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A federal bankruptcy judge Wednesday ordered an external audit of the Roman Catholic Diocese of San Diego amid accusations church leaders are trying to hide assessts to avoid payment to sex abuse victims. Judge Louise DeCarl Adler had earlier threatened the diocese with contempt for misrepresenting facts and possibly violating bankruptcy laws. She criticized church attorneys for failing to include 770 parish accounts in bankruptcy documents.

"This is the most Byzantine accounting system I've ever seen," Adler said. "I am mystified."

The contempt threat Monday came six weeks after the diocese sought bankruptcy protection amid lawsuits by more than 140 people who accuse priests of sexual abuse.

Adler had cited a March 29 letter sent by a diocese parish organization to pastors urging them to get new taxpayer identification numbers and transfer funds to new accounts.

The judge had said any post-bankruptcy transfers between the diocese and parishes outside of normal cash operations violate laws against shifting the diocese's assets while the bankruptcy case is pending - rules designed to protect assets that may eventually be used to compensate clergy sexual abuse victims.

She said any transfers require court approval.

In a sternly worded order, Adler had said attorneys Susan Boswell, Jeffry Davis and Victor Vilaplana appear to have "conspired with parishes" to create new bank accounts separate from the diocese.

On Wednesday, Adler grilled attorneys representing the diocese and the parish organization, as well as two pastors who had sent letters the judge said misrepresented her comments during an earlier hearing.

Boswell apologized and said she had misinterpreted the judge's comments at a March 1 hearing concerning how the parishes should go about protecting their cash flow through the bankruptcy process.

"We are not dealing with a commercial enterprise - we are dealing with a church," said Boswell. "What it does is give money to the parishes. This is not a nefarious function."

Boswell agreed to file amended statements with the court reflecting parish accounts operating under the diocese's taxpayer identification number and to cooperate with an independent audit.

Attorneys for the alleged victims have repeatedly accused the church of trying to hide assets to reduce the overall sum available for potential settlements. They estimate that a fair settlement would total about $200 million.

In March, the diocese proposed a $95 million settlement schedule for victims that would offer plaintiffs anywhere from $10,000 to $800,000.

San Diego was the fifth U.S. diocese to file for bankruptcy. The other dioceses that have filed for bankruptcy protection are Davenport, Iowa; Portland, Ore.; Spokane, Wash.; and Tucson, Ariz. Tucson has emerged from bankruptcy protection, while proposed settlements are awaiting final approval in Portland and Spokane.


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