Stockton Diocese finances strained in the wake of abuse lawsuits, bishop says

snowicki@modbee.comJune 14, 2013 

It will be 20 years next month since Oliver O'Grady last served as a priest in the Stockton Diocese. Yet the impact of the notorious pedophile's 22 years at five parishes remains huge — on his victims and on the diocese's finances.

To date, more than two dozen of O'Grady's victims have collected nearly $25 million in damages from the diocese and its insurance providers, including a $1.75 million settlement announced last week. That does not include an additional $500,000 scheduled to be paid over the next several years in one case, and there are two additional O'Grady lawsuits pending.

Compare that with about $7 million awarded for all other clergy abuse lawsuits against six priests and one Catholic brother, including the largest, a $3.75 million award against the Rev. Michael Kelly last year. Two more lawsuits are pending against him.

Sunday, a letter from Bishop Stephen Blaire was read in all of the diocese's 35 parishes and 14 missions, or small churches, from Lodi to Turlock and from Tracy to Mammoth. It referred to the "evil of sexual abuse" and stated: "The cash reserves from which these payments are made are all but gone. The money that remains for handling these cases is a small fraction of what is needed to face pending lawsuits as well as any new claims."

Blaire said that although protection through bankruptcy has been mentioned as a possible solution, "no decision has been made."

He pointed out that each parish is set up as a separate corporation and so would not be affected by the diocese's decision on the matter.

Thursday, the bishop provided detailed diocesan financial information. He said the reserve account was established in 1962, when the diocese was created out of the archdiocese of San Francisco. The archdiocese gave the fledgling diocese "around $6 million to get them started," Blaire said.

When he arrived as the fifth bishop in 1999, the account held about $10 million and was used mainly for emergency purposes, "like replacing a roof," Blaire said. But since then, most of the money has gone to pay the diocese's share of clergy sexual abuse lawsuits. There's now "less than a million" dollars left in that account, he said.

With four remaining lawsuits against the diocese and an unknown number in the future, diocese officials are discussing several options.

"We have enough money to run the diocese," Blaire said. "We don't have money for these four cases or any other. We have to figure out how to meet the needs to provide compensation for anyone who has been victimized or hurt. These victims … deserve compensation. We've paid out over $15 million of diocesan money, plus all the insurance money, plus the attorney fees. The point is, we've reached the end of our ability to provide that compensation."

O'Grady root of problem

O'Grady, he said, is the root of much of the problem.

Before he was deported to his native Ireland in 2000, O'Grady agreed to be defrocked in exchange for a diocese-provided annuity that began paying out in June 2010 when he turned 65. The 10-year plan, which cost the diocese about $77,000, pays O'Grady $788 a month. He is in a Dublin prison, sentenced last year to three years for possession of thousands of images of child pornography.

"He violated the trust of the people in all of the (Stockton) parishes he was in," Blaire said. "What he did was an enormous harm to the people he abused, as well as the diocese he was serving. The consequences will be with us for a long, long time.

"I know personally many of those who have been hurt by him. I just cry when I speak to them. It should never have happened."

Besides the human toll, he added, there is the financial cost.

"There is no easy answer," he said. "I don't know a diocese that runs as slim an operation as we do. You can't cut back any further."

Nancy Sloan, one of O'Grady's first victims, said Friday: "I am saddened to hear the Stockton Diocese has jumped on board to hide behind loopholes in a blatant act of irresponsibility. If appropriate actions by decades of bishops had been taken immediately against the pedophile priests such as Oliver O'Grady, there would not be the necessity of civil actions."

Victims don't look forward to lawsuits, she said.

"No victim cherishes the act of going to court. We have been through enough for many lifetimes, but for the Stockton Diocese to hide behind a bankruptcy claim is one slap too many. The diocese is not poor, except in judgment. Sell properties, get rid of ornate possessions, live in action as Jesus did."

The diocese, which runs on about $5 million a year in operational expenses, will decide on a course of action "in a few months," Blaire said.

John Manly, a Southern California attorney who has represented several of the victims, said the diocese has plenty of money and is basically playing a shell game.

"The fact is the Stockton Diocese has about $40 million in liquid assets," he said. "Our estimation is they have between $75 million and $100 million in diocese and parish accounts.

"Essentially, what the Stockton Diocese has done is put it in various accounts, not putting it in the reserve fund, and pretending they don't have any money. It's like Google taking all of their billions and putting it in a Swiss bank account and leaving half a million in a U.S. bank account and saying that's all they have. I can't prevent them from filing bankruptcy, but they'll have to explain (all those accounts) to the court."

Blaire acknowledged there are additional accounts, such as 35 incorporated parish funds and others, for example, for Catholic Charities, St. Mary's High School, Central Catholic High School and Catholic Cemeteries. There also is the capital campaign fund set up in 2008 as a corporation and governed by its own board. But he said all of that money is designated for things such as scholarships and construction costs in poor parishes and doesn't go for diocesan operating expenses.

Accusation rejected

He rejects Manly's charge that filing for bankruptcy would be a strategic move to prevent turning over material in the Michael Kelly cases or to eliminate settlements.

A bankruptcy filing has helped a handful of other dioceses around the country, Blaire said, but only where there has been plenty of communication and thoughtful discussions among all parties, including attorneys and clergy abuse victims.

"We are looking at some serious steps," he said. "My hope is to take every step carefully, keeping everyone informed, as we try to work out this situation."

Bee staff writer Sue Nowicki can be reached at or (209) 578-2012.


27: Number of clergy sexual abuse lawsuits filed naming Oliver O'Grady; two pending

$24.8 million: Amount of money paid to date in those lawsuits; $500,000 more is to be paid over the next 10 years for one victim

$10.8 million: Amount paid by diocese; rest paid from insurance proceeds

$2.775 million: O'Grady settlements paid out in past two years

11: Lawsuits against all other priests; two were referred to the Archdiocese of San Francisco for abuse that happened there and one was dropped; two lawsuits against the Rev. Michael Kelly are pending

$7 million: Amount paid in these lawsuits; $3.75 million for first Kelly lawsuit

$31.9 million: Total damages paid by Stockton Diocese for clergy sexual abuse

$13.7 million: Amount paid by diocese (does not include litigation fees)


The Bee asked Catholic parishioners what they thought about Bishop Stephen Blaire's letter, if they believed the diocese should file for bankruptcy, if the action would impact their parish and if this situation would prompt them to cut or eliminate their giving. Here are some excerpts:

• • •

'I felt that it was a heartfelt letter and must have been very difficult for the bishop to write. It was very transparent and it addressed issues that I wondered about. (Filing for bankruptcy) should be our last resort only after all other avenues have been exhausted, such as insurance, savings, assets, etc. Financially, our parish is separate from the diocese, but we are all involved in making reparation for the injustice done. This won't make me change my giving. Charity is a way of life for Catholics. We serve the poor and vulnerable; we look to the dignity of the whole person,no matter what.'

— Malissa Souza, Modesto

• • •

'I think (filing for bankruptcy protection) is sad, but it probably needs to be done.'>

— Gary Nelson, Modesto

• • •

'I felt compassion for the victims who have suffered from the actions of those who abused them. I also felt compassion for Bishop Blaire for having inherited this situation and encouraged by his communication of it to parishioners. The decision to file for bankruptcy protection is probably the Stockton Diocese's best legal option. But it still has a moral obligation to victims and parishioners to be as forthcoming as possible about what happened.It will not affect my giving. The money I give to the church is that with which God has so generously blessed me. Do I wish it were for aiding the hungry, thirsty, homeless and poor in spirit? Yes, of course, but I'm not going to abandon the church that provides me with such spiritual nourishment.'

— Donna Roeck, Modesto

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