Catholic church used $400m in Irish bank loans to pay U.S. sexual abuse victims

Allied Irish Bank behind pay-outs for four U.S. dioceses in 2007

Loans signed off by bank's headquarters in Dublin

Lawyers brand AIB the banking arm of the Vatican

More than $400m of compensation to American victims of sexual abuse by Catholic priests was paid with loans and guarantees from Allied Irish Bank, it has ben revealed.

The funds, in the form of loans, guarantees and lines of credit, were given specifically to pay clerical abuse victims, and led to AIB being dubbed the 'Vatican's banking arm' in U.S. legal circles.

The revelation that a comparatively small Irish bank based on another continent was used to pay off victims will raise questions about AIB's links to the church.

Corrosive links: Allied Irish Bank became known as the 'Vatican's banking arm' in U.S. legal circles

One of the payments, of $250m to the Los Angeles diocese, emerged in a new book entitled 'Render Unto Rome: The Secret Life of Money in the Catholic Church', by Jason Berry, which outlines extraordinary links between the bank and the church.

But an investigation by the MoS has established that in a few short months in 2007 AIB emerged as the lender behind abuse settlements for four separate dioceses, and the true figure was almost twice as high.

It also emerges that while AIB was used to pay the bulk of the Church's abuse claims, the dioceses were able to hold on to most of their properties.

Berry also claims that out of 194 Catholic dioceses in America, 45 banked with AIB. In the book, he asks: 'Was AIB a pass-through for Vatican funds to help certain dioceses while others had no such advantage?'

Many American dioceses, confronted in recent years with compensation cases, have filed for bankruptcy and negotiated settlements with victims.



But instead of being funded by the Vatican, which is fighting court cases by denying any legal responsibility to pay, almost half a billion of the money paid out in America was borrowed from AIB in Dublin.



Top men: The then- Allied Irish Banks director Eugene Sheehy, left, and the chairman of AIB at the time was Dermot Gleeson, right



Many other agreements may have been made out of court, in secret.

The MOS has confirmed that all of the loans were agreed by the bank's headquarters in Dublin, and amount to as much as a quarter of AIB's €2bn exposure in America the following year.

The MoS has also discovered that the loans are now being quietly repaid. In a revelation that will prompt further questions about whether the Vatican is behind the international deals, the supposedly-indebted dioceses have begun to pay off the AIB debts with money from other, unnamed, institutions.

Just last month a $40m line of credit to the Diocese of Portland in Oregon was taken over by an un-named creditor.

Bob Krebs, a spokesman for the diocese for many years, declined to name the new lender. Asked why AIB had been used to help fund its abuse compensation cases, he said he did not know who 'found Allied Irish for us'.

Of the deals, by far the largest line of credit was for Los Angeles, for $256m. The diocese avoided going into court with abuse victims by reaching a settlement in advance.

Teen victim: Esther Miller was abused by a young deacon in Los Angeles

It emerged afterwards that AIB loans and guarantees accounted for almost half of total settlement.

The deal included $175m in cash and another $25m to pay the interest, and helped Los Angeles avoid selling the bulk of its properties or reveal the true value of its total assets.

In San Diego AIB gave cash and credit of some $100m, almost half the $198m paid out to 144 victims.

That diocese filed for bankruptcy on the eve of the first civil trial against it, a case involving Monsignor Patrick O'Keeffe, originally from Kilkenny.

The Diocese of Portland, in Oregon, also filed for bankruptcy because of compensation actions.



Of a $129m settlement for victims $40m came from AIB. The loan effectively allowed the diocese to close the bankruptcy proceedings without selling any assets.

A loan document obtained by this paper details the loans in Portland. On AIB headed paper, it details how the loans were being specifically made to trusts set up to pay known and future abuse claims for the diocese.

The letter was written one day before a similar letter giving credit to the Diocese of Los Angeles, again signed by its LA-based senior vice president Charles Lydon and London-based vice president John McGrath.

U.S. lawyer Jim Stang, who sat on nine bankruptcy committees charged with looking after victim creditors, said: 'We joke that AIB is the bank of the Catholic Church.'

The bank is still exposed on some of the loans. It is owed almost $10m by the diocese of Wilmington in Delaware.

An AIB spokesman said: 'AIB's business focus in America was in the 'Not for Profit' areas and this included churches.

'Any loans advanced were approved in accordance with AIBGroup policy.'

An AIB source said they were 'standard commercial loans'.

A spokesman for the Archdiocese of Los Angeles said the allegation of Vatican involvement 'is complete rubbish'.

'The Archdiocese initiated the loan discussions with AIB and other potential lenders in the summer of 2007. An arrangement was closed with AIB in November 2007,' he said.

'Settlement related financing was undertaken as a way to allow an orderly liquidation of surplus assets by the Archdiocese, and provided time for the Archdiocese to formulate a post-settlement recovery plan.



Financing arrangements with AIB or any other potential lender had no impact on the settlement timing or terms. The AIB loan was repaid in full during the 2011 fiscal year.'





AIB deal meant US church could hide abuse documents

By John Breslin



Esther Miller was a teenager living in Los Angeles when she was repeatedly forced to commit sexual acts with a priest who went on to abuse other young girls.



That period in her life still haunts her as she enters her fifties.



The man who abused her – a young deacon still at seminary college – groomed her by getting close to her parents.



Over the course of two years, until she was 17, the priest forced himself on her. He was later appointed principal of a Catholic high school despite questions over his behaviour.



He told Esther to go to confession, but only to a particular priest. He called her evil. He later turned out to be a serial abuser of boys too.



She mentioned some details of the encounters to her mother, who slapped her and told her never to speak ill of the clergy.



The abuse had a profound effect on the next two decades of Esther’s life. She was married four times and had dozens of jobs.



Only after the revelations in the Boston diocese in 2002 did she set off on the long road to forcing the Archdiocese of Los Angeles to reveal what it knew. Esther’s case was one of hundreds, which were finally settled in mid 2007 for $660m.



‘I was surprised at the dollar amount. I had no idea of the insurance and other ways of raising money.’



And she had no idea until this week that Allied Irish Bank had helpfully stepped in with guarantees of hundreds of millions.

