Monday, July 25, 2005

TUCSON, Ariz. - The Roman Catholic Diocese of Tucson was the second in the nation to file for Chapter 11 bankruptcy because of sex abuse claims against priests, and now it looks to be the first one to emerge.

But whether it now will serve as a model for similar negotiations in other dioceses, as Bishop Gerald Kicanas hopes, is an open question.

At least in the short term, it seems unlikely to have much effect on two more acrimonious diocesan bankruptcies playing out in Portland, Ore., and Spokane, Wash., say bankruptcy specialists and other analysts who have followed the sex abuse scandals plaguing the Catholic Church. The leader of a major victim’s advocacy group expressed disappointment with the settlement.

Still, Sam Gerdano, executive director of the American Bankruptcy Institute in Alexandria, Va., said the Tucson case shows what is possible if all sides are determined to reach a deal.

In Tucson, Mr. Gerdano said, the diocese proactively put some money on the table and “indicated a willingness to get to a plan” as part of a negotiating process typical in Chapter 11 reorganization cases.

That plan, in the end, skirted questions about whether parishes and other properties tied to the church could be used to settle diocesan debts — an issue that has plagued the other cases.

Instead, a compromise was reached, with Tucson parishes agreeing to contribute $2 million toward the diocese’s $22.2 million settlement in exchange for not being subject to claimants suing them individually. Doing so led the diocese’s insurers, which had balked at contributing to the settlement pool, to agree to pony up $14.8 million.

Judge James Marlar gave his approval to a settlement and reorganization plan with the diocese contributing $5.58 million to the total amount. Once the order is entered, creditors should start receiving payments in about 60 days, and the diocese — serving about 350,000 Catholics in nine central and southern Arizona counties — will be discharged from Chapter 11 bankruptcy.

Payouts to victims will go as high as $600,000 initially, with possibly more later.

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