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$11 million abuse settlement offered by Fairbanks diocese

  • Author: Lisa Demer
  • Updated: September 29, 2016
  • Published October 29, 2009

The Catholic diocese of Fairbanks, struggling for years with claims of sexual abuse by priests and church volunteers, is pitching an $11 million plan in bankruptcy court to resolve hundreds of claims.

Individual victims would be guaranteed a minimum of $5,500 and those that suffered serious abuse would get significantly more, said Kasey Nye, the diocese's Tucson, Ariz.-based bankruptcy attorney.

But a lawyer and an advocate for victims say the proposal is unacceptable and insulting. Elsie Boudreau, an abuse victim turned advocate, called it "a second rape."

"The people that I've talked to range from 'that's just laughable' to 'oh my gosh,' it goes right to the heart of them," said Boudreau, whose $1 million settlement in 2005 with the diocese and the Jesuit religious order is the largest known in Alaska. A social worker, Boudreau works in Anchorage as a victim advocate for Manly & Stewart, a California-based law firm that joins with Cooke Roosa of Anchorage to represent many Alaska abuse victims.

Since the diocese's plan was filed in U.S. Bankruptcy Court this week, she said, victims have been asking, "'How can that be for everything I've gone through?' It breaks their heart."

Ken Roosa, an Anchorage lawyer who represents 240 victims with claims against the diocese in bankruptcy court, said he doubted the church proposal would generate $11 million, and that bankruptcy lawyers -- he's not one -- and administrative costs will absorb a couple million off the top. The victims will be putting forth their own plan in bankruptcy court, he said.

The diocese, officially the Catholic Bishop of Northern Alaska, turned to bankruptcy court last year after efforts to settle sex abuse lawsuits failed. Some of the claims stretch back decades to priests who died long ago. Some are more recent. Many claims are against one man: the late Catholic church volunteer Joseph Lundowski, accused of molesting dozens of children in Western Alaska villages in the 1960s and 1970s.

In all, nearly 300 abuse victims have filed claims in bankruptcy court against the Fairbanks diocese.

The sprawling diocese covers 400,000 square miles and includes 46 parishes in Northern Alaska, the Interior and the Yukon-Kuskokwim Delta, from Barrow to Bethel, Fairbanks to Nome.

The diocese hoped one of its insurers, Continental Insurance Co., would be forced to pay millions for the claims, but U.S. Bankruptcy Judge Donald MacDonald ruled last month that the diocese could not prove it had a liability policy for the period in question.

After that ruling, representatives of the abuse victims sued the diocese, Immaculate Conception Elementary School, Monroe Catholic Junior-Senior High School and all 46 parishes, accusing them of trying to shield assets from the bankruptcy.

One suit argues that the parishes and diocese should all be considered one entity for the bankruptcy case. It contends that paperwork filed by the diocese less than a year before the bankruptcy specifying that it only holds parish property for the benefit of the individual parishes amounts to "a great sham." The suit also says that a large endowment of donor money should be available to creditors in the bankruptcy, but the diocese maintains it's off-limits. A second suit says the diocese fraudulently put $3 million into a trust for the parishes and schools just six months before the bankruptcy was filed.

"I am very concerned that this litigation has the possibility to destroy all of the little parishes stretched throughout the northern part of the state," Ford Elsaesser, a lawyer for the parishes, said in a letter to news reporters in September.

Anyway, most of the parishes are poor, don't support themselves and rely on the diocese for operating funds, said Robert Hannon, diocese chancellor.

Nye, who guided the Catholic Diocese of Tucson through a similar Chapter 11 bankruptcy organization, said the new proposal in Fairbanks puts considerably more cash on the table than an earlier plan.

Most of the money -- $7.5 million -- would come from the diocese selling certain key properties to its endowment. Roosa said that amounts to the church selling property to itself, but Nye said it's a way to generate money for the victims.

The parishes themselves would contribute $500,000. The diocese also is proposing to auction off Pilgrim Hot Springs near Nome. The church once had an orphanage there but the property was essentially abandoned years ago. It has potential for geothermal power, a commercial greenhouse or a resort, Hannon said.

And the diocese still is trying to force two other insurance carriers to pay. Nye said that could lead to millions for victims. But Roosa noted that the church has had years to get the insurance money, and hasn't.

If the latest proposal were approved by the bankruptcy judge, the first payments would go out within a month, Nye said.

The longer lawyers spend fighting over the bankruptcy, Nye said, the less money there will be for victims, and the longer they must wait to get anything.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390.

By LISA DEMER

ldemer@adn.com

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