GavelMILWAUKEE — The Milwaukee Archdiocese’s journey through the Chapter 11 reorganization process included a public hearing in U.S. Bankruptcy Court on Friday, Feb. 11. Termed a “First Meeting of Creditors,” the meeting focused on the Financial Reports filed Monday, Feb. 7 by the archdiocese.

During the two-hour session moderated by Assistant U.S. Trustee David Asbach, the chief financial officer for the archdiocese, John Marek, was questioned about the financial schedules and statement of financial affairs that had been submitted by the archdiocese.

Following the examination by Asbach, the local representative of the bankruptcy court in Milwaukee, creditors and their representatives were invited to ask questions of Marek about the archdiocese’s financial schedules and statement of financial affairs.

Asbach began the hearing by reminding the approximately 30 participants that the scope of questioning should generally relate to financial affairs and should not be a substitute to a deposition.

In spite of that directive, however, attorneys for victim/survivors attempted to question Marek about items outside the scope of the financial reports, such as the Faith in Our Future trust, the Catholic cemeteries trust and assets of closed parishes. Asbach repeatedly steered the questioning by the attorneys back to the filed financial reports.

In those reports, the archdiocese reported total assets of $40,744,398 and liabilities of $24,069,103.

Appearing at the hearing with Marek was Daryl Diesing, the archdiocese’s bankruptcy attorney from the law firm of Whyte Hirschboeck Dudek.

During his opening statement, Diesing explained that the archdiocese operates on a virtually break-even budget of $24 to $26 million annually, but over the last 20 years, had to spend more than $29 million to cover abuse claims and legal costs associated with them.

“These costs have been increasing over the years and that’s troublesome,” he noted, explaining the archdiocese is aware of 12 lawsuits involving 17 plaintiffs pending against it. Additionally, he said, the archdiocese knows of six or seven additional claims where individuals have not filed a lawsuit, but they have legal representation, two claimants who wish to use the archdiocese’s mediation system, and an attorney with one or more claimants who might wish to file.

“Also we’ve had a few inquiries since the (Jan. 4 reorganization) filing, but surprisingly little activity since,” he added.

Asbach’s questioning of Marek began with inquiries about the staffing of the archdiocese and its major sources of income and expenditures.

Marek explained that the three main sources of income are the Catholic Stewardship Appeal which aims to generate about $7.5 million annually; parish assessments, which he likened to a tax on each parish, accounting for about $5.5 million a year; and the Catholic cemeteries which generate in the $5 to $6 million range, he said.

The three largest sources of outflow, according to Marek, are salaries and benefits, grants given to support Catholic activities and programming.

Asbach also questioned Marek about property owned by the archdiocese, including a designated, but undeveloped All Souls Cemetery, and the St. Leo School property subject to an offer to purchase.

Once he had completed his questions, the floor was open for questions from the public. One man who identified himself as a sexual abuse victim said he was interested in the archdiocese’s mediation system. Another speaker representing Mork Construction who holds contracts for work in the cemeteries questioned whether the archdiocese planned to continue with construction plans. Marek assured him that was its intent.

Gillian Brown, a Los Angeles bankruptcy attorney representing the creditors’ committee, began by questioning Marek about the Faith in Our Future trust. She attempted to draw connections between the trust and the archdiocese by noting that the public relations firm that does creative work on behalf of the schools, also designed the Faith in Our Future creative campaign, and that Archbishop Jerome E. Listecki and Bishop Richard J. Sklba are among the trust’s five trustees.

Asbach allowed her line of questioning about the Faith in Our Future for a short while, but cut it off, reminding her that it was not part of this bankruptcy hearing.

“We’ll get into that another time,” she noted.

Brown also questioned Marek about the estimated value of miscellaneous episcopal rings, crosses and jewelry listed on the personal property schedule. Explaining that the items are pectoral crosses and rings from previous bishops and that an incoming bishop will be offered the opportunity to choose one for himself, Marek said, “It’s a nice cross, but I wouldn’t give you $10 to wear it to a party tonight.”

Attorney Jeffrey Anderson of St. Paul, Minn., representing victim/survivors, continued the line of aggressive questioning begun by Brown, pressing Marek for the reason why mediation efforts in Chicago late last year failed.

After Marek repeatedly reminded Anderson that he was not present for mediation talks, Diesing objected, “If these are proper questions, they are not questions for this witness,” he said.

Anderson continued by asking Marek who made the decision to file for reorganization, suggesting in his question that it was made years ago by Archbishop Timothy M. Dolan.

“Are you aware that Archbishop Dolan had made the decision?” he asked Marek. Asbach pulled him back, however, saying, “Let’s stick to the bankruptcy case.”

Anderson also questioned the establishment of a Catholic cemetery trust fund in 2008 and the transfer of $55 million to that fund, suggesting it was an effort by the archdiocese to shield assets.

Marek explained that the funds were moved into a perpetual care trust from an income care fund, but their purpose was the same – to take care of the ongoing needs of a cemetery.

As Anderson persisted in his line of questioning, Asbach interjected. “I’m not going to turn this into a deposition. You and the committee have differences with the archdiocese about these funds and their relationship to the archdiocese, but we’re not going to have an argument about this here.”
Anderson also tried to probe into the establishment of Faith in Our Future, suggesting it was started after a Wisconsin Supreme Court decision went against the archdiocese; the status of the property and assets of the “100 plus closed parishes” listed on the archdiocesan Web site; and why the Jan. 4 date was chosen for the filing in U.S. Bankruptcy court. Anderson said he believed the date was chosen because it was two days before Bishop Sklba would have given a deposition.

Asbach interjected when Anderson pressed Marek about the date for the filing, saying, “This is not the place. The question is in the form of an argument and his acknowledgement is not going to make it true or not.”

The next step in the bankruptcy process, according to archdiocesan spokesperson Julie Wolf, is a “bar date order and noticing,” that she described as a “final call” for all survivor victim/survivors to come forward to be included as claimants. The date for that hearing has not yet been scheduled.