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Diocese opts for bankruptcy filing
sacred heart pic
The Stockton Diocese, which oversees all three Turlock Catholic churches, will become the 10th diocese in the United States to file for bankruptcy. - photo by Photo Contributed

The Diocese of Stockton has filed for Chapter 11 bankruptcy protection after a series of costly sexual abuse settlements left them financially drained.

After months of contemplating the move to file bankruptcy, the Diocese announced Monday they would file the Chapter 11 papers today.

“After months of careful consideration and prayer, it has become clear to me that the Diocese of Stockton’s financial difficulties can only be resolved by filing for bankruptcy protection,” said Bishop Stephen Blaire. “This decision was reached through consultation with experts in finance and law, as well as with priests, parishioners and many others in the community our Diocese serves.”

Blaire said the Diocese has sufficient funds to cover the normal operations, but does not have the reserve funds needed to cover settle pending lawsuits stemming from sexual abuse allegations.

“Very simply, we are in this situation because of those priests in our Diocese who perpetrated grave, evil acts of child sexual abuse,” Blaire said. “We can never forget that these evil acts, not the victims of the abuse, are responsible for the financial difficulties we now face.”

Locally, the Diocese oversees All Saints University Parish, Sacred Heart Church, and Our Lady of the Assumption of the Portuguese Church, all in Turlock, and St. Anthony’s Church in Hughson. It also includes Sacred Heart’s Turlock schools. However, Blaire expects the bankruptcy filing will have no impact on the parishes, schools, and other ministries.

“It is important to remember that the only entity seeking bankruptcy protection is the corporation sole known legally as the Roman Catholic Bishop of Stockton,” Blaire said. “The parishes and Catholic schools within our Diocese are separate corporations and should not be impacted by this filing. The same is true for other separate corporations, such as St. Mary’s and Central Catholic High Schools, and the Madonna of Peace Retreat Center.”

The Diocese of Stockton has paid out more than $14 million over the past 20 years to settle sexual abuse claims. The majority of the claims were lodged against defrocked priest Oliver O’Grady, who spent several years at Turlock’s Sacred Heart Church. O’Grady has admitted to sexually abusing at least 25 children of all ages and both sexes, and sleeping with two mothers to gain access to their children. O’Grady was arrested in 1993 in Calaveras County on multiple sexual abuse charges. He pled guilty to four counts, including the molestation of two Turlock brothers, and was sentenced to 14 years in prison. He served seven years and was then deported back to Ireland in 2000.

Blaire said the bankruptcy filing was not an attempt to hinder victim’s seeking financial renumeration.

“This has been a difficult decision. Nevertheless, I am convinced this step will allow us to achieve two essential goals,” Blaire said. “First, it will provide a process to compensate as fairly as possible the victims of sexual abuse, including those who have not yet come forward or had their day in court.  At the same time, the process will provide a way for us to continue the ministry and support we provide to the parishes, the poor and the communities located within our Diocese.”

Filing for bankruptcy will allow the Diocese to deal with any ongoing or additional lawsuits collectively instead of one at a time.

The Diocese reported having $15 million in assets and $17 million in liabilities. The holdings that will certainly be affected by the bankruptcy filing are several properties in Stockton, including a convent and the bishop’s residence, and land in Valley Springs. A judge could order some or all of the holdings sold to pay off the Diocese’s creditors.

Once the papers are filed declaring bankruptcy, the Diocese will have 120 days to turn in a repayment plan. A bankruptcy judge can approve of the plan and set it into motion or reject it and put another option into place. At the same time, creditors could hire their own attorneys and attempt to have the other parishes, schools and ministries considered as the Diocese’s assets.

The Diocese will continue its normal business operations, but expenses and decisions that fall outside the day-to-day operations will be decided by the court.

The Stockton Diocese will become the 10th diocese in the United States to file for bankruptcy.