Beset by ongoing financial woes brought about in large part by costs associated with clergy sexual abuse cases, the Diocese of Stockton this week was expected to file for Chapter 11 bankruptcy protection.

“After months of careful consideration and prayer, it has become clear to me that the Diocese of Stockton’s financial difficulties can only be resolved by filing for bankruptcy protection” said Bishop Stephen E. Blaire in a prepared statement issued Jan. 14. “This decision was reached through consultation with experts in finance and law, as well as with priests, parishioners and many others in the community our Diocese serves.”

Bishop Blaire said attorneys for the diocese will file for Chapter 11 bankruptcy protection on Jan. 15 (after The Tidings’ press deadline), making Stockton the tenth diocese in the United States to make such a filing.

“This has been a difficult decision,” continued Bishop Blaire, who became Stockton’s bishop in 1999 after serving as a Los Angeles auxiliary bishop since 1990 (he was ordained a priest in 1967 for the Archdiocese of Los Angeles).

“Nevertheless, I am convinced this step will allow us to achieve two essential goals. First, it will provide a process to compensate as fairly as possible the victims of sexual abuse, including those who have not yet come forward or had their day in court. At the same time, the process will provide a way for us to continue the ministry and support we provide to the parishes, the poor and the communities located within our diocese.”

The bishop pointed out that the only entity seeking bankruptcy protection is the corporation sole known legally as the Roman Catholic Bishop of Stockton. “The parishes and Catholic schools within our diocese are separate corporations and should not be impacted by this filing,” he said.

The same is true for other separate corporations, such as St. Mary’s and Central Catholic High Schools, and the Madonna of Peace Retreat Center.

Filing for bankruptcy is “a painful but necessary decision” for the Diocese of Stockton, he added, saying he was “deeply grateful” for “the understanding, patience and support expressed by so many people in the Church and in the wider community” since bankruptcy was first suggested six months ago.

“During this challenging time, we place our trust and confidence in God and ask for guidance in light of our faith,” said Bishop Blaire.

He reiterated that filing for Chapter 11 bankruptcy protection is “the only way” the Diocese of Stockton can continue the ministries and support it offers to Catholic parishes and communities, and fulfill the responsibilities it has to victims of sexual abuse, particularly those who have not yet had their day in court.

“Chapter 11 is a process designed to bring all parties together in one place to resolve difficult claims fairly and finally, with the supervision of the bankruptcy court,” he said. “A bankruptcy allows the diocese to deal with all these issues collectively rather than one at a time.” 

The diocese has a balanced budget and sufficient funds to continue its normal operations, he continued. It does not, however, have reserve funds available to settle pending lawsuits of sexual abuse, or to handle any new claims that may be made.

“In the past 20 years, we have paid more than $14 million in legal settlements and judgments in an effort to fulfill the responsibility we have to the victims of clerical sexual abuse,” Bishop Blaire said. “Total payments, including those from insurers and other payors, have amounted to $32 million.

“Very simply, we are in this situation because of those priests in our diocese who perpetrated grave, evil acts of child sexual abuse. We can never forget that these evil acts, not the victims of the abuse, are responsible for the financial difficulties we now face.”

Diocesan officials have tried to identify other solutions. For most of the past year, they have met with advisors, pastors, parishioners and community members in hopes of finding a different path forward.

“It now appears that Chapter 11 protection is the only way we can fulfill our responsibilities to the victims of sexual abuse and our responsibilities to the parishes and communities we serve,” Bishop Blaire said. “The bankruptcy process is the only avenue to get all parties in one place to resolve any remaining sex abuse claims in the fairest possible way.”

In a Chapter 11 filing, the Bankruptcy Court supervises the process where whatever funds are available to claimants and creditors will be distributed as fairly as possible. Victims of sexual abuse will be represented in this process intended to result in fair compensation of all of these individuals.

“If we did not file, any remaining funds available to victims would likely be consumed in the next case, leaving nothing for those claims that have not yet been resolved,” said Bishop Blaire.

The Chapter 11 process is “extremely transparent and public,” he added. “Our creditors and the public will be able to see all that we have and all the diocese has to work with in providing compensation for creditors and claimants.”

Since he came to Stockton in 1999, the bishop noted, “I have settled cases whenever possible and sought to provide the victims with whatever assistance would help them. I never want to lose sight of the fact that the acts of sexual abuse committed by priests betrayed the trust people have placed in us and have inflicted severe damage on innocent lives. I carry these convictions with me into this important decision concerning our finances and future as a diocese.”