Rules Are for Schmucks: The Bankruptcy of Religion

I’m not a fan of metaphor, because it can lead to confused thinking. So my title here doesn’t refer to some general failing on the part of religion but to specific cases of churches not being able to pay their bills.

Earlier this month Pope Francis won yet more press adulation by meeting with a group of sex abuse victims to beg their forgiveness for the “sins and grave crimes” committed against them. Words, of course, are easy. Someone truly sorry for a misdeed backs up words with actions, trying to the extent possible to rectify the damage that was done. Backdoor attempts to weasel out of compensating those you have wronged are not consistent with the idea of begging their forgiveness.

This is precisely what the Pope’s minions in the Archdiocese of Milwaukee are trying to do. Back in 2007, when it became clear that the archdiocese was going to owe the victims of its priests’ horrific acts a large sum of money, Archbishop Timothy Dolan began to scramble for ways to avoid paying them. One idea he hit upon was to take $55 million sitting in the archdiocese’s general funds and transfer it to a newly created trust fund, with the stated purpose of paying for the upkeep of the local Catholic cemeteries. The hope was that the $55 million would then be protected from the claims of the general creditors of the archdiocese, including (but not limited to) the sex abuse victims. Dolan boasted in a letter to Rome that this was exactly what he had in mind: “By transferring these assets to the Trust, I foresee an improved protection for these funds from any legal claim and liability.” The Vatican then approved the transfer, a necessary step under canon law. Shortly thereafter, Dolan was promoted to the powerful Archdiocese of New York, and then was elevated to the rank of Cardinal (by Francis).

You may be thinking that courts have the power to see through shams like this. The law indeed provides powerful tools to pull money back into a bankruptcy estate that a debtor was trying to shield from its creditors. For example, suppose I created a separate bank account called the “Granados Funeral Fund” and start shoveling money into it. If I were shortly thereafter to declare bankruptcy, do you think I could tell my credit card companies, “You can have the $100 in my checking account, but you can’t touch the $10,000 in my Funeral Fund, because I’ve decided that’s dedicated to a different purpose”? After they stopped laughing, my friends at MasterCard would have little difficulty in reaching those funds.

My problem (here as elsewhere) is that I’m not a church. And according to Wisconsin District Court Judge James Randa, that makes all the difference in the world. Last year Randa overruled the conclusion of a bankruptcy court judge and held that the Religious Freedom Restoration Act of 1993 (RFRA) even applies to laws as religiously neutral as the Bankruptcy Code. RFRA is the federal statute that forces the government to bend over backwards to accommodate religious practices of all flavors, even when those who assert it are seeking exemption from perfectly normal laws that apply to everyone equally—like the bankruptcy code.

According to Judge Randa, the perpetual care of corpses or ashes entrusted to its care is an essential part of the Catholic faith. “If the [Cemetery] Trust is legally compelled to cede all or part of the funds to the [bankruptcy] estate, there will be no funds or substantially less funds for that perpetual care. As a result, neither the Debtor nor the Trust and its Trustee will be able to fulfill their canonical and moral obligations to provide the appropriate care for these sacred sites—consistent with Catholic doctrine and canon law—or assure the requisite permanence, reverence and respect for those buried there.”

In other words, if money is taken from the church’s trust fund to pay its legitimate creditors, then the church won’t have as much money left over with which to do its religious work. (Ah, the wonders of mathematics!) Therefore, under RFRA, the government needs to bend over backwards to grant special exemptions for religious practice–in this case, a special exemption allowing the archdiocese to stiff all the people to whom it legitimately owes money.

It turns out that Judge Randa knows about this subject in part because he has his own relatives interred in cemeteries run by the Archdiocese of Milwaukee. So if families of the deceased have to pony up a little more to keep the graves maintained, he will suffer a personal financial loss—a fact he didn’t disclose when issuing his opinion. The whole mess is now in front of the Seventh Circuit Court of Appeals. There is more complication to the case than I can explore here, but the bottom line is whether or not a church can use RFRA to avoid paying its legitimate bills.

Unfortunately, the archdiocese has some significant case law on its side, to the effect that RFRA can override normal bankruptcy procedures. Those rules provide that if someone just gives away money shortly before declaring bankruptcy, the person’s creditors can go after the recipients of those gifts and take back that money to satisfy their debts. In other words, if I were to make a large donation to the American Humanist Association (hint, hint) not long before I declared bankruptcy, Mr. MasterCard could show up at AHA’s door and get that money back. But, according to the 1996 case of Young v. Crystal Evangelical, if instead I had given tithes to a church, that would be different – my creditors would be out of luck. (Interestingly, the Clinton Justice Department initially entered that case on the side of the creditors to defend normal bankruptcy procedure, but at the last minute pressure from the God industry lobby caused them to back out.)

There is, of course, an easy way to resolve the Milwaukee matter without lawyers. Since the Vatican had the power to approve the transfer back in 2007, presumably it has the power to un-approve it now and order the current bishop to move the cemetery trust money back to the general archdiocesan fund where it can be used to satisfy the legitimate claims of creditors. If Francis were truly sorry for the evil done to the abuse victims, isn’t that what he would do? Don’t hold your breath, though—he’s too busy doing photo-ops.