Monica Barrett of the Survivors and Clergy Leadership Alliance speaks Wednesday about the Archdiocesan settlement plan. With her are Peter Isely (from left) of the Survivors Network of Those Abused by Priests, Father James Connell and Michael Sneesby. Credit: Rick Wood

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The Archdiocese of Milwaukee would set aside $4 million to compensate about 125 victims of childhood sexual abuse — less than a quarter of all claims — and to sue its insurance companies in hopes of securing additional funds under a reorganization plan filed Wednesday in U.S. Bankruptcy Court.

As part of the plan, the archdiocese said it would also borrow $2 million from a $57 million trust set aside for the operation of its cemeteries — money it argued it could not use for sex abuse claims — to pay a portion of its bankruptcy legal fees.

If approved by the court, and if no additional money comes in, the $4 million would be the smallest settlement paid to abuse survivors in any of the dozen or so Catholic Church bankruptcies filed since 2004.

The plan is likely to face opposition by attorneys for victims and the creditors committee — which, while it represents all creditors in the bankruptcy, is composed of only abuse survivors.

The archdiocese attributed the low figure in part to costly legal fees caused by the victims' aggressive pursuit of church assets that could fund a settlement. The inability to draw on its insurance coverage also is a major factor.

Victims and their advocates have argued the archdiocese has only itself to blame for the legal costs. On Wednesday, they called the $4 million "sickening" and "obscene," saying the archdiocese moved assets in advance of the bankruptcy to shield them from victims, and that insurance documents estimated the value of church buildings and property in the 1990s at more than $1 billion.

"No amount of money is going to be satisfactory, that's a given," Archbishop Jerome Listecki said in an interview Wednesday, acknowledging the "tremendous hurt" suffered by victims of clergy sexual abuse in Milwaukee.

"But we're already insolvent," he said. "What we're trying to do is the best we can with what we have."

'Again, we are victims'

Peter Isely of the Survivors Network of Those Abused by Priests and the Survivors and Clergy Leadership Alliance derided the offer as "an obscene gesture." In an emotional news conference outside the archdiocese's Cousins Center headquarters, he pointed out that the archdiocese had paid some abusive priests $20,000 to leave the priesthood and millions to its attorneys to fight survivors over the years.

The amount set aside would amount to less than $7,000 per abuse claim — presuming all 575 were compensated. The $4 million set aside in the plan would be the smallest settlement offer of the eight dioceses that have proposed plans to date. Those have ranged from $9.8 million in tiny Fairbanks, Alaska, to $198 million in San Diego. Across the country, the average payment to survivors was more than $400,000.

"Again, we are victims of this archdiocese," said Isely, who was molested by a Capuchin priest as a teenager at St. Lawrence Seminary in Fond du Lac County.

"The whole bankruptcy was filed, according to Archbishop Listecki, on behalf of survivors, to bring them healing and wholeness," he said. "Nothing shows more dramatically than this what the archdiocese cares about and values."

Standing outside Archdiocesan headquarters, Isely and others said the plan was an affront to Pope Francis' message of healing and renewal. James Connell, a retired priest who has been critical of the church's response to the crisis, said: "It is a sad day. It is an embarrassing day."

"Justice is a matter of equity between the parties and the common good of society," Connell said. "I certainly hope the bankruptcy court explains how this stands as justice."

Monica Barrett, who was raped by a priest when she was 8, appeared to be on the verge of tears as she spoke.

"This is a very sad day for survivors," she said. "It's just insulting. It is much like being raped all over again."

Creditors committee attorney James Stang declined to comment, saying he had yet to see a copy of the plan. But attorney Jeffrey Anderson, who represents the majority of abuse survivors in the bankruptcy, said that based on the archdiocese's comments, the plan appears to reflect the local church's long-standing policy treating harshly those victims who challenge it in court.

"Never in my 30 years of working with survivors in their pursuit of truth and efforts to protect kids have I seen a bishop or diocese be more deceitful, more deceptive, more purposeful in pouring salt in the wounds of survivors," he said.

A question of fraud

The archdiocese filed for Chapter 11 protection in January 2011 as several sexual abuse lawsuits accusing the archdiocese of fraud were advancing toward trial. In announcing the bankruptcy filing, Listecki said it was the only way to equitably compensate victims and continue the mission of the church.

Victims with claims in the bankruptcy have accused the archdiocese of defrauding them by moving abusive priests from assignment to assignment without telling families of their histories.

Archdiocese spokesman Jerry Topczewski said the archdiocese still maintains it defrauded no one, but that it decided to compensate some survivors to avoid costly trials and further trauma to those victims. The archdiocese has maintained throughout the bankruptcy that it has no legal liability for any of the abuse, arguing among other things that the cases were beyond the statute of limitations, that they involved religious order priests and others not technically employed by the archdiocese, or that they were filed by victims who had signed prior settlements with the church.

Filing the reorganization plan is a major step toward the archdiocese's exit from bankruptcy, but it must be approved by U.S. Bankruptcy Judge Susan V. Kelley, a process that could take months if not years depending on the legal battles that ensue, according to legal scholars.

In addition to setting aside the $4 million, the plan would:

■Compensate victims with "eligible" claims in a process determined by the court. Topczewski said that would include about 125 individuals.

■Establish a $500,000 lifetime therapy fund for victims.

■Outline a "feasible operational plan" for the archdiocese to continue its ministry.

■Allow the archdiocese to retain ownership of the Cousins Center in St. Francis. The archdiocese would restructure its mortgage and renegotiate its lease with the Milwaukee Bucks to increase revenue for building operations.

■Borrow $2 million from its cemetery trust to pay legal fees accruing as part of the bankruptcy, using as collateral five properties owned by the archdiocese.

The plan does not include any significant contributions from its insurance carriers. The archdiocese said it would emerge from bankruptcy at least $7 million in debt.

It was not immediately clear how the filing of the plan would affect other issues playing out before the 7th Circuit Court of Appeals, including the question of whether tapping the cemetery trust funds would violate the archdiocese's free exercise of religion, and whether U.S. District Judge Rudolph Randa should have recused himself from an appeal on that issue.

National attention

With 575 sexual abuse claims and more than $11 million spent on legal fees over the three years, this has become one of the largest and most contentious of the dozen or so church bankruptcy cases to date.

It has charted unprecedented legal territory and drawn national attention, in part because of the role of New York Cardinal Timothy Dolan, who led the Milwaukee Archdiocese from 2002 to 2009. Documents released last summer show Dolan obtained Vatican approval to move $57 million in cemetery funds off the archdiocese's books and into a special trust to protect it from legal liability.

The archdiocese, which had spent an estimated $30 million on the sexual abuse scandal before filing for bankruptcy, has maintained from the beginning that it did not have significant funds for a settlement. At the time of its filing, it listed $100 million in assets, but insisted that all but a few million dollars was in segregated funds that could not be used to pay abuse settlements.

It also did not have insurance — a significant contributor to diocesan bankruptcy settlements around the country — until recently.

State courts had ruled that the archdiocese could not tap its insurance to pay sex abuse settlements because fraud constitutes an intentional act rather than an accident. The archdiocese had appealed that decision to the Wisconsin Supreme Court, but it was automatically stayed by the filing of the bankruptcy in 2011.

Insurance experts hired by the bankruptcy creditors committee uncovered other policies victims said could be worth hundreds of millions of dollars, and the archdiocese has been pursuing those. One group of insurers including Lloyd's of London agreed to buy back its policies, and the archdiocese is continuing to pursue claims against two others: Stonewall Insurance Co. and OneBeacon.

Crocker Stephenson of the Journal Sentinel staff contributed to this report.