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The attorney representing a creditors committee of clergy abuse survivors told a judge this week that it may seek standing in the case to challenge the Archdiocese of Santa Fe’s movement of assets before it filed for bankruptcy.
“The committee is ready to move forward on standing motions to avoid fraudulent conveyances that we believe occurred when the archdiocese corporately reorganized,” James Stang, a Los Angeles-based attorney representing the committee, said Monday. “We believe there’s a basis for us bringing those fraudulent conveyance actions.”
Parties in the Chapter 11 case were in court Monday updating a federal Bankruptcy Court judge on the status of mediation.
In court filings, the committee says offers and counteroffers have been exchanged, but the archdiocese and creditors have not been able to reach an agreement on the terms of a reorganization plan. A third mediation session is scheduled for next week.
One impediment they’ve discovered, the committee says, is a move by the archdiocese before filing for bankruptcy to incorporate all of its parishes and to transfer substantial property to a real estate trust of which the archdiocese and parishes are beneficiaries. A substantial amount of money was also moved into a trust.
Stang said in an interview Monday that their theory is that the transfers were made with an intent to hinder or defraud the creditors.
In court documents, the committee asserts the archdiocese has rights under state law and Bankruptcy Code to recover the transferred cash and property from the trusts, which could possibly be used to pay creditors.
The creditors committee also says the archdiocese is not taking adequate steps to realize the value of its real estate assets and that there has been disagreement over the value of a sexual abuse claim.
Bruce Anderson, one of the attorneys representing the archdiocese, said in court that good faith mediations continue and they remain committed to resolving claims on behalf of survivors. Attorneys did not respond to calls seeking comment on the committee’s plans. Archbishop John C. Wester has said in the past that he decided to file for reorganization to ensure that all claims of child abuse survivors, including those who come forward in the future, can be settled “fairly and equitably.”
Federal Judge David Thuma acknowledged Monday that negotiating cases such as this is difficult, but he said the alternative is not attractive.
“I think everybody appreciates that a full-blown litigated Chapter 11 is kind of a last choice of all parties,” he said. “It’s incredibly expensive, it takes forever, and it’s just not something that’s designed to provide a satisfactory solution to the abuse victims or the church or anybody else.”
He set another status hearing for early next month and said he is doing the best he can to help the mediation process along.
“I understand Mr. Stang’s position that, you know, at some point, you have to start filing motions and doing things that are adversarial,” he said.
Around 400 people have filed notices with the U.S. Bankruptcy Court alleging they were harmed and are owed damages tied to abuse by priests and other clergy working in the archdiocese.