Archdiocese spent $8.8M on clergy misconduct; deficit: $3.8M

Facing abuse lawsuits, archdiocese opens up on finances.

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For the first time, the Archdiocese of St. Paul-Minneapolis released a detailed financial audit report to the public Thursday, saying it was a move to “improve transparency and accountability” in the wake of growing allegations of child abuse by its clergy.

The report said the archdiocese spent $8.8 million over the past decade on costs related to clergy misconduct. That does not include settlements and other payments made by the archdiocese’s insurance company, the report said.

The archdiocese spent more than $6.2 million on cases involving misconduct with minors, assisting the victim and abuser, the report said. That includes $2.3 million for legal settlements, $1.8 million for victim support such as counseling and therapy, and $566,000 in legal fees.

Priests who committed the abuse received another $1.5 million during this period for their living expenses, the report said.

In addition, the archdiocese spent $2.6 million over the past decade on priest misconduct that didn’t involve children. That includes inappropriate behavior with adults, alcohol and gambling addictions.

The biggest share — $1.7 million — paid for the living expenses of the problem priests. Another $519,000 was used for victim support services, the audit said, and $209,000 for legal services. The archdiocese said it is required under church law to care for priests who have been removed from the ministry.

The archdiocese has been criticized for failing to disclose how much money it has spent on child abuse cases, in particular how much it has paid to the priest abusers. In recent months it has been rocked by lawsuits and complaints, resulting in the departure of key archdiocesan officials.

Bishop Lee Piché issued a statement that said, “We are taking these steps because they are the right thing to do — because they protect the young and vulnerable, care for victims of abuse, and restore trust among the laity as well as our clergy who are serving honorably.”

$3.9 million deficit

The audit shows a $3.9 million deficit. But Thomas Mertens, chief financial officer for the archdiocese, concluded that as of June 30, “the financial condition of the archdiocese is solid,” even with the liability stemming from the recent wave of lawsuits claiming clergy child sexual abuse.

Net operating revenue in 2013 was $35.5 million, the audit showed, compared with $39.4 million in operating expenses.

Operating expenses, in fact, jumped nearly $9 million over 2012. The reason: The archdiocese added $5 million to its litigation reserve fund — which had a negative $1 million balance in 2012 — and spent an additional $2.8 million on its communications office and an evangelical initiative, the report said.

The archdiocese had $41.5 million in net assets in 2013, the report said.

The audit was limited to the “chancery corporation.” The vast network of other institutions overseen by the archdiocese, such as parishes and schools across 12 counties, were not included.

Advocates for victims of abuse already are charging that the audit does not reflect the full extent of the archdiocese’s assets.

Still unknown was the archdiocese’s ability to respond to the roughly 20 lawsuits filed so far this year on behalf of child sex abuse victims. The $8.8 million it spent on costs related to clergy misconduct over the past decade could pale compared with future costs. That spending occurred during a decade when lawsuits against the archdiocese were blocked by a statute of limitations on older claims. That limitation has now been lifted for three years, and new lawsuits are filed every couple weeks.

The audit acknowledged the archdiocese is uncertain how it will pay for future claims.

“Unknown claims can go back many years where insurance may not have been available or coverage limits were minimal,” the audit noted. “Also punitive damages and other claims may not be covered by insurance at all.”

Second opinions

Charles Zech, a professor at Villanova University who studies church financial management and ethics, said he will be surprised if the $5 million set aside for clergy sexual abuse lawsuits lasts very long, especially with the archdiocese already running a modest deficit.

“The $5 million can get eaten up pretty quickly,” he said.

Zech said bankruptcies have happened in other Catholic dioceses around the country in states that have expanded the statute of limitations for child sexual abuse lawsuits. The archdiocese’s financial stability will depend on some extent to its insurance limits, Zech said.

Typically, he said, the extent of coverage in sexual abuse cases depends on what policies were in place at the time of the abuse.

Although some cash-strapped dioceses have shifted valuable assets out of reach of abuse victims, Zech said he didn’t see anything in the reports that indicated any shift of church funds during the 2013 fiscal year.

The Rev. James Connell, a retired Catholic priest in Milwaukee who is a certified public accountant, said he is impressed by the strength of the balance sheet and not concerned about the one-year operating deficit.

“I don’t see a bankruptcy in the offing,” said Connell, an advocate for victims of clergy sexual abuse and a member of a national group called Catholic Whistleblowers.

Connell said it’s notable that actual litigation expense reached $3.95 million in the St. Paul-Minneapolis archdiocese in 2013. While the cost of future lawsuits are an obvious risk for the archdiocese, so is the $47 million in combined debt owed by individual parishes and institutions to various lenders, he said. The report said the archdiocese is on the hook for any defaults.

 

hopfen@startribune.com 612-673-4511 tony.kennedy@startribune.com 612-673-4213

  • Archdiocese finances

    $3.9 million

    operating deficit

    $6.2 million

    costs for clergy abuse of minors (over 10 years)

    $5 million

    added to litigation reserve fund

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