Funding of settlement in the works

Following the announcement of a proposed $85 million settlement agreement between the Archdiocese of Boston and 552 alleged victims of clergy sexual abuse questions have arisen as to how the pay outs to victims will be funded.

The source is uncertain at this time, according to David Smith, Chancellor of the archdiocese. The archdiocese is planning to borrow “substantially all the money initially,” Smith said and recoup as much as possible from insurance carriers and real estate sales over time. Despite the uncertainty, Smith said, the archdiocese’s priority is “to have the cash available to pay the victims.”

"Where exactly the money will come from and how much we are going to need, we don’t know at this point, but we are comfortable in that the borrowing can be arranged in time to make the payment,” he said.

The accelerated pace of settlement negotiations in recent weeks has left the archdiocese little time to make formal funding arrangements. It may take the archdiocese as much as 60 days to work out the complete details, Smith said.

The archdiocese is in the process of selling property that could yield as much as $15 million. A “substantial part” of the remaining amount is expected to come from insurance companies. However, no agreement has been reached with the archdiocese’s insurance carriers yet.

The amount eventually raised from insurance carriers will depend on the number of victims that opt in to the settlement.

"The insurance companies have a legal obligation [to pay the claims]. In what dollar amount, whether or not that is before or after litigation is required, at this point, is unknown," he said

Smith credits the speedy resolution of the settlements to change of negotiation strategy by Archbishop Seán O’Malley.

"The key to moving forward was the archbishop's decision to reverse the process. The process was to work with the insurance companies towards a settlement. The process changed to work with the victims toward a settlement, with a deliberate decision to save the discussions with the insurance companies until later," he said.

Smith stressed, as he has in the past, that the archdiocese “will not use Annual Catholic Appeal money or Promise for Tomorrow money” to pay the settlements. “We are not using assets of existing parishes. That has been decided,” he added.

The Archdiocesan Finance Council has approved the agreement, a reference to the proposed settlement with 84 victims of the late John Geoghan that was derailed after the archdiocesan council declined to consent to the agreement.

The Finance Council, Smith said, and other institutions such as the College of Consultors will play a role in determining the sources of the funds to be paid, as they “may have to approve what specifically we liquidate to pay off the debt.”

Smith believes that it will take until early 2004 to determine the ultimate sources of funding for the settlement. At that time, the archdiocese will publish a full record of amounts paid and what assets were liquidated to raise the money.

"We owe that to the public, and we will do it first in The Pilot," Smith said.