Crime and Justice

How Vermont’s Catholic Church stashed away a half-billion dollars in assets

The Cathedral of St. Joseph in Burlington on Friday. Photo by Glenn Russell/VTDigger

When Vermont’s Catholic Church recently came clean about its half-century-long history of child sex abuse claims against 10% of its clergy, many wondered how much money the state’s largest religious denomination had on hand to deal with a potential new wave of lawsuits.

The statewide Diocese of Burlington’s latest public financial statement lists $16 million in unrestricted net assets.

But that figure doesn’t include an estimated $500 million in property that church leaders stashed into trusts more than a decade ago to protect those assets from priest abuse settlements.

In the spring of 2006, then-Bishop Salvatore Matano began to see how much the scandal, first exposed by the Boston Globe, would cost the church.

The Vermont diocese had paid one accuser $20,000 to drop his court case in 2003. A year later, two more men demanded $120,000 and $150,000 respectively before they agreed to settle. In 2006, the church, facing a six-figure debt and a seemingly endless series of civil lawsuits, saw individual settlement claims rise to nearly $1 million.

That’s when Matano hatched an idea. The bishop told his attorney to place each of the diocese’s local parishes — some 130 at the time — into separate trusts whose holdings could only be tapped for “pious, charitable or educational purposes,” shielding the property from potential multimillion-dollar jury verdicts.

“In such litigious times, it would be a gross act of mismanagement if I did not do everything possible to protect our parishes and the interests of the faithful from unbridled, unjust and terribly unreasonable assault,” Matano wrote in a private letter to concerned Catholics.

Soon after, the diocese’s lawyer quietly sent a stack of two-page “deed into trust” form letters to municipal clerks throughout the state.

Although news reports revealed the diocese’s initial idea for shielding assets 13 years ago, details about how the church carried out the plan, what it stockpiled and where everything would lead haven’t been reported until now. As renewed scrutiny of priest misconduct raises new questions about the diocese’s capacity for future payouts, the trusts could soon be tested.

‘The information we have is sufficiently compelling’

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Ever since 17th century Catholic explorer Samuel de Champlain inspired the name of the Green Mountain State — “Voilà les monts verts!” he reportedly exclaimed four centuries ago — the church has played a prominent role in Vermont history, boasting as many as 157,000 members as late as 1980.

But its reputation was besmirched when former residents of Burlington’s now-closed St. Joseph’s Catholic orphanage spoke publicly in the 1990s about enduring physical and psychological abuse during the facility’s operation from 1854 to 1974.

The diocese offered each orphanage resident $5,000 to drop their right to sue. As many as 160 considered the deal and more than 100 accepted payment, according to news reports from the time.

When the press reported on a statewide priest misconduct scandal in the early 2000s, church leaders used a similar strategy to keep survivors from talking.

The idea initially worked. In the fall of 2003, the diocese settled the first lawsuit for a small unspecified sum.

“I’m not going to tell you the amount, although it’s relatively low,” the accuser’s lawyer said at the time of a figure reported to be $20,000. “It was never about the money, it was getting the church to recognize what they did was wrong. We don’t think this is the end of the story. We think there are other victims out there.”

Other survivors weren’t as easily satisfied. A year later, the diocese settled two more cases for $120,000 and $150,000. The church also revealed it had spent more than $700,000 to squash earlier lawsuits dating back to 1950 and another $2 million for orphanage-related compensation, counseling and legal fees.

The diocese doesn’t have insurance for abuse cases and therefore must pay for settlements with assets on hand. (Church leaders stress they don’t tap regular collection money or the diocesan Bishop’s Fund for settlements.)

By 2005, more than a dozen people had filed lawsuits seeking liens on church property totaling up to $30 million.

“We believe the information we have is sufficiently compelling that seven-figure verdicts are quite likely,” their lawyer, Jerome O’Neill of Burlington, said at the time about the possibility of jury trials. “We want to make sure that there are sufficient assets available if we are successful in our actions.”

Former Vermont Catholic Bishop Salvatore Matano speaks in Chittenden Superior Court in 2008. Archive photo

‘This was much more than we wanted to pay’

Soon after, O’Neill scored big when a judge ordered the Vermont Attorney General’s Office to share the priest misconduct files it obtained from the diocese. The lawyer received hundreds of pages of paperwork chronicling the fact the church knew several of its priests had faced accusations of child sex abuse for decades but did nothing to alert the public or police.

By the spring of 2006, O’Neill had 17 new clients and a slate of trials set to start the day after Easter. What the public didn’t know: the first of those cases centered on claims against the former Rev. Edward Paquette, who secret files showed to be the worst serial predator of all the state’s clergy.

A court order restricted anyone involved from talking publicly. But privately, O’Neill and church leaders understood the value of the papers the lawyer held in his hands. If they were introduced in court, a shocked jury might award a survivor a multimillion-dollar verdict.

The church seemed ready to reject escalating settlement demands as Burlington’s Chittenden Superior Court screened jurors for the first Paquette trial in April 2006. Then the judge, gaveling in proceedings, announced the parties had forged a last-minute agreement for a record $965,000.

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“This was much more than we wanted to pay,” the diocese’s lawyer said outside court. “But we decided that it would be the best to minimize the cost.”

Church leaders had hoped the settlement would keep the accuser from talking publicly. But once the court lifted its gag order upon the close of the trial, O’Neill — whose client hadn’t signed a nondisclosure agreement — surprised everyone by revealing all of the evidence.

The documents showed Vermont Catholic leaders knew two other states had dismissed Paquette for child sex abuse before they assigned him to Rutland in 1972, Montpelier in 1974 and Burlington in 1976. 

“The dossier is large and the history long,” the bishop of Fort Wayne-South Bend, Indiana, had warned his Green Mountain State colleagues in a letter about the priest’s record of molesting boys.

For the first time, the public had a glimpse of what the diocese had covered up for decades.

‘Unbridled, unjust and terribly unreasonable assault’

By the first week of May 2006, the church, suddenly in debt more than $1 million and facing a rising number of lawsuits, was studying its financial options. It soon made headlines by announcing it wanted the judge who oversaw the $965,000 settlement to be barred from presiding over the remaining cases.

“The diocese has great concern over the lack of a level playing field,” its lawyer said at the time. “We’re not trying to hide anything. We’re trying to keep prejudice from building.”

Unbeknown to the public, another church attorney was mailing two-page form letters to municipal clerks to secure parish property into individual local trusts.

“This deed into trust shall operate as an assignment of all personal property, tangible and intangible, fixed or moveable, together with all accounts, funds, benefices and entitlements, related to the ownership, operation, management, control, preservation and use of the herein conveyed real estate,” each document says.

Catholic trust
A Vermont Catholic Church document placing local parish property into a protective trust. Photo by Kevin O’Connor/VTDigger

As outlined in the papers now on file in town clerk’s offices, the diocese’s bishop is the “trustee” of each trust, each parish pastor is the “trust administrator” and each parish finance council forms the “trust advisors.”

“Thus, the present diocesan protocols and regulations for the administration of parishes remain, in effect, unchanged,” Matano wrote in his private letter to concerned Catholics. 

Speaking at a 2006 Mother’s Day reception at the Woodstock Inn, Matano told attendees the trusts were “an extra layer of protection” from anyone seeking to tap church assets.

“I’m really in a no-win situation,” he said. “I want to be sensitive to victims, but I don’t want to inflict pain on innocent parishioners. It’s certainly just to ask the church to be accountable, but is it just to destroy parishes, schools and other agencies of care to do so?”

Learning about Matano’s statement about protecting the church from “unbridled, unjust and terribly unreasonable assault,” the national Survivors Network of those Abused by Priest blasted the bishop for “attacking deeply wounded men and women who were raped as kids by priests.”

“How can you lash out at them and call their long overdue, David vs. Goliath effort an ‘unbridled, unjust and terribly unreasonable assault?’” survivors wrote in a letter to Matano. 

‘It has a very serious impact on a small, rural diocese’

O’Neill responded more strategically. The lawyer, knowing the church doesn’t pay taxes and its properties aren’t listed at fair market value, sought assessments of the holdings’ true financial worth. 

Former state economist Arthur Woolf reviewed insurance and municipal records to place a “market value” of all Vermont Catholic Church-related property at between $270 million and $500 million. 

An insurance company, for its part, estimated the replacement cost of all parish, school and support buildings at $400 million, noting the number didn’t put a price tag on the underlying land.

Matano, who steadfastly confined his media comments to diocesan-run press outlets, defended the trust idea in a rare 2006 interview. Noting “this is not in any way intended to penalize victims,” the bishop said the plan was designed to reassure Vermont churchgoers who feared the potential loss of their parish holdings.

“They had no part in these awful events of the past,” he said. “I think it’s unfair to penalize them and say they are responsible.”

St. Stephen Catholic Church in Winooski, seen on Friday. Photo by Glenn Russell/VTDigger

Matano wasn’t the only Catholic official aiming to shield assets. U.S. Cardinal Timothy Dolan, for example, was head of the Archdiocese of Milwaukee, Wisconsin, in 2007 when he worked to move nearly $57 million in church holdings into a cemetery trust to protect them “from any legal claim and liability,” he wrote in a letter to the Vatican.

O’Neill believes the act of shifting assets into trusts broke Vermont’s fraudulent deeds law, which bars any transfer “with intent to avoid a right, debt or duty.” He filed state and federal cases in 2009, charging the diocese not only shielded parish property but also $3.8 million into a pension fund and another $3.7 million into a Vermont Catholic Charities account.

“You can’t take property you have, transfer it and then say it’s beyond the reach of your creditors,” the lawyer explains today.

Headlines about the trust plans soon gave way to news of more lawsuits, more settlements and a string of trials. Juries went on to slam the church with a record $8.7 million verdict in May 2008, a nearly $3.6 million verdict in December 2008 and a $2.2 million verdict in October 2009.

“It’s a very, very large amount of money,” Matano told reporters at the time. “It has a very serious impact on a small, rural diocese.”

To ensure the church paid, a judge placed liens not only on the 32-acre Burlington headquarters and the site of the former St. Joseph’s Orphanage but also a portion of its investment portfolio. By the start of 2010, a second judge overseeing more than two dozen additional lawsuits proposed merging the cases into an unprecedented joint trial.

The diocese, fearing bankruptcy, announced it wanted to settle rather than try to defend against the cases.

With most of its assets in the trusts, the church raised $10 million by selling its Old North End offices and campus — the largest open tract of land on the Lake Champlain waterfront in the state’s most populous city — to the alternative liberal arts Burlington College in 2010.

“This will be truly transformative for the college,” the school’s head, Jane O’Meara Sanders, said at the time.

That was not to be. Instead, the financial burden of the purchase led to the closing of Burlington College in 2016 and caught Sanders in a federal investigation as her husband, U.S. Sen. Bernie Sanders, launched his first White House bid. A Justice Department review reportedly concluded last year without charges. But the resulting headlines — “Wife’s Failure to Save College Is Still Looming Over Sanders,” the New York Times reported on its front page this past summer — continue to reverberate through a second campaign cycle.

The former diocese headquarters is now the site of a 700-unit housing and business complex.

‘Who’s controlling the puppet strings?’

The diocese hoped it was finished with lawsuits, only to find itself again under scrutiny when 2018 BuzzFeed published an article titled “We Saw Nuns Kill Children: The Ghosts of St. Joseph’s Catholic Orphanage.” The story led church and law enforcement leaders to launch separate misconduct investigations and the state Legislature to remove a statute of limitation restriction for survivors to file civil cases.

O’Neill has five new lawsuits pending.

“We’ll see if we can resolve them,” he says today. “If not, we go forward with litigation.”

The former St. Joseph’s Catholic Orphanage in Burlington where the Roman Catholic Diocese of Burlington used to be headquartered, seen on Nov. 14. Photo by Glenn Russell/VTDigger

Matano’s successor, Vermont Catholic Bishop Christopher Coyne, isn’t looking for a fight. Calling for the church to be “fully honest about these sins of our past,” Coyne has released accusers from past nondisclosure agreements and worked with a local and state task force of police and prosecutors now investigating the history of churchwide misconduct.

“I think Bishop Coyne is trying to deal with the legacy problem of abuse,” O’Neill says. “I perceive him as someone who wants to be fair. But whether the amount of money the diocese has is adequate to resolve the cases remains to be seen.”

The diocese didn’t respond to calls for comment other than to report Coyne was away this past week at the U.S. Conference of Catholic Bishops annual general assembly in Baltimore, Maryland. He’s returning home to a church that’s financially stable. But that could change if the latest lawsuits go to trial.

Settling what he thought were the last of the abuse cases long ago, O’Neill dropped his fraudulent deeds fight and allowed the six-year statute of limitations for contesting the issue to pass. But if a future jury awards a big payoff to one of his clients, the lawyer believes a judge could rule the parish trusts to be diocesan assets and therefore available for tapping.

“The fact the bishop is the trustee makes the trusts more vulnerable to attack,” he says. “You’d have to have a judgment before it became a real issue, but if the diocese is unable to pay, we will have no hesitancy to reach for those assets. The church may have transferred them, but who’s controlling the puppet strings?”

Not Matano. He left Vermont in 2013 to become bishop of the larger Diocese of Rochester, New York — which recently became the 20th nationwide to seek bankruptcy protection from creditors impacted by church’s misconduct scandal.

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Kevin O'Connor

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Christine Carrington

What could be more “pious” than to right the horrific wrongs of past priests?

Pete Novick

“All those who honor the name of Jesus are engaged in a joint search for the Jesus who will not be found in marble halls or wearing imperial costumes. He is forever on the run. He is the one who said, “Whatever you did to any of my brothers, even the lowliest [elackistoi], you did to me” (Matthew 25:41). That means that the priests abusing the vulnerable young were doing that to Jesus, raping Jesus. Any clerical functionary who shows more sympathy for the predator priests than for their victims instantly disqualifies himself as a follower of Jesus.”

– From Garry Wills essay, “Forgive Not: A Catholic struggles with the sins of his church”, The New Republic, May 18, 2010

http://www.tnr.com/article/forgive-not?page=0,0

Wills, a prolific writer, wrote “Lincoln at Gettysburg: The Words That Remade America,” (Simon & Schuster), which was awarded the Pulitzer Prize for general nonfiction in 1993.

Rama Schneider

This international organization, the catholic organization, is criminal. Period. It should be treated as such. Period.

James Taylor

This institution has used up all its passes for being absolved from these heinous crimes against children. Outside of a total takeover of the Vatican and dismantling of this cult, nothing will convince me there has been change.

Elizabeth A. Mahaffy

Bishop Matano, at the time, announced to the faithful that the trusts were being established to protect our CHURCHES–that is the property that is in trust. This is all old news.

John M Farrell

The Catholic church is and always has been a very corrupt organization

Kathy Callaghan

As a Catholic, my personal faith is not shaken by the horrible misdeeds of some of the Church’s representatives on earth. My faith remains strong as it is not reliant on the actions of those on earth. However, I am deeply saddened by all of it, and I do believe that those individuals will pay greatly for having misled and abused members of their flock – those who were entrusted to them. Somewhere in the Bible it says, “God is not mocked”, and “Vengeance is mine, saith the Lord”, and I do believe that there will be serious consequences for these priests. I will be praying every day for healing and peace for those who were injured, and that is something that we can all do.

Mike DeSanto

The Catholic Corporation behaves like a business. Start taxing the assets and end the absurd notion that churches of any denomination deserve protection as nonprofits.

Charles Russell

This whole account of the Catholic Church is a story about a major institution gone corrupt.
What it is not however is an account of a people’s misplaced faith in Biblical Christianity. The Bible gives ample warning – here is a sample: Jude 4 “For there are certain men crept in unawares, who were before of old ordained to this condemnation, ungodly men, turning the grace of our God into lasciviousness, and denying the only Lord God, and our Lord Jesus Christ”. KJV

Christopher Daniels

This is one of the strongest pieces of reporting ever produced by Digger. Well done.

Ernie Zimmerman

I would say this is strong reporting by Digger, if it wasn’t just an extended rehash of what the Burlington Free Press already reported throughout May of 2006. There is nothing in the above story about Matano’s Plan to save the individual parishes from being shuttered that hasn’t been known for over a decade.

Jerry Kilcourse

This shouldn’t come as surprise concerning the church’s previous criminal cover ups.

Jeff Dardozzi

As a former catholic and someone who was once groomed by clergy as an altar-boy, as someone who once witness the sexual assault/near rape of a school mate while showering at a seminary outside Phila during a ‘special’ trip to their pool, as someone whose own brother committed suicide as the result of sexual abuse at the hands of the parish priests and the subsequent shame and indifference felt and the absolute denial on part of caregivers (parents, school teachers, etc) that their could be any veracity to his story (his death preceded the public revelations). As someone who as taken the time to know the dark history of the church – the Magdalene Laundries, The Doctrine of Discovery and subsequent genocides, Franco’s prisons, the residence schools…the Inquisition – the list is long and ugly. The idea that it is a few bad apples is nonsense.

If this was any non-mainstream religious organization it would have been forcible disbanded, its leadership arrested, its assets confiscated.

robert bristow-johnson

i am not gonna jump on the hate bandwagon here.

the Vermont diocese has lost the North Ave property (what later became the Burlington College fiasco and is now just another real estate development), the Holy Cross camp on Mallets Bay, and now the downtown cathedral building (what the heck is gonna happen to that property now?).

i s’pose some folks think that it’s appropriate to sue the diocese to death, but i don’t. the church denomination needs to pay for their sins. but they don’t get the death penalty.

Pamela Simmons

Another religious, tax-exempt corporation hiding behind their beliefs.

Duane L Peterson

A while back, I gave great thought and began a plan to create an American Catholic Church. Not bound by the Pope and the Vatican history (Crusades, Nazis, pedophile club, exclusion of women) but a celebration of Jesus’ love. A lot of American Catholics, repulsed by the atrocities of The Church, still hold powerful connections to the best of the scriptures (love thy neighbor as thyself, welcome the stranger, coexist with creation) and the rituals which bring those to mind. Many of us are trying to navigate a world often devoid of meaning, and we want our kids to be raised in a tradition of thoughtfulness. There’s a great opportunity to reclaim the wayward Church. I hope that each revelation (thank you Digger) of its corruption isn’t another reason to turn away from what’s good about rallying around Jesus’ love. Perhaps Corporate Catholicism has to end, for a joyful replacement to emerge — that could appeal to a lot of folks for whom the dated model don’t work. Or…

Michelle Richards

OMG

Protecting their parishes is different than protecting their parishoners, evidently.

“In such litigious times, it would be a gross act of mismanagement if I did not do everything possible to protect our parishes and the interests of the faithful from unbridled, unjust and terribly unreasonable assault,” Matano wrote in a private letter to concerned Catholics.

David C. Austin

Priests and others in The Church who violated the trust placed in them will have to answer for their sins. But to suggest that The Church as a whole is somehow responsible for the terrible acts of individuals and the misjudgment of those who supervised them is offensive. My Great Great Grandparents fled Quebec to escape religious and economic persecution. For them and others like them, The Church and each other was all they had. Based on some of the comments here, the bigotry that they faced is sadly still alive and well today. I am a member of the same parish they attended when they got here. The prospect of losing our Church would be devastating, both to people like myself, and the less fortunate here in our community that we gladly serve. I am grateful that Bishop Matano had the foresight to take the necessary action to ensure that our Churches and schools can and will continue on.

Sandy J Rhodes

The Catholic church is complicit in the crimes against minors. It knowingly shielded and moved around criminals, like pieces on a chess board. The church made a game of it. The Catholic Church is an accessory to the sexual abuse of minors, all the while putting on a face of piety. I wonder why the governments allow it to exist. If it was any other corporation it would have been dissolved. Maybe it’s because the church is a large player in politics. And yes, it is also a corporation, a business for profit.

morgan rye

seems like catholics will back their churh no matter what just like trumpers will back trump no matter what. i believe it is called blind faith. as has been said… if any other organization or institution did this they would no longer exist.

Russell Paul

The Catholic Church is just another multi-national corporation that is watching out for its own bottom line, regardless of who it hurts or how shady it acts, avoiding paying taxes and avoiding any responsibility for its actions. This newest revelation is no surprise.

Will Hatch

“Why do you notice the splinter in your brother’s eye, but do not perceive the wooden beam in your own eye? How can you say to your brother, ‘Let me remove that splinter from your eye,’ while the wooden beam is in your eye? You hypocrite, remove the wooden beam from your eye first; then you will see clearly to remove the splinter from your brother’s eye.”
-Matthew 7:3-5

edward letourneau

Show us how much money the lawyers are getting out these claims.

bub gast

sickening…….

LSamuel Miller

Old,old news! The real news for most parishioners (Church members) is simply that they do not own their churches. Instead of trusts, the individual churches should have been given to the true owners, the parishioners.

Jerome Jackson

My uncle was there, a boy of color. He was abused while there and it manifested in very destructive ways. He lived as best as he could manage, but he simply could not hold on. He completed suicide, leaving four children without a father. The task of telling his kids why he left this earth was bestowed upon me.

The church’s actions have irreparably ruined lives both directly and indirectly. Those whose lives who have been indirectly impacted should also file claims if they have evidence to support it. The church is not above any law, and ought to pay dearly for what they have done.

walt amses

One of the really difficult things to get your mind around is the Catholic Church going any lower than decades of facilitating child rape by priests, turning the church into a hunting preserve for pedophiles. Conniving to hide half a billion dollars in assets to protect themselves rather than the victims is as horrific as it is unsurprising from this hierarchy of miscreants.

 

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