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The Milwaukee Archdiocese fought its bankruptcy tooth and nail. Leaders elsewhere took a different approach.

In March, lawyers for the Catholic diocese in Gallup, New Mexico, announced a sweeping plan intended to settle its debts and end a bankruptcy that began in 2013. Like other church bankruptcies around the country, this one was hastened by claims of sex abuse that church officials would have to account for, somehow. As a solution, the March plan proposed spending $3 million on legal and other fees and the remainder of the $22 million settlement to compensate victims of clergy abuse, along with other debts.

Photo by Adam Ryan Morris.

Photo by Adam Ryan Morris.

Earlier in the case, such an arrangement is exactly what the federal judge overseeing the case, David Thuma, had implied he wanted. What he didn’t want, he said, was for it to turn out like the church bankruptcy in Milwaukee, where lawyers collected more than victims: “I would be pretty unhappy if that happens in this case.” Among some judges, the Milwaukee case – which dragged on for four years before finally resolving late in 2015 – has become the prime example of how not to handle a church bankruptcy driven by sex abuse claims. Here, the archdiocese, led by Archbishop Jerome Listecki, spent some $30 million on legal fees and other costs as the case languished in legal purgatory. In the end, about 450 people who filed abuse claims shared in just $21 million.

Compare that with a similar case in the Helena, Montana, diocese, also resolved in 2015. It took just 13 months and required a total of three hours in court. In the end, legal and other fees amounted to about $2.5 million, not including a sum paid by insurers. About $21 million went to victims, approximately the same amount mustered by the much larger Milwaukee archdiocese.

When Bishop George Thomas took over the Helena diocese in 2004, it faced a legal situation similar to Milwaukee’s, and his first instinct was to fight, he says. But meeting with a victim and his family over dinner one night changed his mind. “I realized how soul-searing this has been for him,” says Thomas, who’d worked in community mental health for many years.

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Once the number of abuse lawsuits aimed at the diocese had climbed above two dozen, Thomas filed for bankruptcy. And as in Milwaukee, claims by victims seeking compensation subsequently rose into the hundreds. In Helena, they totaled 362. But the case didn’t drag on for years or involve hearings attended by a dozen or more lawyers, most paid by the archdiocese under bankruptcy rules.

“We chose mediation and conciliation over acrimony and litigation,” says Thomas, who declined to comment directly on the Wisconsin city’s approach. The Helena diocese didn’t challenge a single one of the 362 claims and instead assigned an independent administrator to determine how much money each victim should receive. “Every day I am affirmed that this was the best way to go,” he says.

Church lawyers in Milwaukee challenged all 575 of the abuse claims filed, something called the “scorched earth” approach by Michael Finnegan, a St. Paul lawyer who has represented victims in Wisconsin and a number of other lawsuits around the country. Lawyers on both sides accused the other side of delays.

Wary bankruptcy judges in Montana and Minneapolis courtrooms have made similarly critical comments about Milwaukee’s handling of its bankruptcy. Finnegan says no other church body has been “as aggressive as Milwaukee.” The bankruptcy plan here remained contentious to the end. “All of the other cases got near unanimous approval by the survivors,” he says.

Listecki, the top church official in Milwaukee, is himself a lawyer by training and a retired military chaplain who grew up on the industrial southeast side of Chicago. He served as in-house counsel for the Archdiocese of Chicago and also as a radio and television host.

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“The bankruptcy proceeding did take too long, and even $1 spent on legal fees was $1 too much,” Listecki says in an email to Milwaukee Magazine. He wanted to settle by mediation rather than litigation but was rebuffed by lawyers for victims in four attempts, he says.

According to lawyers party to the archdiocese’s first offer during mediation, church officials offered just $4.6 million to a group of 24 victims, an average of $191,000 apiece. (In the final settlement, 120 victims will receive $2,000 each, and 336 will get an average of $38,000 after legal fees.) These 24 victims were the original group that hastened the bankruptcy by threatening to sue. Church leaders had already seen how expensive a state court judgment could be: In 2006, 10 California victims of two Milwaukee priests transferred out West after they got in trouble here sued and won $16.65 million from the archdiocese, about half of which was paid by insurers.

Both the Milwaukee and Helena bankruptcies leave local Catholics with debt. Officials from the Milwaukee Archdiocese hope to pay down their $7 million bill through church operating funds, and Jerry Topczewski, a spokesman for Listecki, says this will happen “over a number of years, just like a mortgage.”

In Helena, church leaders are once again bucking convention and hope to eventually settle their debts using money from a massive real estate development. Built by a private firm on land previously set aside for a church cemetery, the “Trinity Center,” which broke ground earlier this year, will include space for retail stores, movie theaters, restaurants, walking trails and even a dog park. There’s no indication yet just how long the project, and the promised revenue, will take to arrive.

‘Fire and Brimstone’ appears in the May 2016 issue of Milwaukee Magazine.

Find the May issue on newsstands beginning May 2, or buy a copy at milwaukeemag.com/shop.

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