More than $400m of compensation to American victims of sexual abuse by Catholic priests was paid with loans and guarantees from Allied Irish Bank, it has ben revealed.
The funds, in the form of loans, guarantees and lines of credit, were given specifically to pay clerical abuse victims, and led to AIB being dubbed the ‘Vatican’s banking arm’ in U.S. legal circles.
The revelation that a comparatively small Irish bank based on another continent was used to pay off victims will raise questions about AIB’s links to the church.
One of the payments, of $250m to the Los Angeles diocese, emerged in a new book entitled ‘Render Unto Rome: The Secret Life of Money in the Catholic Church’, by Jason Berry, which outlines extraordinary links between the bank and the church.
But an investigation by the MoS has established that in a few short months in 2007 AIB emerged as the lender behind abuse settlements for four separate dioceses, and the true figure was almost twice as high.
It also emerges that while AIB was used to pay the bulk of the Church’s abuse claims, the dioceses were able to hold on to most of their properties.
Berry also claims that out of 194 Catholic dioceses in America, 45 banked with AIB.
In the book, he asks: ‘Was AIB a pass-through for Vatican funds to help certain dioceses while others had no such advantage?’
Many American dioceses, confronted in recent years with compensation cases, have filed for bankruptcy and negotiated settlements with victims.
But instead of being funded by the Vatican, which is fighting court cases by denying any legal responsibility to pay, almost half a billion of the money paid out in America was borrowed from AIB in Dublin.
Many other agreements may have been made out of court, in secret.
The MOS has confirmed that all of the loans were agreed by the bank’s headquarters in Dublin, and amount to as much as a quarter of AIB’s €2bn exposure in America the following year.
The MoS has also discovered that the loans are now being quietly repaid.
In a revelation that will prompt further questions about whether the Vatican is behind the international deals, the supposedly-indebted dioceses have begun to pay off the AIB debts with money from other, unnamed, institutions.
Just last month a $40m line of credit to the Diocese of Portland in Oregon was taken over by an un-named creditor.
Bob Krebs, a spokesman for the diocese for many years, declined to name the new lender.
Asked why AIB had been used to help fund its abuse compensation cases, he said he did not know who ‘found Allied Irish for us’.
Of the deals, by far the largest line of credit was for Los Angeles, for $256m.
The diocese avoided going into court with abuse victims by reaching a settlement in advance.
It emerged afterwards that AIB loans and guarantees accounted for almost half of total settlement.
The deal included $175m in cash and another $25m to pay the interest, and helped Los Angeles avoid selling the bulk of its properties or reveal the true value of its total assets.
In San Diego AIB gave cash and credit of some $100m, almost half the $198m paid out to 144 victims.
That diocese filed for bankruptcy on the eve of the first civil trial against it, a case involving Monsignor Patrick O’Keeffe, originally from Kilkenny.
The Diocese of Portland, in Oregon, also filed for bankruptcy because of compensation actions.
Of a $129m settlement for victims $40m came from AIB.
The loan effectively allowed the diocese to close the bankruptcy proceedings without selling any assets.
A loan document obtained by this paper details the loans in Portland.
On AIB headed paper, it details how the loans were being specifically made to trusts set up to pay known and future abuse claims for the diocese.
The letter was written one day before a similar letter giving credit to the Diocese of Los Angeles, again signed by its LA-based senior vice president Charles Lydon and London-based vice president John McGrath.
U.S. lawyer Jim Stang, who sat on nine bankruptcy committees charged with looking after victim creditors, said: ‘We joke that AIB is the bank of the Catholic Church.’
The bank is still exposed on some of the loans. It is owed almost $10m by the diocese of Wilmington in Delaware.
An AIB spokesman said: ‘AIB’s business focus in America was in the ‘Not for Profit’ areas and this included churches.
‘Any loans advanced were approved in accordance with AIBGroup policy.’
An AIB source said they were ‘standard commercial loans’.
A spokesman for the Archdiocese of Los Angeles said the allegation of Vatican involvement ‘is complete rubbish’.
‘The Archdiocese initiated the loan discussions with AIB and other potential lenders in the summer of 2007. An arrangement was closed with AIB in November 2007,’ he said.
‘Settlement related financing was undertaken as a way to allow an orderly liquidation of surplus assets by the Archdiocese, and provided time for the Archdiocese to formulate a post-settlement recovery plan. Financing arrangements with AIB or any other potential lender had no impact on the settlement timing or terms. The AIB loan was repaid in full during the 2011 fiscal year.’