Church's abuse costs could top $100 million

Boston archdiocese scrambles to pay claims against pedophile priests

Loans, donations considered

March 04, 2002|By BOSTON GLOBE

The Roman Catholic Archdiocese of Boston, in fiscal distress from years of spiraling costs, faces the prospect of paying more than $40 million to settle 140 pending sexual molestation claims against priests and perhaps tens of millions of dollars beyond that to settle new claims that are pouring in.

Because the archdiocese has made payments of between $30 million and $40 million, the combination of past, pending and new claims is expected to cost more than $100 million, according to estimates from advisers to Cardinal Bernard F. Law and others who are familiar with church finances.

Of the $40 million in pending settlements, less than $10 million is covered by insurance. The archdiocese's liability insurance coverage for the years when most of the abuse occurred is all but exhausted, and insurers are refusing to cover other cases, contending that Law and other officials acted recklessly in assigning priests they knew were molesters, according to one of the cardinal's advisers.

The estimated $30 million to $40 million paid to victims over the past decade plus the $40 million for the pending cases will make Boston's the costliest priest abuse scandal in the history of the Catholic Church in the United States.

One hundred victims of just one priest, convicted pedophile John J. Geoghan, have received $15 million, according to church officials. They estimate that 90 other pending claims against Geoghan could cost more than $25 million.

Despite the probable costs, some top advisers to Law believe that the archdiocese has no alternative but to make equitable out-of-court settlements.

"The archdiocese can survive financial insolvency," Robert Popeo Sr., chairman of the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, said in an interview. "But we cannot survive moral bankruptcy, and that's what we face right now, unless we eradicate this problem of pedophilia."

The archdiocese is so concerned about the high costs that Law has been telephoning wealthy donors, hoping to raise $25 million for a fund he wants to create to settle the sex abuse cases. Moreover, the cardinal and some of his advisers have considered seeking a long-term loan from the Knights of Columbus, a national Catholic fraternal organization that has substantial assets, or selling major parcels of real estate to fund the settlements.

But a Globe review of church documents and public records, along with interviews with people involved in archdiocesan finances, shows that in recent years the archdiocese has sold off most of its investment portfolio and substantial real estate holdings from its central funds to cover revenue shortfalls in operations.

Moreover, despite the cardinal's assurances that no settlements have been or will be paid from donations by Catholic laity, the records, along with interviews, suggest that some of the settlement funds have come at least indirectly from parishioners.

Unlike Popeo, some of Law's outside lay advisers have proposed that the archdiocese take a tough negotiating posture on pending cases, including forcing some victims to go to trial, where judges would be forced by the state charitable immunity law to reduce any jury award to $20,000.

Their fiscal concerns appear to be warranted: In the five years that ended June 30, the archdiocese sold off 60 percent of its stocks and 98 percent of its bonds, according to limited financial statements the archdiocese made available in response to a Globe request.

By far the largest block of stock sales was made in the final year of that period, when the archdiocese sold nearly $10 million in stock, in a down market, to pay for operations.

Starting in 1994, soon after the archdiocese began paying secret settlements to people who had been sexually molested by priests, the sale of real estate soared, as well. From 1994 through December, the property-rich, cash-poor archdiocese sold $33 million in real estate, with the proceeds going into its central funds or to its parishes.

Law and David W. Smith, the archdiocese's chief financial officer, have insisted that no archdiocesan general funds or parish collections have been used to pay settlements for sexual abuse victims. Instead, church officials blamed the financial losses on the fact that regular collections and fund-raising appeals have remained flat at $28 million a year while the archdiocese has had to increase spending for needy parishes and poor urban parochial schools as well as for improved technology and Y2K conversion costs.

But some officials who have reviewed the archdiocese's finances said church funds have been used, at least indirectly, to help pay victims of sexual abuse by priests. For example, most of the premiums used to finance the archdiocese's self-insurance fund are paid out of donations to individual parishes.

Several Boston business leaders whom Law has consulted in recent weeks said the spate of civil cases brought against the church for clergy sexual abuse will probably result in long-standing financial damage to the archdiocese.

In addition to the estimated $80 million to $90 million paid or anticipated to be needed to close out pending cases, the archdiocese will probably face escalating demands from the scores of victims who have come forward in the two months since the disclosure of the extent of sexual abuse by priests and revelations of the archdiocese's decade-long effort to keep the problem secret.

Last week, the Globe reported that more than 200 people who say they were victimized have contacted lawyers from just three law firms.

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