By Valerie Schmalz

Sex abuse claims threaten Jesuit universities

Northwest Jesuit province files for bankruptcy, but the plaintiffs' lawyers cast a wider net

The Oregon province of the Society of Jesus' decision to file for bankruptcy in the face of hundreds of sexual abuse claims -- most related to Jesuit missionary activity decades ago in the Alaska bush -- opens uncharted territory that may jeopardize the financial health of Gonzaga University, Seattle University and other Jesuit educational institutions.

The question of assets is a critical one. In its filing, the Oregon province listed $4.8 million in assets and $61.8 million in liabilities, including about 200 pending or threatened sex abuse claims. On its website, province officials -- who are declining interviews -- state that the province paid $25 million to settle more than 200 claims over six years, and in 2007 alone the province and its insurers paid settlements of $55 million.

"We have depleted our financial resources and our ability to offer financial help to other claimants," the province states on its site.

The Oregon Jesuits are the first group of Religious to file for bankruptcy in an effort to assure orderly and finite payment of sexual abuse claims and to protect existing ministries. Since 2004, several dioceses have filed for bankruptcy for the same reason.

'Financially crippled'

By filing for Chapter 11 reorganization, an organization submits its finances to a federal bankruptcy judge who determines the organization's assets and which of those assets are available to creditors. The filing stops all legal actions and centralizes them in bankruptcy court.

"Theoretically, it is possible that Gonzaga and Seattle would be totally and completely sold -- lock, stock and barrel-- and turned into cash and the cash go to the creditors. As a practical matter, that will probably not happen," said Frederick J. Naffziger, professor of business law at University of Indiana, South Bend, and a specialist on the impact of U.S. bankruptcy laws on Catholic Church properties.

But Naffziger said that if the judge rules, and is upheld on appeal, that the universities are assets of the Jesuit province, the schools "will probably be financially crippled by losing their endowment and some property, but would continue to function."

Both universities and several Jesuit high schools issued reassuring statements to alumni and supporters. Gonzaga University president Jesuit Father Robert J. Spitzer wrote in a Feb. 18 letter to alumni: "The Oregon province of the Society of Jesus is a completely separate organization from Gonzaga University. Gonzaga was separately incorporated and registered with the secretary of state in Washington in 1894."

Similarly, Seattle University's vice president for finance and business affairs Ronald Smith said his school was not involved in the bankruptcy proceedings. "Seattle University is, and has been for more than 100 years, an independent Washington nonprofit corporation," he said.

But Naffziger said a separate incorporation is not necessarily enough to show that the schools are not province assets for bankruptcy purposes.

"One of the major arguments in this case is going to be, what are the Oregon province's assets?" he said. "The Oregon province says the universities are separate from [it] and therefore do not belong to [it]. But they could be separate and still belong to the province."

For example, he said, if General Electric filed for bankruptcy, creditors could go after NBC, which is owned by GE.

Attorneys for the child sexual abuse victims say the Jesuits have seriously undervalued their holdings by excluding their educational institutions as well as other assets. And they say Jesuit liabilities will be much higher once all of the sexual abuse claims are submitted to the federal bankruptcy judge. The Jesuit province includes Alaska, Montana, Oregon, Washington and Idaho.

"They are lowballing it," said Anchorage, Alaska, plaintiffs' attorney Ken Roosa, who expects sexual abuse claims to total in the range of $300 million. He is working with Newport Beach, Calif.-based Manly & Stewart Lawyers, one of the main groups of attorneys suing for damages and which averages settlements of $1.6 million apiece for each client, partner John Manly said. Manly also represented 50 of the plaintiffs in the record $660 million settlement from the Archdiocese of Los Angeles in 2007.

Dead perpetrators

Spokane, Wash., attorney John Allison, who represents 36 people from the Colville Indian Reservation in Omak, Wash., says he expects more claims to come from Idaho and Washington. Fifteen people from Omak received a $4.8 million settlement from the province in 2007 for abuse that occurred from the mid-1960s to the mid-1970s, he said. 

Allison said that before the judge gets to the universities, he may examine the mutual funds listed on the Jesuit province filing, which hold amounts of $10 million, $11 million and $16 million, as well as property held in trust that includes a $7 million property in Idaho.

Most of the Oregon province claims relate to Jesuit missionary activity in the Alaskan Bush from 1960-2004, Manly said.

Few if any criminal charges have been brought in any of the cases because of the statute of limitations. In some cases, witnesses are unavailable and most perpetrators are elderly or dead, said Ronnie Rosenberg, human resources director for the Diocese of Fairbanks, Alaska. But she said there is little dispute the abuse occurred.

The Oregon Jesuits hastened to point out that abuse was not systemic in their province.

"Out of the nearly 3,000 Jesuits who have served in the Oregon province since 1950, less than 1 percent has credible allegations of misconduct made against them. Most of the accused have either died or are elderly and in failing health," said a statement on the province's website.

Since 1950, the U.S. Church has paid more than $3 billion in sex abuse claims -- not including treatment costs and legal fees -- according to bishop-accountability.org, which has compiled a list of settlements and awards.

Eskimo victims

Most of the victims were Yup'ik Inupiaq Eskimos and Athabascan Indians, who lived -- as many still do -- in isolated villages unreachable except by small plane, dog sled or snowmobile. Most of the abuse occurred during a time when the parish priest was one of the most powerful figures in a village that was so isolated that it might not even have a phone line, said Ronnie Rosenberg, an official of the Fairbanks, Alaska, diocese. In recent decades, satellites have brought phone and television service to the remote villages scattered across the 409,849 square miles of the Fairbanks diocese.

Among the accused abusers is Jesuit Father James Poole, who founded KNOM radio in Nome, Alaska, in 1975. Father Poole is reportedly in a nursing home in the Midwest.

The worst offender, based on claims against the Fairbanks diocese, is now dead -- Joseph Lundowski, a lay volunteer, said Rosenberg.

The Jesuits ran the Diocese of Fairbanks and its organizational predecessors for more than 100 years until 2002, with all but six or eight of the current 46 parishes still located in remote villages inaccessible by road, said Robert Hannon, special assistant to Fairbanks Bishop Donald Kettler, who was the diocese's first non-Religious bishop.

Last March, the diocese filed for Chapter 11 bankruptcy reorganization in an effort to manage the payment of abuse claims. The final count of victims for the diocese is 294 people and 41 abusers, 23 of them Jesuit priests, and most of them either dead or in nursing homes, Rosenberg said.

Valerie Schmalz is an OSV contributing editor.