Bankruptcy Judge Wades Into Harrisburg Diocese's Finances

Feb 21, 2020

A federal judge on Friday began the process of figuring out how the Harrisburg Roman Catholic Diocese will remain functioning and able to pay its bills while its 2-day-old bankruptcy filing inches ahead.

Chief Bankruptcy Judge Henry Van Eck heard from lawyers for the diocese and the bankruptcy trustee about the church’s intertwined financial operations, including the widespread use of its federal employer identification number by schools, parishes and other entities.

“That admission alone is sufficient to convey legal title of the funds in those accounts” to the diocese, the bankruptcy trustee wrote in a Thursday filing.

Blake Roth, an attorney for the diocese, said it has located 79 bank accounts for such diverse uses as a high school cafeteria and a basketball boosters’ club. The exact balances in those accounts have not yet been established, Roth said.

Roth said legal ownership of various accounts will be established at some point.

“This is going to be central to this, like every diocesan case,” Roth said. “We fully expect this is going to be litigated.”

Van Eck agreed with diocesan requests to permit it to continue to pay utility bills and insurance premiums, as well as its $240,000-a-month payroll for 177 employees and a share of the costs for 18 others who also work for related entities.

Discussion during the two-hour hearing also focused on how to prevent misuse — while the bankruptcy case is pending — of accounts that currently have $150 million to pay for perpetual care of cemeteries, two charitable trusts and a pension fund for priests. The diocese said it borrowed $12.5 million against the pension account to pay for a compensation fund last year for the victims of child sexual abuse by priests.

The diocese sought reorganization under bankruptcy law this week, saying it was in financial straits even before a 2016 grand jury subpoena and investigation resulted in hefty legal costs.

The diocese has said it paid more than $12 million to 111 victims through its voluntary compensation program but faces mounting lawsuits and the prospect that the state may soon permit lawsuits from victims who otherwise would have been considered too old to sue under Pennsylvania law.

The diocese serves about 250,000 Catholics in 89 parishes.