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God, Incorporated


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The Roman Catholic Diocese of San Diego stared into the face of big payouts——for the sins of pedophile priests it long harbored——and declared bankruptcy. The diocese has clearly erred in reporting its finances. But how does it fairly compensate victims and not break the bank at local parishes?

IT'S AN UNUSUALLY gloomy April afternoon. A stiff breeze shoots rain pellets into your cold face. You step into the vast jury-pool room at the Federal Court Building on Front Street, after passing through the metal detector and handing over a tape recorder and camera-equipped cell phone. No recording devices are permitted inside. But there is plenty to see and hear, and there are heart-wrenching stories to consider.

An ungodly battle is buffeting through this bankruptcy court. The debtor is the San Diego Roman Catholic Diocese. Back on February 27—the day before the first of a slew of pedophile-priest cases was going to state court—the diocese filed for Chapter 11. That halted the trials. Now alleged victims—grown men and women who say their youthful innocence was tainted or stolen—are here by the dozens. In this 341 hearing, often referred to as a “first meeting of the creditors,” the people who say priests fondled, abused and raped them are not technically “victims.” They are “creditors.”

After a lengthy hail of legal questions and answers from diocese officials, here comes a creditor to sit at the U-shaped table at the front of the jury-pool room. Dianna Williams trembles as she slips on reading glasses. Directly across the table is Bishop Robert Brom. His hair is white, and he wears a clerical collar and black robe. A foot-tall cross hangs on a chain around his neck. He sits flanked by lawyers and a small coterie of church officials. In church hierarchy, Bishop Brom reports only to the Vatican. He is the highest-ranking Roman Catholic in San Diego. He is also the sole proprietor of the corporation that is the local diocese.

As she begins to speak, Williams is already crying. But she won’t be deterred by tears. Her voice is loud and impassioned, even though her words are choked by an unseen pain.

“Bishop Brom, in 2004 you sent word you would help us with therapy,” she begins. “I needed it. I’m plagued with panic attacks. I couldn’t take my children to school. I had suicidal thoughts. I wanted to put the Nazareth House boarding school behind me. I live my rape 24 hours a day. I started therapy, and you stopped it.

“I’ve lost my faith and my sister and my virginity and the rest of my life. Could you make good on that therapy promise? If you’re honorable, reinstate my doctor.”

You’re sure most first meetings of the creditors don’t engender this sort of emotional drama. Officiating the hearing is United States Department of Justice trustee Steven Katzman. In a firm but compassionate manner, he informs the room that questions must be directed at the church’s financial situation. Katzman starts to ask Williams if she has such a question.

But Brom speaks up. “I can’t respond in this forum,” he says, and his manner of speaking—the measured enunciation —reminds you of Mr. Rogers, the late children’s TV host.

“How can you not reinstate my doctor?” cries Williams. “How can you not publicly list my perpetrator’s name? There were a lot of us there in Nazareth House.”

“I want to do what’s right for you,” says Brom, leaning forward. “It may be more therapy. I don’t know you . . .”

Katzman intercedes. “There have been some horrific crimes done here,” he says. “But we have to focus on financial affairs so the lawyers can proceed.”

Williams’ attorney steps forward and reaches for a microphone. “This is about lives, too,” says Irwin Zalkin. “Not just schedules and disclosures, but people’s lives.”

Diocesan lawyer Susan Boswell pipes in. “This diocese has great sympathy for the victims . . .” She barely gets the words out of her mouth before the crowd erupts in derisive laughter.

To you, new to this drama, it appears many people in this gray, antiseptic room have been battling this monolithic religious entity for restitution far too long—in court since 2003; in minds and hearts for most of their troubled adult lives.

This is how you watch the modernday morality play unfold. In your head, you hear the song by U2—”Bullet the Blue Sky”—in which Bono yells: “Well, the God I believe in isn’t short of cash, mister!” Sure, but how do you do the right thing when the rosary of religion is so entwined with the gold chain of capitalism? Lead the flock. But don’t forget to collect the alms. Comfort the sick and ailing. But don’t spend too much money doing it.

Welcome to Enron-by-the-Cross at God, Inc.

BISHOP BROM SAYS the diocese’s reason for declaring bankruptcy is twofold. “It’s the best way available to compensate all the victims of sexual abuse as fairly and equitably as our resources will allow without crippling our ability to accomplish the mission of the church,” he says.

You know Catholic education is at the heart of that mission. Since the founding of the San Diego Diocese, it has done many good deeds. Today, it provides financial assistance to parishes and schools with special needs. You’ve seen or heard of countless acts of benevolence and good ministry from Roman Catholic dioceses the world over. And you know the sins of the wicked should not be draped on the shoulders of all who wear the cloth and serve their God with faith and devotion.

The San Diego Diocese made an unsuccessful settlement attempt with a mega-group of lawyers from 23 firms representing more than 160 men and women with abuse claims. (Originally, 143 lawsuits were filed; more cases have been added.) But victims’ lawyers say the diocese has been deceptive on all financial fronts.

“This diocese has provided us with scant and misleading information,” says Zalkin, a partner at San Diego’s Zalkin & Zimmer. His firm is representing 63 victims, including Diana Williams. “I have not seen good faith displayed by them.”

Paperwork signed by Brom claims the diocese is worth $165 million. The settlement offer was $95 million. San Diego is the fifth—and largest—diocese to file bankruptcy in the face of hefty settlements, following those in Tucson, Portland, Spokane and Davenport, Iowa. The Diocese of Orange (County) recently settled with 90 victims for $100 million. One Orange County man who alleged he was molested (for three years by a priest who died of AIDS) received $3.7 million alone.

Plaintiffs’ lawyers—the group of 23 aligned firms—believe the San Diego settlement should be in the $200 million range. They further believe the diocese is severely and strategically underreporting its assets.

There is little doubt there has been underreporting. The diocese twice had to amend its financial disclosure statements. Presiding federal Judge Louise DeCarl Adler calls the bookkeeping “Byzantine.” She is “mystified” as to why original statements don’t include 770 bank accounts held by the diocese’s 98 parishes. A core argument here is whether parish assets belong to the diocese or to the parishes themselves. (On May 10, Adler ruled the issue would be resolved in a fall trial.)

Under questioning by federal trustee Katzman, the diocese’s head financial officer, Richard Mirando, concedes that current market appraisals are not being used for 32 diocese properties. Rather, assessed or book values are listed. Many of these assessments were last done in the 1960s, some as far back as the ’40s.

The Holy Cross Cemetery is listed at an assessed value of $11 million. But Newport Beach–based lawyer John Manly—part of the plaintiffs’ team— notes the general manager of the cemetery testified in court two years ago that the property was worth roughly $40 million.

Asked if he thinks current San Diego real estate values might be substantially higher than old assessments, Mirando replies, “I expect it would be higher, but I don’t know what it would be.”

During the hearing, Katzman brings up two financial investments—for $21 million and $17 million—that are not on initial schedules filed by the diocese. Officials again say it was a mistake to leave them off, but call it clerical error.

You’re not keeping count, but Bishop Brom rivals Attorney General Alberto Gonzalez for the number of times he can’t recall or doesn’t know key facts about the organization he is running. At one point during the 341 hearing, Brom concedes: “I don’t know who might know what the net worth of the diocese is.”

Zalkin thinks it’s worth “hundreds of millions of dollars.” Attorney Andrea Leavitt believes the diocese might be worth a billion. Leavitt points out the diocese left a significant pending land sale off its statements. Two years ago, church-affiliated University of San Diego High School moved to Carmel Valley. It’s now become the state-of-the-art Cathedral Catholic High School. The “Uni” High land was sold to William Lyon Homes for at least $65 million. The deal is currently on hold pending the diocese’s bankruptcy proceedings.

Diocesan lawyer Boswell says the Uni land is owned by Catholic Secondary Education, a separate corporation that has several high-ranking diocesan officials as officers. That’s one of the morass of matters Judge Adler will have to sort out.

Boswell, who has been involved on both sides of bankruptcy cases for 30 years, says the notion the diocese is hiding assets is ridiculous. “Look, prior to this filing, the diocese didn’t do reports on a consolidated basis,” she says. “Separate divisions had their own accounting and reporting. It’s not a small task to combine all this. Also, it’s not uncommon for ‘unknown’ to be put next to property, or for you to give the best information you have.”

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