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PORTLAND, Ore. - The Portland Archdiocese on Tuesday filed for bankruptcy 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, accused of molesting more than 50 boys in the 1980s. Grammond died in 2002.
Plaintiffs in the two lawsuits involving Grammond have sought more than $160-million.
The archdiocese and its insurers already have paid more than $53-million to settle more than 130 claims dating back to 1950 by people who say they were abused by priests. Most of those lawsuits have been filed since 1999.Bud Bunce, spokesman for the 356,000-member 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.
"This is a stunner," said Elizabeth Warren, a professor of law who teaches bankruptcy at Harvard Law School.
"The archdiocese will be required to open its books - something no other archdiocese around the world has been willing to do - and that's a very high price to pay for a religious institution that has guarded its own privacy for centuries," she said. "And the second thing that will happen is that their operations come under the scrutiny of a court. Think about what that means: court supervision over charitable and religious works."
Chapter 11 bankruptcy frees an organization from the threat of creditors' lawsuits while it reorganizes. But it also could open church records to public scrutiny, and could require church leaders to cede some financial control to the courts.
It is rare for religious organizations in the United States to file for bankruptcy. Eleven Hare Krishna temples and schools affiliated with the movement formally known as the International Society of Krishna Consciousness filed for bankruptcy in 2002 in response to lawsuits alleging child abuse in Hare Krishna boarding schools in the 1970s and 1980s; the Baptist Foundation of Arizona, founded by the Arizona Southern Baptist Convention, filed for bankruptcy in 1999 because of financial losses.
A judge likely would 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.
"The pot of gold is pretty much empty right now," Vlazny said.
Plaintiffs' attorney David Slader countered that the church was simply trying to avoid the details of the lawsuits coming out in court. "The bishop hasn't begun to touch his pot. He is lying," Slader said.
The archdiocese owns more than $500-million in tax-assessed properties, Slader said, and also has many investments, but he could not disclose the estimated value of those because of court-ordered confidentiality.
"The archdiocese is one of the wealthiest corporations in Oregon," Slader said. Bunce declined to disclose the value of church assets.
Grammond served as a priest throughout the state from 1950 to 1985, when he took sick leave. Allegations of sexual abuse against Grammond were reported in 1991, but the charges didn't become public until 1999, when a former altar boy sued him and the archdiocese.
Grammond was suspended when he refused to fully cooperate in the church investigation.
In a deposition taken before his death, Grammond said, "I'd say these children abused me. They'd dive in my lap to get sexual excitement."
James Devereaux, one of the plaintiffs, said he would persevere with the suit.
"We will continue our fight to finally get the archdiocese to accept the sin of its crimes," he said.
The Archdiocese of Boston was flooded with hundreds of lawsuits and considered bankruptcy, but opted to sell church real estate worth millions to settle claims.
In the 1990s, the Archdiocese of Santa Fe, N.M., was brought to the brink of bankruptcy and had to borrow from parish savings accounts to pay out millions of dollars because of abuse claims.
Nationwide, abuse cases have cost the church more than $650-million since 1950.
- Information from the Boston Globe was used in this report.