Diocese of Buffalo Files for Chapter 11 Bankruptcy

"We're off to a good beginning for a long process" - Documents, instant analysis and reaction inside

Diocese of Buffalo with two dozen protesters calling for Bishop Malone's resignation. September 10, 2018 (WBEN Photo/Mike Baggerman)

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Buffalo, NY (WBEN/AP) - The Diocese of Buffalo has filed for Chapter 11 Bankruptcy in a federal court.

The filing was made Friday morning in US Federal Bankruptcy Court after weeks of saying the move was "imminent." Bishop Edward Scharfenberger, who is serving as the Apostolic Administrator for the Diocese, is expected to speak more on the filing Friday afternoon.

In a statement, the Diocese said the filing aims to provide resolution for the most number of individuals who have been harmed by sex abuse, while continuing the work of the church.

Following a lengthy hearing in Federal court in Buffalo, Bishop Edward Scharfenberger emerged, saying, "Things went pretty well as we anticipated, we're off to a good beginning for a long process".

"We have no more urgent work than to bring about justice and healing for those harmed by the scourge of sexual abuse," Scharfenberger said in a statement. "Our decision to pursue Chapter 11 reorganization... 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."

Catholic Charities is not included in the bankruptcy filing.

The Diocese of Buffalo posted a $5 million loss in 2019, and with a barrage of lawsuits from the clergy misconduct scandal still pending, according to a financial report released earlier this year.

”In response to the magnitude of the number of claims, lawsuits and alleged damages, the (Central Administrative Offices) has determined that a filing of a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code is imminent,” the diocese’s 2019 financial report said.

The diocese is the second of New York’s eight dioceses to seek bankruptcy protection. The Rochester diocese filed for Chapter 11 protection in September. Nationwide, more than 20 dioceses have sought bankruptcy protection in a sexual misconduct reckoning that has spanned nearly two decades.

It was the second consecutive yearly loss for the diocese of 163 parishes and missions across eight counties. It lost $1.8 million in fiscal 2018.

The diocese already has paid out about $18 million - including $1.5 million from the sale of the bishop’s mansion - to more than 100 victims under an independent compensation program established in 2018. It faces more than 220 new lawsuits filed since August, when New York’s Child Victims Act suspended the statute of limitations to give childhood victims one year to pursue even decades-old allegations of abuse.

Filing for bankruptcy protection, the report said, “best allows the CAO to manage the claims adjudication process in an orderly manner, as well as to ensure the equitable treatment of all claimants.”

Following is a complete press release issued by the Diocese of Buffalo:

Buffalo Diocese Embarks on Path Toward Reorganization Chapter 11 filing aims to provide resolution for the most number of individuals who have been harmed by past by sexual abuse while continuing the work of Catholic ministry

The Diocese of Buffalo has formally filed for Chapter 11 reorganization under the U.S. Federal Bankruptcy code with a primary aim of enabling financial resolution for the most number of
individuals who have filed claims under the Child Victims Act - a year-long window that opened on August 14, 2019 that suspends the statute of limitations related to allegations of past sexual abuse. A further objective of reorganization is that it allows the Diocese to continue uninterrupted its mission throughout Western New York, while working to settle claims with existing Diocesan assets and insurance coverages.

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

Parishes of the Diocese are separately incorporated under New York State’s Religious Corporation Law and not included in today’s filing. Similarly, Catholic elementary and secondary schools are also not part of the Chapter 11 case, given that they are owned by parishes or are separately incorporated entities. Catholic Charities of Buffalo, with its extensive ministries that serve residents throughout Western New York, providing critical social services, is also separately incorporated under New York’s Not for Profit Corporation Law and will not be part of the filing. This is also true for the Diocese’s capital and endowment Campaign - Upon This Rock.

A Chapter 11 filing is a voluntary action taken by a company or entity in order to implement a financial reorganization, settle claims for those to whom it has a financial obligation and emerge after the process with its operations intact. Under Chapter 11, an entity generally maintains its normal operations. It continues to do business in a routine manner.

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