Catholic World News News Feature

Flawed records found in San Diego diocesan bankruptcy August 01, 2007

A court-appointed investigator has criticized the financial statements submitted by the Diocese of San Diego, California, in its filing for bankruptcy protection.

After a thorough perusal of diocesan and parish financial records, accountant R. Todd Neilson issued a 175-page report pointing to inconsistencies in the church records.

Neilson, a forensic accountant formerly employed by the FBI, found "openly questionable activities" in some diocesan financial accounts. He charged that some parishes had tried to conceal funds, and diocesan officials were "woefully unaware" of parish financial practices.

The court-ordered investigation showed that the San Diego diocese had made contradictory statements about its legal and financial relationship with the parishes. In bankruptcy filing the diocese had said that parish funds do not belong to the diocese but are held in trust for the parishes. But that claim, Neilson observed, was "in direct contradiction" to the claims previously made by diocesan officials in presentations to banks and investors.

Michael Webb, a lawyer for the diocese, told reporters that the investigator's report uncovered "a small number of problems, all of which have been corrected or are in the process of being corrected." Irwin Zalkin, a lawyer for sex-abuse victims who have sued the diocese, took a much harder line, saying that Nielson's report revealed diocesan officials' "utter contempt for the bankruptcy court and the legal system."

Neilson's report will now be examined by Jude Louise DeCarl Adler, who is supervising the bankruptcy case for the San Diego diocese. Judge Adler will decide whether the problems uncovered in the report have any material bearing on the bankruptcy case.