A federal judge has determined that there are sufficient allegations of fraud against the Roman Catholic Diocese of Harrisburg and ruled that attorneys representing sexual abuse survivors can seek a judgment to have an estimated $95 million in assets that the Diocese transferred behind two different trusts transferred to their bankruptcy status.
According to the Feb. 17 ruling by Chief Bankruptcy Judge Henry W. Van Eck, the assets include $50 million in real estate such as the diocesan campus, the bishop’s residence and a retirement home for priests, all in Harrisburg, along with with eight cemeteries, including All Saints. Cemetery in Elysburg and seven high schools, including Our Lady of Lourdes Regional in Coal Township.
Also at risk of being returned to the bankruptcy estate are $45 million worth of furniture and appliances, cash and securities, religious artifacts and objects, vehicles, notes, records and books, according to documents filed with the US Bankruptcy Court. for the Middle District of Pennsylvania.
In a grand jury report unsealed in 2018, 45 officials from the Diocese of Harrisburg were identified as alleged abusers. Many were included in a church-issued report released two weeks earlier that named 71 priests and seminarians accused in church records of sexual misconduct with children dating back to the 1940s.
The Diocese of Harrisburg filed for Chapter 11 bankruptcy on February 19, 2020. It opened the trusts on November 13, 2009, as allegations of widespread sexual abuse nationwide within the Catholic Church mounted, court records show.
Van Eck ruled in federal court granting a motion to the Official Tort Plaintiffs Committee to file fraudulent transfer lawsuits against the Diocese of Harrisburg. Allegations of the Diocese’s attempts to defraud creditors through the trusts were “enough,” Van Eck found.
On Feb. 18, attorneys representing sexual abuse survivors filed new and separate motions asking a federal judge to order that the assets in the trusts be allocated to the estate of the bankrupt diocese, something Van Eck did not do. in his ruling the day before.
The attorneys are asking the court to rule that the transfers were fraudulent, that the creditors are entitled to the assets, and that the trusts are unenforceable.
Attorneys for abuse survivors wrote in the legal findings that protecting property in trusts has been a strategy followed by Catholic dioceses in other parts of the US, including in Milwaukee.
As the current papal-appointed bishop, Bishop Ron Gainer is the trustee of every trust in the Diocese of Harrisburg, court records show. However, the Most Reverend Kevin C. Rhoades was a bishop at the time the trusts were established.
Van Eck’s opinion found that the Diocese appears to be both the settlor and beneficiary of the trusts, “hallmarks of a self-established trust” that would not protect assets from creditors in this case, according to court records.
Ruling against the Diocese’s defense, Van Eck found that state law allows an unincorporated religious entity to hold title to the property, and that the statute of limitations was met because the claimants could not reasonably have known that the assets were transferred until after bankruptcy was declared.