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Canadian churches face property seizures in suits

Special to the National Catholic Reporter

The prospect of mainline Christian churches going bankrupt in North America seems bizarre to many people. But at least two Catholic dioceses in the United States have warned in recent years that bankruptcy could be in the offing, and an Anglican diocese in Canada said it has no choice but to file.

Already the Cariboo diocese in British Columbia has been ordered to produce a list of its paintings and jewelry. Diocesan officials said liquid assets are gone and the diocese is facing government seizure of all its properties, including 73 graveyards, according to recent news reports.

As in the U.S. dioceses of Santa Fe, N.M., and Dallas in recent years, the financial resources of Canada’s four mainstream churches are under serious threat from lawsuits related to sex abuse claims. In Canada, thousands of suits have been filed by former Indian boarding school students claiming sexual, psychological and “cultural” abuse.

Most of the residential school lawsuits were filed against the government and didn’t name the churches. But the government has drawn the churches into the process by naming them as third-party defendants.

The Indian boarding schools were owned by the federal government and operated under contract by the Catholic, Anglican, Presbyterian and United Churches of Canada until 1969. After that, the schools were run by the government until the last school closed in 1996.

The schools date to the late 19th century, when the federal government was looking for ways to carry out its obligations under the “Indian Act” to provide education to aboriginal people. The churches agreed to run a network of about 100 schools. Most were concentrated in the western provinces of Manitoba, Saskatchewan and British Columbia, though others were in the Maritimes, Ontario, Quebec and Northern Canada.

The schools operated under an “assimilation” or integration policy. Aboriginal students were often forbidden to speak their native language or learn their traditional arts, dances or religion.

So far, the government is facing some 7,000 lawsuits with potential liabilities of between 1 to 5 billion in Canadian dollars -- $648 million to $3.2 billion in U.S. currency. The number of lawsuits is expected to grow to 16,000.

Among other consequences for religious organizations:

  • Three provinces of the Missionary Oblates of Mary Immaculate, a Catholic religious order that ran 57 of the residential schools, are in dire financial straits as a result of some 2,000 claims against the order, mostly third-party claims. The Oblates want to hand over to the federal government most of its property in the province of Manitoba in return for the government’s assuming the order’s liability.
  • The Catholic Whitehorse diocese in Yukon has averted bankruptcy but is running on a “day-to-day” basis, according to Gerry Kelly, adviser on aboriginal affairs to the Canadian Conference of Catholic Bishops in Ottawa.
  • The Anglican General Synod faces bankruptcy by the summer of 2001.The general synod has paid over $2 million in legal fees since 1999.
  • The Anglican Qu’Appelle diocese in Saskatchewan is financially threatened.

Other Catholic religious orders that have faced bankruptcy in Canada include the Christian Brothers, a worldwide teaching order. Although the Christian Brothers didn’t run any residential schools, the order was hit by 89 criminal charges in the late 1980s and early 1990s related to the physical and sexual abuse of children in orphanages and schools it operated in Newfoundland and British Columbia. The order was liquidated under a “Winding-Up and Restructuring Act” in 1996 with total claims estimated at $31 million.

The recent cases in which the government has drawn in churches are particularly painful for the public because they pit the government against the churches. The recent demand that the Cariboo diocese turn over a list of its jewelry prompted a columnist for the Calgary Sun, Paul Johnson, to write that Prime Minster Jean Chretien’s federal government had “basically announced it’s open season on our nation’s mainstream churches.”

Doug Tindal, director of information resources for the Anglican General Synod in Toronto, said the federal government must either seize church buildings in Cariboo or back off. “They’re properly horrified that they’re actually going to take over places of worship,” he told NCR.

Tindal admitted the Anglican church has encouraged parishioners to write to Prime Minister Jean Chretien expressing their concerns about what’s happening in some dioceses. Some letters begin with lines such as, “Your Department of Justice is literally driving my church into bankruptcy.”

With a general election called for Nov. 27, a few political observers suggested the Chretien government is worried the residential school lawsuits might become an election issue. When the election was called in late October, the government held only a slim majority in the House of Commons.

Looking for ways to deal with the growing residential school crisis, Deputy Prime Minister Herb Gray announced in late October that the federal government was willing to settle the residential school claims out of court. Gray explained he was willing to meet with church leaders and plaintiffs, and discuss the possibility of introducing some kind of system for national redress.

Jim Flaherty, attorney general and minister for native affairs in Ontario, said pursuing residential school claims in court doesn’t serve the attempt to heal. “Spending millions of dollars on legal fees rather than on compensating victims seems to be an enormous waste of limited resources,” he explained. “If the federal government doesn’t move forward and establish some sort of alternate process for resolution, then I’ll get the other attorneys general of Canada together again for a meeting on this issue.”

But Tony Merchant, a Saskatchewan lawyer whose Merchant Law Group represents more than half of the residential school plaintiffs in Canada, said any national redress program must pay compensation to individual victims and not simply offer money to the wider aboriginal community.

Bishop Jim Cruickshank of Cariboo said he favors a “constructive conversation” with the government on the condition that survivors and victims of the residential schools are properly taken care of in negotiations.

Cruickshank added that the expected bankruptcy of his diocese has been painful for him personally. “It’s heartbreaking,” he explained. “These last four years have really been tough. I’ve always spent my life having a vision of dreams for the future, and building things up. Now I’m ending my time as someone helping to dismantle something rather beautiful.”

In the United States, the Catholic Santa Fe diocese in 1996 drew up bankruptcy papers after reportedly paying out $50 million in sex abuse claims. Instead of filing, the diocese decided to wipe out the savings of individual parishes.

Two years later, in Dallas, 11 young men who were awarded $118 million by a jury in a sex abuse trial agreed to settle with the Catholic diocese for about $30 million after the diocese warned of further litigation and bankruptcy if efforts were made to seize parish properties. Church officials said parish and school properties were not owned by the diocese but were held in trust for parishioners.

A professor of law at the University of Notre Dame, Gerard Bradley, said it’s “quite possible” that a U.S. Catholic diocese could be forced into bankruptcy. “There are good arguments against seizing churches,” he explained. “But any kind of favorable treatment of a diocese facing bankruptcy would raise questions in present law about an unconstitutional promotion of religion, and a breach of neutrality.”

National Catholic Reporter, November 17, 2000