Lawsuit accuses San Diego Diocese of Fraudulently Transferring Assets

Posted on: April 27, 2023 Catholic Church Sexual Abuse

A lawsuit was filed against the Diocese of San Diego less than two weeks after the diocese said it was contemplating filing for bankruptcy protection. The suit accuses the diocese of fraudulently transferring assets in order to avoid paying large settlements to survivors of clergy sexual abuse.

In 2019, California opened a 3-year revival window for victims of childhood sexual abuse. The window, which closed in 2022, allowed survivors to file new claims even if their deadline to file suit had long passed. Around 400 survivors of clergy sexual abuse filed claims against the Diocese of San Diego during the time the window was open. In what seems like curious timing by the diocese, the lawsuit accuses the diocese of transferring 291 properties into real estate holding companies just after the governor signed the revival window bill into law. According to the lawsuit, the assessed tax value of these properties is $453 million. The suit seeks to undo those transactions. Cancelling the transactions would put the properties back under the control of Bishop Robert McElroy. It would also make them accessible to clergy sexual abuse claimants.

Pieced together from details in the lawsuit, in 2010 the diocese formed separate corporations for each of its parishes. Despite the appearance that each diocese is a separate entity, paperwork forming the corporations appears to show that, ultimately, the assets are still under the control of the bishop. Nothing was transferred to these corporations once they were established. However, in 2018, the year the revival window bill passed the legislature, real estate holding companies were formed for each parish. The next year, when the bill became law, the diocese transferred the properties to the holding companies. Records show no money was exchanged for the transfers. The lawyer filing the suit said he would argue that the diocese waited to see what was going to happen with the revival window legislation. When the bill was signed into law, that’s when the diocese decided to transfer the assets in order to shield these assets from clergy sexual abuse survivors.

This is not the first time the Roman Catholic Church has been accused of hiding assets in order to limit payouts to sexual abuse survivors. In 2020, Bloomberg Businessweek released a report stating it had estimated that $2 billion in assets had been buried by the Catholic Church in order to avoid paying clergy sexual abuse victims. In Santa Fe, a bankruptcy judge overseeing the Archdiocese of Santa Fe’s Chapter 11 reorganization ruled that plaintiff lawyers were allowed to proceed with filing lawsuits against the Archdiocese for claims it fraudulently transferred an estimated $150 million to avoid paying it to sexual abuse survivors. Lawyers for survivors allege the transfer of Archdiocese real estate and assets to parishes is an attempt to avoid bigger payouts to victims. Actions like this, taken by dioceses across the country to hide assets, have sparked investigations by lay-persons alike. A survey done by the Voice of the Faithful in late 2020, showed an extreme lack of financial transparency across the Roman Catholic Church, siting only 5 dioceses in entire the country are transparent about their assets and financials.

A diocese spokesman for San Diego denied any wrongdoing. He said the transfers were just part of the parishes starting the process of establishing their own separate legal status along with their assets. The first clergy sexual abuse case against the diocese is set to go to trial in July, however, a bankruptcy filing would halt any scheduled trials.

The entire article can be viewed here.

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