Amid lawsuits, Buffalo diocese files for Chapter 11 bankruptcy protection

The Catholic Diocese of Buffalo, amid a sexual abuse scandal, has filed for Chapter 11 federal bankruptcy protection, it said in a statement Friday.

A “primary aim” of the filing is to resolve the most number of claims under the Child Victims Act.

Chapter 11 also lets the diocese try to settle claims with existing assets and insurance coverage, the statement says.

The diocese’s bankruptcy filing lists estimated assets between $10 million and $50 million and estimated liabilities between $50 to $100 million.

The Buffalo News has reported that more than 200 lawsuits were filed against the diocese alleging clergy abuse and the diocese has paid more than $17.5 million through a victim’s compensation fund.

A document with the bankruptcy petition cites 250 such lawsuits.

“The Diocese anticipates that in excess of 400 individuals may assert abuse claims for which they may seek to hold the Diocese responsible,” the affidavit states.

“We have no more urgent work than to bring about justice and healing for those harmed by the scourge of sexual abuse,” said Bishop Edward B. Scharfenberger, apostolic administrator. “The intense emotional, mental and spiritual pain inflicted on these innocent victim-survivors is a heavy burden they are forced to carry throughout their lives.

“Our decision to pursue Chapter 11 reorganization — arrived at after much prayer, discernment and consultation with the College of Consultors and our Diocesan Finance Council — is based on our belief that this approach will enable the most number of victim-survivors of past sexual abuse in achieving fairness and a sense of restorative justice for the harm they have experienced. It will also allow the vital, mission-driven work of faith that is so essential to the residents of Western New York to continue uninterrupted.”

A troubled history at the diocese

In December, the Vatican announced Pope Francis had accepted the resignation of Richard Malone as Buffalo’s bishop. No reason was given.

Malone issued his own statement at the time, attributing his early retirement to turmoil caused by the Catholic Church’s clergy sexual abuse crisis, and discord over his response to it.

Since the church’s clergy sexual abuse crisis reignited in 2018, bishops across the country have come under greater scrutiny for the crimes and cover ups alleged to have occurred on their watch. Few faced louder and more persistent accusations than Malone, who had led the diocese of some 600,000 Catholics since 2012.

In October, the Vatican announced its own investigation — called an Apostolic Visitation — into the Buffalo diocese. The results of that probe have not been made public. But the Vatican has a final report, and Malone submitted his resignation to the Pope, after Malone was made aware of the results, the Vatican’s embassy in Washington said.

An expected disappointment

Attorneys for alleged victims of sexual abuse in Buffalo told CNN they were not surprised with the bankruptcy filing but are disappointed that their clients won’t be able to tell their stories in court and learn the full scope of what happened.

“We were expecting this. This diocese even among all the other Catholic dioceses was particularly notorious,” Michael Pfau, a Seattle-based attorney for some of the alleged Buffalo victims, told CNN.

“What this means for accusers is two-fold. On the one hand, they are experiencing anger because they will never have their day in court and get an apology from the people that hurt them. On the other hand, bankruptcy does not mean the victims get nothing. There are assets and insurance that can compensate the victims, but there will be a bar date that will go into effect. That means people with claims need to file as soon as possible, because the judge will set a date after which no claims can be made,” Pfau said.

Steve Boyd, a Buffalo-based attorney currently representing 213 alleged victims in the Buffalo diocese, said his clients see the bankruptcy filing as a “cop out.”

“Part of the healing process for our clients is to get to the bottom of what happened and to learn what the diocese knew,” Boyd said. Now, Boyd says their legal recourse has shifted from a court case to a “simple financial transaction.”

“It’s not just about the money about our clients. When someone gets abused, it’s a betrayal. When the church gets wind of it and doesn’t do anything about it, it’s a second betrayal. Instead of calling the police, they let them continue to offend and create new victims,” Boyd said.

Other bankruptcies across the country

The Buffalo filing brings to about two dozen the number of US Catholic dioceses and religious orders that have filed for bankruptcy in the face of sexual abuse lawsuits.

Claimants allege the regional church offices failed to stop serial predators from abusing young children while covering up sexual abuse and protecting pedophile priests.

The general idea of Chapter 11 bankruptcy is to pause those lawsuits, figure out how much a diocese owns and how much it owes, and then set up a plan to pay off its creditors, bankruptcy experts have told CNN.

Filing for Chapter 11 allows organizations to continue operating and making money, even as they reorganize, negotiate with insurance providers and set up a trust to dole out payments to future claimants.