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Portland Church Files Bankruptcy

Archdiocese of Portland Archbishop John Vlazny gestures as he answers questions during a press conference in Portland, Ore., Tuesday, July 6, 2004. Vlazny announced that the Portland Archdiocese will file for Chapter 11 bankruptcy that same day in the face of dozens of pending cases accusing Roman Catholic clergy of sexual abuse.
AP
The Portland Archdiocese filed for bankruptcy Tuesday because of the steep costs from clergy sex abuse lawsuits, an unprecedented step that could open the Roman Catholic archdiocese to new levels of court scrutiny.

No other American diocese has filed for bankruptcy, though Boston threatened to do so at the height of the abuse crisis that began there two years ago. The Diocese of Tucson, Ariz., has said it will decide whether to seek court protection before an abuse trial there in September.

Portland's Chapter 11 bankruptcy filing halted the trial of a lawsuit against the late Rev. Maurice Grammond, who was accused of molesting more than 50 boys in the 1980s. Grammond died in 2002.

Plaintiffs in the two lawsuits involving Grammond have sought a total of more than $160 million. The archdiocese and its insurers already have paid more than $53 million over 50 years to settle more than 130 claims by people who say they were abused by priests.

Bud Bunce, spokesman for the archdiocese, said church operations will continue as usual.

"All the parishes will continue with their regular services," Bunce said. "For the most part we anticipate the normal, everyday types of activities we do will continue."

But the filing is far from everyday business — and raises concerns about secular oversight of church affairs.

"For a diocese to give up control like this, control over a lot of important decisions, a lot of spending decisions — it's totally unchartered," said Chuck Zech, an economics professor at Villanova University who specializes in Catholic church finances.

Chapter 11 bankruptcy frees an organization from the threat of creditors' lawsuits while it reorganizes. However, it could also open church records to public scrutiny, and could require church leaders to cede some financial control to the courts.

A judge would likely have to approve major archdiocesan expenditures as plaintiffs vie with each other for a share of its assets, said Fred Naffziger, a business law professor at Indiana University. It would be up to the judge to approve how much money creditors receive and which assets should be sold; the judge could also act as a mediator in any settlement talks.

Archbishop John G. Vlazny said the archdiocese tried to settle with the plaintiffs, but could not afford their offer.