in-house attorney, Susan Zeringue, because of a “Chinese wall” between her and the Jones Walker law firm representing the church in the case. Her husband, Wayne Zeringue, is a partner at Jones Walker.
Eagan also testified he has been suffering mental impairment from a 2022 car accident and had been doing things to purposely impede settlement negotiations, leading to the calls for Aymond, and thus Eagan, to be replaced by a trustee.
The archdiocese has argued that the US constitution’s separation of church and state prevents a bankruptcy court from removing the archbishop or any of his appointees as the manager of the church’s business operations. But lawyers for the sexual abuse claimants say the US constitution does not apply in this case.
“They want their cake and they want to eat it, too,” said one of those attorneys, Frank D’Amico. “They can file for bankruptcy protection, but then the court can’t order them to do things within the bankruptcy? That makes no sense.”
At a hearing on Tuesday, Grabill rejected an offer from Vincent Liuzza, a New Orleans-based turnaround expert, to serve as the court-appointed expert, saying she needed to bring in someone without local ties. Liuzza admitted in court on Tuesday that his godson was a Catholic priest within the city’s archdiocese.