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Milwaukee archdiocese says bankruptcy fight has cost $12.5 million in legal, other fees so far

MILWAUKEE - Bankruptcy has cost the Archdiocese of Milwaukee more than $12 million in legal fees and other expenses so far, and rejection of its recovery plan could force it to pay out $13 million more, its attorneys said in newly filed court documents.

The financial details were revealed in the archdiocese's reorganization plan, filed late Wednesday night in federal bankruptcy court. The plan proposes providing $4 million to compensate an estimated 125 victims of clergy sex abuse — less than a fourth of those who filed claims — while other victims would receive therapy but no cash payment. That's the smallest per-victim payment yet offered by the 11 dioceses that have filed for bankruptcy in the past decade.

The Milwaukee archdiocese filed for bankruptcy in 2011, saying it wouldn't have enough money if courts ruled in favour of victims who filed lawsuits. The seemingly stingy sum offered in its reorganization plan can be partly explained by a long, bitter court fight that has drained the archdiocese's finances and its relatively unique organizational structure, which puts much church money out of reach.

In all, the archdiocese said it has spent $6.9 million on its own attorneys during bankruptcy. It estimated its creditors' attorney costs, which bankruptcy rules require the archdiocese to pay, at nearly $5.6 million. The creditors include hundreds of sexual abuse victims along with others who are owed money.

The archdiocese filed for bankruptcy after an October 2010 offer to pay $4.6 million to 23 victims was rejected. At the time, it had only $5.6 million that wasn't earmarked for specific purposes, according to the court documents.

Victims' attorneys had hoped to tap into more than $100 million held in trust funds and by the archdiocese's 202 parishes. The archdiocese resisted, however, arguing that it didn't control that money and had no right to spend it. Courts thus far have agreed, but not before the archdiocese racked up big legal bills.

One of the biggest fights has been over a cemetery trust fund established under New York Cardinal and former Milwaukee Archbishop Timothy Dolan. A judge ruled that fund off-limits last year, but the creditors have appealed that decision. That litigation alone cost nearly $2.5 million, according to court documents.

One factor in the court's decisions has been that Wisconsin parishes are incorporated separately from the archdiocese and control their own money. Parishes in many other states are incorporated as part of a diocese, allowing it to tap into their assets. One such example is in Spokane, Washington, where the diocese agreed in 2007 to pay $48 million to about 175 victims, with $10 million coming from 82 parishes.

The Milwaukee archdiocese noted that it has cut costs dramatically in recent years to come up with money to pay victims. Its budget last year was $24 million, less than two-thirds of what it was in 2002, when the national sexual abuse scandal erupted. Most of its budget comes from donations, fees paid by parishes and schools and the sale of cemetery plots.

The archdiocese said it keeps about $2 million on hand for cash flow, but otherwise its savings have been depleted by the sexual abuse scandal.

"Some have speculated about the value of the religious jewelry and art of the Archdiocese," its attorneys said in court documents. "However, the value of the jewelry and art owned by the Archdiocese is nominal. Liquidation value is estimated to be under $25,000."

The archdiocese's headquarters on Lake Michigan was mortgaged to help pay for a nearly $16.7 million settlement with 10 victims in 2006. The debt on the property is more than its current value, according to court documents. Other properties, including campus ministries in Milwaukee and Whitewater, have little value, they said.

The reorganization plan calls for the archdiocese to put up five parcels of undeveloped land as collateral for a $2 million loan from the cemetery trust fund. The money will be used to help compensate victims.

The archdiocese released personnel files last summer for 42 priests with confirmed allegations of sexual abuse. Victims had pushed hard to make the documents public. The archdiocese said that effort cost more than $665,000, mostly due to the need to review the records and delete information identifying sexual abuse victims.

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