New York's Catholic church leaders control billions outside the reach of abuse survivors
ALBANY — The Catholic bishops of New York sold a lucrative insurance business they controlled and stored the proceeds in a foundation they also administer, keeping billions out of the reach of survivors of childhood sexual abuse.
The move occurred in 2018, with the church selling its Fidelis Care insurance company and moving $4.3 billion of the proceeds into the new Mother Cabrini Health Foundation. At the same time, the Child Victims Act in New York was gaining momentum in the Legislature, a measure that the church had lobbied against for more than a decade. It was ultimately signed into law a year later; and it has exposed the church to thousands of lawsuits alleging sexual abuse of children and, in some instances, the coverup of those incidents and shielding of predators.
It has been the church’s practice across the country for more than a decade to divert swarms of abuse claims into bankruptcy proceedings rather than handling each in individual court proceedings. That strategy allows the church to often avoid public trials or witness depositions, and to handle claims in one court proceeding that potentially will preserve more of their financial assets. Four of the eight dioceses in New York have already declared bankruptcy, as abuse lawsuits continue to pour in across the state.
“This is certainly a transaction that is on our radar," said Ilan D. Scharf, an attorney at Pachulski Stang Ziehl & Jones in New York City, which has specialized for years in representing abuse survivors in diocesan bankruptcy cases. "The fact that they are hiding behind what they claim are legal structures that protect these assets is no excuse for them to avoid using that money to help the victims of these dioceses.”
Scharf's firm is working on the creditors committee in the Rochester, Buffalo and Rockville Centre bankruptcy cases, meaning they are working to determine the settlement amounts for the abuse survivors.
As existing bankruptcy proceedings develop, or if more begin in the future, the church may have ensured that billions of dollars less would be available to those who say they were sexually abused within the church.
"I will say that if the church and the Mother Cabrini Fund wanted to assist survivors, they could use proceeds from that fund, either by loaning it to various dioceses, or purchasing assets of the diocese, or giving grants to the diocese, to free up money that is otherwise being used for their missions to create liquidity for survivors," Scharf said.
In the church's Chapter 11 bankruptcy proceedings, courts tally the assets held by the diocese and then dole out settlements to creditors, including people with abuse claims, often according to the total dollar value of the assets. If the money is held in a separate corporate entity — like the Mother Cabrini Health Foundation instead of an individual diocese — it won’t be counted by a judge because the entity that declared bankruptcy isn’t the legal owner, even if there’s overlap among who controls the funds.
A lengthy investigation published last year by Bloomberg Businessweek and published reports on dozens of Catholic dioceses that have filed for bankruptcy over the last two decades, have revealed the church commonly uses this alleged “shell game” tactic. Money is moved from the church’s direct holdings into trusts, pensions or foundations to avoid bankruptcy creditors, but those trusts, while separate on paper, are still controlled by the dioceses.
That strategy, while legal, is frequently scrutinized by lawyers who specialize in abuse cases. Businessweek estimated that the church had shielded about $2 billion from bankruptcy proceedings over a 15-year period. Multiple bishops in New York have been tied to the practice, including Cardinal Timothy Dolan, New York's archbishop and a former president of the United States Conference of Catholic Bishops.
In creating Mother Cabrini Health Foundation, the New York Catholic bishops more than doubled Businessweek’s estimate from the previous 15 years combined. Jim Stang, founder of Pachulski Stang Ziehl & Jones, aid it "dwarfed" any other single transaction.
“These strategies and schemes are well known to those who have sought accountability from the Catholic bishops for harm done by clergy. But now there is a body of evidence that lays this chicanery bare—that Catholic bishops across the country are moving and hiding their financial assets the same way they have moved and hidden predator priests for decades. It is deceitful, duplicitous, and dastardly," said Jeff Anderson, of Anderson & Associates, whose firm specializes in abuse cases.
The insurance company and joint foundation are controlled collectively by the New York bishops rather than by a single diocese. It creates a complex and unprecedented legal issue, one that Scharf and Stang described as “unique.” They said that they are not currently pressing to include shares of Cabrini’s assets in court for the three diocesan bankruptcies they’re working on in New York, but that “it’s obviously an asset that’s been mentioned.”
The Times Union interviewed more than a dozen experts for this story, and none could confidently project how a court would handle whether to count the foundation as diocesan assets. It's an open question.
“In my view this isn’t so much them hiding things, though they do that sometimes. It’s more like hiding them in plain view,” Stang said. “They just thought they had lots of good defenses for why that money did not have to get disclosed to the demands of abuse survivors. … Most of the time they’re just saying, ‘You can’t reach this.’”
The Mother Cabrini foundation gives grants to charities around the state, including Catholic Charities, which is directly affiliated with the church, and sometimes directly back to the dioceses. The foundation has made $315 million in grants since its formation, said Jonathan Rosen, a public relations professional employed by Cabrini. Rosen said “less than 10 percent,” which works out to $31.5 million, went back directly to the dioceses, and a total of $37.4 million has gone to Catholic Charities.
The money is used to build homeless shelters, bolster immigrant legal services, create supportive housing and various other nondenominational charitable enterprises. Cabrini donated $2 million for a home for victims of domestic violence in Schenectady, for instance. When the foundation was endowed in 2018 from the proceeds of the sale of the church-controlled insurance company, it instantly became the largest Catholic foundation in the country, according to Guidestar, which tracks nonprofit data.
"Neither the Archdiocese of New York, nor any of the other dioceses of New York, owned Fidelis or controlled its assets, and the decision to sell Fidelis to Centene Corporation was totally and completely unrelated to the CVA in any way," said Joseph Zwilling, the communications director for the Archdiocese of New York, in an email to the Times Union.
While it's true that the dioceses don't legally own or control Fidelis or Cabrini, the bishops, who are in charge of the dioceses, are the controlling members of the nonprofit, and they appoint the board. The CEO is Monsignor Greg Mustaciuolo, former vicar general and chancellor of the New York archdiocese.
And charitable giving is part of the mission of the Catholic church. Meaning that Mother Cabrini's assets, although separate on paper from diocesan assets, are controlled by the bishops and the funds used to support activities the church would be doing anyway, said Jason Amala, an attorney with Pfau Cochran Vertetis Amala, which handles abuse cases, making the foundation effectually an extension of the church.
“How did the church amass its fortune? The whole thing is supposedly a charity. Look at the massive wealth they’ve accumulated," Amala said, pointing to how Mother Cabrini funds the dioceses directly and Catholic Charities. "So to the extent you can continue to do your 'charitable works,' but use those works to amass huge amounts of money, you can’t just use it to paper-over a huge chunk of your overhead.”
It started in 1993, when the Brooklyn Diocese founded a not-for-profit health insurance business called Fidelis Care. Four years later, the other seven dioceses in New York were brought in, each agreeing to invest in the business. Fidelis became a member organization, where the members included the bishops from across the state and the cardinal. Taking advantage of massive federal and state investment in health care over the last two decades, Fidelis Care grew significantly, becoming the largest insurance provider in New York with more than 1.3 million policies.
“This arose because of an unusual set of circumstances where you had something that was not necessarily designed to make money and all of a sudden it became highly profitable because of a change in the law,” Stang said.
On a parallel track, activists and lawmakers began pushing for the Child Victims Act in 2006, which would open a “look-back window” where people could bring lawsuits alleging child abuse outside the statute of limitations, no matter how long ago the abuse occurred. That legislation had the potential of exposing the church to an enormous amount of liability, and the church knew that.
The church spent millions lobbying against the CVA for years as one of their top legislative priorities. The measure stalled for years, often due to the support of Republicans in the state Senate, but it continued gaining momentum. In 2015, the church made the decision to sell Fidelis, saying it was because of future health care policy changes and because of increased competition in the industry. Meanwhile, the CVA inched closer and closer to becoming law, with the Assembly passing it in 2017 for the first time in nine years. It was blocked by the Senate that year, which was controlled by Republicans at that time.
“I had senators tell me they got calls from their local bishops demanding that they never pass the Child Victims Act. That it would bankrupt the church and the victims are only after money and you have to protect the church,” said Gary Greenberg, a longtime advocate who lobbied for the CVA.
The New York archdiocese opened its own fund to pay victims directly in 2016, and a recently leaked transcript of a December 2017 meeting on the subject with other dioceses from around the state shows that church leaders hoped the fund would have the effect of either scuttling support for the CVA or not allowing survivors who accepted money to later sue the church. The transcript was first reported by ABC News, then was obtained Thursday by the Times Union.
“We are already doing this, why bother? Don’t reopen the statute. We are taking care of our own problem. I think that is guiding Cardinal Dolan as well,” said Kenneth Feinberg, an attorney appointed by the cardinal to administer the victims fund, in a private teleconference with church officials and lawyers. He reiterated several times in the call that this is the goal of the fund, and says they must consider "politically and financially what is the better way to go."
"Looking over this shoulder, he is worried that Albany has come very close to reopening the statute," Feinberg said of the cardinal.
In September 2017, after the breakthrough of the CVA in the Assembly, the bishops voted to sell Fidelis to a large St. Louis health care corporation. After a protracted negotiation with Gov. Andrew M. Cuomo over how much of a cut would go to the state, a deal was finalized in 2018 with the sale generating $3.3 billion, plus a substantial amount of assets held by Fidelis that weren’t included in the deal.
The deal was approved by the state after the bishops agreed to pay more than $1 billion into the state general operating fund, and it was given final approval two months later by the attorney general. The bishops took their $3.3 billion from the sale, plus another roughly $900 million more in Fidelis assets that weren’t included in the deal, and created the Mother Cabrini Health Foundation. It, like Fidelis, was a “member organization,” where the sole members were the bishops, who retained control.
“Under New York law, the net proceeds from the Fidelis transaction were required by law to be used for health-related activities for New York’s needy, similar to Fidelis,” said Rosen, the spokesman for the Mother Cabrini foundation.
Nothing in the law would have precluded the foundation from distributing the proceeds to the dioceses if the bishops and state attorney general authorized it, as it says that funds from dissolved charities must go to other tax-exempt organizations, which dioceses are. Instead, the move effectively tossed more than $4 billion from the right hand of the church to the left, maintaining control over the funds, but keeping them in a separate corporate entity so the money wouldn't be counted as assets belonging to the dioceses — and capable of being pried away by abuse claimants.