Wednesday, August 7, 2013

Property of the Estate in Church Bankruptcies: 'Archdiocese of Milwaukee'

Thomas M. Horan writes in this American Bankruptcy Association Journal column [pdf] on why the Archdiocese of Milwaukee Parish Investment Fund was not an asset subject to claims of creditors in bankruptcy.

To do so, he contrasts it to the similar pooled investment account (PIA) which the Diocese of Wilmington, Delaware, maintained for its parishes. Wilmington also filed for bankruptcy reorganization. As Mr. Horan sees it,

"The critical difference between the [Milwaukee] fund and the [Wilmington] PIA (which, for the PIA, made a difference worth $74 million to its nondebtor participants) is that the fund was set up as a segregated account into which only monies of the parishes intended for the fund was to be deposited." (pages 45-46)
If that was the critical difference for the parish fund, then it seems to me it will be the critical difference regarding the cemetery perpetual care fund. I have not seen this specifically addressed in any press reports or party's public statements regarding the bankruptcy litigation regarding the latter. [That is, I have not seen specific details of the operation of the cemetery fund to compare to those of the Parish Investment Fund.]

Regarding "smoking gun" statements of our Archdiocese,

"Because the Milwaukee Archdiocese took this approach, the transfers of the corpus of the fund to the parishes and parish trust was immune from attack as fraudulent transfers, even though there was evidence to suggest that the fund was closed as an element of planning to protect the assets of the fund at a time of mounting archdiocesan exposure to possible liabilities connected to sexual abuse claims. However, this evidence is irrelevant because the funds being protected were not debtor funds." (page 46, footnote omitted)
While a similar statement by Archbishop Dolan regarding creation of the cemetery trust has been a public relations asset for SNAP, it appears it will be irrelevant to whether or not the trust is an asset subject to the claims of clergy sexual abuse victims.

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