Boston Cardinal Weighs Drastic Step

A financial panel with the Boston Archdiocese has given Cardinal Bernard Law permission to file for bankruptcy as the Archdiocese struggles to address potentially crippling lawsuits over sexual abuse by priests.

If Cardinal Law decides to go ahead and file for protection of the Archdiocese's assets under the provisions of Chapter 11 bankruptcy law, he would have to first get the approval of the Vatican.

Wednesday's green light for a bankruptcy filing from the financial oversight panel of the Boston Archdiocese came just one day after the long-anticipated release of 3,000 pages of Archdiocese personnel files made public by lawyers representing alleged sex abuse victims.

The lawyers say the files - obtained by court order - contain allegations against priests including cocaine use and sexual abuse of at least three girls recruited to become nuns. According to the Boston Globe, the women say Rev. Robert Meffan - who has since retired - told them they were "brides of Christ" and described himself as "the second coming of Christ." The Globe furthermore reports that Meffan - interviewed this week - acknowledged having had sexual contact with the women and explained that he "was trying to get them to love Christ even more intimately and even more closely."

The files also reportedly include a 1999 note from Cardinal Law to an accused priest whose behavior had made him a candidate for defrocking - a step which is not taken lightly - telling him his ministry might be restored at some point because of "the wisdom which emerges from difficult experience."

"It is very clear from the documents that Cardinal Law and top diocesan officials knew far more, far earlier, about far more priests and their abusive behavior than officials have ever let on, but did so very little to protect not just innocent children, but adults, boys and girls, church employees, and regular lay people," says David Clohessy, national director of the Survivors Network of those Abused by Priests, in an interview with the Globe.

The Archdiocese of Boston has been hit with a blizzard of lawsuits from lawyers representing hundreds of men and women who claim to have been sexually abused and faces a potentially staggering financial liability in those lawsuits, many of which hinge on decisions to transfer, instead of suspend, priests that church higher-ups knew had been accused.

No Roman Catholic diocese in the United States has ever filed for bankruptcy. Such a step would give a secular court control over its finances and open it up to unprecedented scrutiny.

The Archdiocese's financial assets - despite donations withheld by Catholics angry about the scandal - are considerable. A recent analysis by the Globe puts the value of the Archdiocese's real estate holdings alone at over $1.3 billion.

"We believe a mediated resolution would be preferable to seeking Chapter 11 protection and remain hopeful that this process currently under way will be successful," says archdiocese spokeswoman Donna Morrissey. "However, we feel it is also necessary to carefully consider the alternative or complementary approach of a Chapter 11 reorganization."

A bankruptcy filing would put litigation against the archdiocese on hold.

Morrissey says she does not know when Law will make a decision.

The archdiocese, facing lawsuits from some 400 alleged victims of sexual abuse by clergy, has been pondering the possibility of bankruptcy at least since this past summer.

By filing for bankruptcy, the archdiocese would admit liability, but Law would no longer have to answer questions in pretrial depositions and archdiocese attorneys would not have to release any more priests personnel files to plaintiffs' lawyers.

Mitchell Garabedian, an attorney for alleged victims, said the vote is "posturing and a bluff" in the midst of negotiations trying to reach financial settlements of clergy abuse lawsuits.

"Archdiocese leaders are trying to use this as leverage in the mediation process," he said, as a way to get plaintiffs to lower their expectations.

CBSNews.com Legal Analyst Andrew Cohen explains that a bankruptcy filing would put the Boston Archdiocese in an unusual position.

"This is not a first amendment issue - not an issue of the government infringing upon the free expression of religion. If the Archdiocese decides to file for bankruptcy, it will voluntarily be accepting the jurisdiction of the bankruptcy court and won't be able to then make any sort of claim for special treatment," explains Cohen.

"When you file for bankruptcy, you give up a lot of control and a lot of rights, including the right to be free from having other people evaluate your corporate books," he adds. "That's why I think this bankruptcy talk is is just that - talk designed to pressure the plaintiffs in these cases to perhaps accept less settlement money from the Church."

There is some precedent to that as a tactic in settling lawsuits.

"Corporate and individual defendants threaten bankruptcy all the time when faced with a lawsuit - sometimes they file, sometimes just the mere threat of bankruptcy, with all that entails, creates a quick settlement," says Cohen. "I think the latter is the much more likely scenario."

In fact, that scenario has already played out in the Catholic Church, in Dallas in 1997. A jury there ruled the diocese should pay $119 million in a sex abuse case, but after the diocese said it might file bankruptcy, the victims settled for $31 million.

Attorney Jeff Newman, whose firm represents more than 200 alleged victims in the Boston Archdiocese, says the threat of bankruptcy could jeopardize current settlement talks between the archdiocese and more than two dozen plaintiffs' lawyers.

"The announcement... makes everything more murky because we're putting in enormous effort and time toward settlement when, the next day, they can simply file for bankruptcy," says Newman. "What we're seeking from the cardinal is a clear statement that they'll come to the settlement table and give it ample opportunity to succeed, and during that time, they won't file bankruptcy."

This isn't the Boston finance committee's first go-round with high stakes settlement negotiations.

Last May, the finance council rejected a proposed settlement worth up to $30 million for 86 victims of defrocked priest John Geoghan. Victims' attorney Mitchell Garabedian was forced to renegotiate, and in September the sides agreed on a $10 million settlement.