Buffalo Catholic Diocese files for bankruptcy

The Buffalo Catholic Diocese has announced the formal filing for Chapter 11 reorganization in federal court, under the U.S. Federal Bankruptcy Code.

The move had been expected for some time. Interim Bishop Edward Scharfenberger held a press conference to address the situation Friday afternoon.

Bishop Edward Scharfenberger, at center, speaks during a news conference hours after the Catholic Diocese of Buffalo filed for Chapter 11 bankruptcy protection and reorganization. With him are, left to right, diocesan finance council chair Jim Beardi and attorney Steve Donato.
Credit Tom Dinki, WBFO

“Obviously, the big question that we have right here is that in order for there to be love and all of that, there has to be justice," said Scharfenberger, in his opening remarks. "There has to be a sense that we're doing things right. And that we're doing things fairly and that we're doing them in a transparent manner."

According to the petition, the diocese has somewhere between $10 million to $50 million in assets, between $50 million to $100 million in liabilities, and anywhere from 200 to 1,000 creditors.

The diocese owes $3.5 million to its 20 largest unsecured creditors. The largest creditor is M&T Bank, which is owed $1.6 million. The other 19 are all abuse survivors owed $100,000 each via Child Victims Act lawsuits.

The diocese's expenses have exceeded its revenue the past several years, according to an affidavit by Charles Mendolera, the diocese’s executive director of financial administration. The diocese generated approximately $13.1 million in revenue in the 2018-19 fiscal year, but expenses totaled approximately $18.1 million. The year before, revenues were $18.1 million and expenses were $19.9 million. Additionally, the diocese has spent nearly $20 million over the past two fiscal years paying abuse victims via the diocese’s Independent Reconciliation and Compensation Program.

Individual parishes and schools, according to the bishop, need not worry about the bankruptcy filing. Scharfenberger explained that each parish is its own individual corporation and is not covered in Friday morning's petition. Attorney Steve Donato of Bond, Schoeneck & King, representing the diocese, explained steps that could be taken to ensure the safety of those parishes and other entities outside the main diocesan offices.

"During the Chapter 11, we will secure an agreement to have the actions against the parishes stayed as well, in order to allow the opportunity to explore the creation of a trust for the plaintiffs. And we have been successful in other diocesan cases and doing that," he said. "But there's also an ability to go to the bankruptcy judge and specifically ask that the non-diocesan entities be protected."

Since the opening of the Child Victims Act window in August, approximately 250 lawsuits have been filed against the diocese by alleged abuse victims. The diocese says it expects ultimately more than 400 alleged victims to file suits. Insurance may cover some of the CVA claims, according to Mendolera.

The Roman Catholic Diocese of Rochester declared bankruptcy in September after dozens of lawsuits were filed alleging child sexual abuse over several decades.

“Reorganization is considered the best and fairest course of action for the victims and for the well-being of the diocese, parishes, agencies and institutions,” said Rochester Bishop Salvatore Matano at the time.

Jeff Anderson & Associates, which has filed many of the lawsuits against dioceses, including in Buffalo and Rochester, said filing bankruptcy is not about fairness at all.

“The Diocese of Buffalo is using bankruptcy to continue to conceal the truth about predator priests in this diocese,” said Anderson. "This bankruptcy is designed to critically impede the excavation of information through the civil justice system and directly undermines the spirit and intent of the Child Victims Act. Bankruptcy also limits the ability for survivors to unearth the names and information pertaining to predator priests who sexually abused children and what the diocese and its top officials knew about the alleged abusers and when they knew it."

Attorney Steve Boyd, who is collaborating with Anderson in many cases against the Diocese of Buffalo, was in the courtroom for Friday morning's proceedings. He says survivors of clergy sexual abuse will ultimately be compensated financially.

At right, attorney Steve Boyd speaks following bankruptcy proceedings Friday morning. With him is Gary Astridge, a plaintiff who has filed a lawsuit against the Catholic Diocese of Buffalo.
Credit Thomas O'Neil-White, WBFO

"There will be plenty of money to go around. But the bigger issue for, I think, a lot of our clients is getting to the bottom of it," he said. "Find out, 'what did they do once the client complained? Who complained before me and could my abuse have been avoided?'"

“Abuse survivors need to understand the Diocese has assets and insurance, said attorney Michael Pfau, whose firm has represented thousands of abuse survivors across the country."A bankruptcy is simply a way to give the Diocese a legal ‘time out’ from the current litigation so that one judge can ultimately decide a fair way to compensate all people who timely file a claim in the bankruptcy. Bankruptcy allows the Diocese to restructure its assets and finances to continue operating while also providing some measure of accountability for child sexual abuse claims."

Pfau said now is the time for Buffalo survivors to file a claim with the bankruptcy court "in order to ensure their rights are protected.”

Attorney Kevin Stocker, who is also representing clergy abuse cases, agreed but said each person needs to be comfortable with their decision.

"With all the people that I've met with, everybody's different with their comfort level," Stocker said. "Some people will take this abuse to their graves and never make comment of it because it's too painful. Others find courage in numbers in going forward with other people who have also been abused, so they know they're not the only ones. And some have a lot of courage and will talk publicly about it."

Bishop Scharfenberger encouraged any additional victims who have remained silent to date to come forward. In his words, he wants to "walk with them."

The question was then raised whether federal proceedings would limit discovery for any future plaintiffs. Donato suggests it could be the opposite.

"Discovery sometimescan be broader than in state court," He replied. "The filing of the case simply stays and stops the state court litigation. But effectively, those issues will be transferred to the federal bankruptcy court and we will address those issues as the process proceeds."

Boyd disagrees.

"When the abuse happened, that's a betrayal. And when the abuse is is not recognized, and when the priests are being shuffled around, that's a second betrayal by your church. So this isn't all just about money. And what the diocese has done in this action is they're going to cut off discovery as best they can," he said. "We're still gonna fight over that and turn it into a financial transaction. It's not a very church like way to apologize to people that you've hurt."

Diocese whistleblower Siobhan O'Connor expressed concern that moving the diocese’s many Child Victims Act civil cases to bankruptcy court will shield the diocese from further scrutiny. The diocese can now avoid the discovery phase of a civil trial, meaning diocesan officials won’t be forced to testify or provide documents about abuse cases.

“There are still ways to negotiate for that information, I know lawyers will be advocating on behalf of their clients, but it really just changes the nature of this process,” O’Connor said. “So I would still encourage survivors to come forward because it still is a way to hold them accountable, but, unfortunately, it limits the amount of justice that the survivors will receive in terms of the information that they're seeking.”

Scharfenberger was introduced as Buffalo's apostolic administrator Dec. 4, 2019, the same day the Vatican confirmed Bishop Richard Malone had stepped down from his role as leader of the diocese. Among the questions he faced that day was whether bankruptcy was still under consideration, as Malone had suggested as early as 2018.

When asked in January how much he is willing to disclose about past cases, Scharfenberger said he is willing to reveal "everything that is necessary" to help the diocese heal and move on from its crisis.

"I want to say up front, there are no secret files," he said then. "What we do have are confidential files. The issue is, in personnel files, what information is in there that should be accessible to those for whom it is important? And the answer is there really already is. If anybody is pursuing a case, whether it's a legal case by the CVA or in the Church itself, certainly they'll have access to all the information that is needed."

Joining Boyd outside in court Friday morning was Gary Astridge, a plaintiff against the Diocese of Buffalo, who suggests nothing has changed, even after the resignation of Bishop Richard Malone in December.

"I called January 14, January 15, asking what the process was and just got voicemail, and never a returned response," he said. "So to me, as a survivor, that was extremely insulting not to get any kind of word back."

The diocese has 138 full-time employees and 51 part-time employees. It also provides payments and benefits to 152 retired priests, as well as stipends and benefits to 16 seminarians. The diocese’s average monthly payroll for active priests is $110,000, while retired clergy have an average payroll of $166,000 per month. Seminarians’ average monthly stipends total approximately $2,500.

During Friday's news conference, Bishop Scharfenberger was quizzed about a meeting held the revious Monday at a local parish, in which priests facing "credible accusations" were present. He said the intention was to hold a private meeting as part of a healing process but expressed regret that many victims were triggered by public revelation of that gathering.

He also said he, too, would like to know why the clergy sex abuse scandal was allowed to fester for as long as it did, while adding that his primary task is to foster healing in the present.

"I would like to know why too but I want to focus on what we can do now. I can help going forward by ruminating and speculating as to why certain actions were were not taken in years past. I don't think that's productive right now, maybe we can get some investigators to do that," Scharfenberger said. "But what I want to do is do what can I do now. I want to heal the hurt where it is now and go forward, you know, and that's my perspective. Because I want to do what is most constructed for the time that I have that I'm here.

"I see this as a way right now of doing something. This is a significant event that we're doing today. And I think it would actually speed up the process, to be quite frank with you."

WXXI's Randy Gorbman contributed to this story.

Diocese of Buffalo bankruptcy affidavit by Tom Dinki on Scribd