Last updated February 18, 2009 9:18 p.m. PT

Seattle U may be caught in Jesuit scandal

But campus insists it won't be affected by bankruptcy filing

By JOHN IWASAKI
P-I REPORTER

On the surface, it might sound alarming, if not preposterous: Could Seattle University be in jeopardy over the bankruptcy protection sought by the Jesuits of the Northwest in response to a blizzard of sexual abuse claims?

No way, according to documents recently filed in U.S. Bankruptcy Court in Portland by the Society of Jesus, Oregon Province, which does not include the First Hill campus on a list of properties that it owns or holds in trust.

Absolutely possible, contend attorneys for dozens of abuse victims, saying the court will reveal the connections between the province and Jesuit-affiliated assets.

Top officials of Seattle U and Gonzaga University in Spokane, the state's other Jesuit higher education institution, released multiple statements over the past two days that emphasized the separation between the schools and the Oregon Province, the Roman Catholic order covering Washington, Oregon, Idaho, Montana and Alaska.

"I want to assure you that Seattle University is not a part of this bankruptcy proceeding," said the Rev. Stephen Sundborg, Seattle U's president, adding that the school is "not owned, operated or controlled by the Oregon Province."

But attorneys who have filed multiple suits alleging sexual abuse by priests say that provincial officials have tried to shield the Jesuits' assets, whether they are owned by the province or not.

"The question is not whether (the Jesuit-affiliated properties) are part of the Oregon Province; the question is whether they have the legal responsibility or exposure for criminal activity done by the Oregon Province," said John Manly, a Newport Beach, Calif., lawyer for dozens of Alaska Natives who say they were abused.

Seattle lawyer Tim Kosnoff, whose clients include those who say they were abused by Jesuits in Washington, said that when the province's bankruptcy petition is scrutinized in court, anything is possible.

"Could Seattle U and all its real estate be in jeopardy? The answer is definitely yes," he said.

Seattle U and Gonzaga were each incorporated at least 110 years ago. Since Seattle U and the province are "legally and financially separate and independent entities," Sundborg said, the bankruptcy would not negatively affect the university's operations, finances or educational mission.

His presidential counterpart at Gonzaga, the Rev. Robert Spitzer, made the same point and added: "Gonzaga University's assets are its own and not subject to others' creditors."

Kosnoff said when the Catholic Diocese of Spokane filed for bankruptcy in 2004, the court found assets of the church that were not included in its filing. He and Manly say the Portland-based province may also be "playing games" to protect its assets.

"I'm not saying those assets could be reached. I would assume that they were insulated and organized separately," Kosnoff said.

But if the lines are blurred and the separation of properties in practice is "really just illusory, the court can treat them as assets of the debtor," he said.

Since 2001, the Oregon Province has settled more than 200 abuse claims and paid more than $25 million, not including payments from its insurers. In 2007 alone, the province and its insurers paid $55 million in settlements.

With about 200 additional abuse claims pending or threatened, "it is the only way we believe that all claimants can be offered a fair financial settlement within the (province's) limited resources," said the Rev. Patrick Lee, provincial, or top official, in the province.

In a separate letter to supporters, Lee said that the province is "at a crossroads due to the actions of a few people that have caused a great sadness for so many in our Church. These actions have resulted in great sorrow as well as pain and humiliation for the many Jesuits who have faithfully kept their vows and humbly served God's people. Our concern must be for those who have suffered and who are in need of healing."

Manly argues that the province is acting out of selfishness, not compassion. The bankruptcy filing was not to ensure that enough money was available to pay claims, he said, but to prevent further claims.

The bankruptcy filing says the province owns only its Portland headquarters and an adjoining studio, valued at nearly $1.2 million, but not 21 other listed properties, most of which it holds in trust for Jesuits. Those properties include a residence on the campus of Seattle U, valued at $2.7 million; another on Capitol Hill, valued at $1.4 million, and a senior care residence in Spokane, valued at $2.8 million.

"It's fundamentally dishonest," Manly said. "They don't want their victims to gain access to (Jesuit-affiliated assets). They're saying, 'We don't own the roof over our heads.' It's crazy."

Altogether, the province lists assets of $4.8 million, half of that in a cash management account, and liabilities of $61.8 million, most of that owed to abuse victims.

"We have reason to believe that, at a bare minimum, the Oregon Province has $100 million in assets, and own or have equitable interest in $1 billion in assets," Kosnoff said.

Even without taking the value of Seattle U and Gonzaga into account, the Jesuits have "plenty of money to resolve these (abuse) cases," Manly said.

P-I reporter John Iwasaki can be reached at 206-448-8096 or [email protected].