Feb. 23—A federal judge found sufficient claims of fraud allegations exist against the Roman Catholic Diocese of Harrisburg and ruled that attorneys representing sexual abuse survivors can seek a judgment to have an estimated $95 million in assets the Diocese transferred behind two different trusts moved to its bankruptcy estate.

According to the Feb. 17 ruling by Chief Bankruptcy Judge Henry W. Van Eck, the assets include $50 million in real estate like the Diocesan Campus, bishop's residence and a retirement home for priests, all in Harrisburg, along with eight cemeteries including All Saints Cemetery in Elysburg and seven high schools including Our Lady of Lourdes Regional in Coal Township.

Also at risk of being returned to the bankruptcy estate is $45 million in furniture and appliances, cash and securities, religious artifacts and objects, vehicles, notes, records and books, according to filings with the U.S. Bankruptcy Court for the Middle District of Pennsylvania.

In a grand jury report unsealed in 2018, 45 officials with the Harrisburg Diocese were identified as alleged abusers. Many were included in a church-issued report released two weeks prior naming 71 priests and seminarians accused in church records of sexual misconduct with children dating to the 1940s.

The Harrisburg Diocese filed for Chapter 11 bankruptcy on Feb. 19, 2020. It opened the trusts on Nov. 13, 2009, as allegations mounted around widespread sex abuse nationwide within the Catholic Church, court records show.

Van Eck issued a ruling in Federal court granting a motion to the Official Committee of Tort Claimants to pursue fraudulent transfers claims against the Harrisburg Diocese. Allegations of attempts by the Diocese to defraud creditors through the trusts were "sufficient," Van Eck found.

Attorney Robert Kugler of Stinson LLP, Minneapolis, represents the Official Committee of Tort Claimants along with his colleague, attorney Edwin Caldie. On Feb. 18, they filed new, separate motions asking a federal judge to order the assets in the trusts be assigned to the Diocese's bankruptcy estate, something Van Eck didn't do in his ruling the day prior.

The attorneys ask the court to rule the transfers were fraudulent, that creditors are entitled to the assets and that the trusts are unenforceable. They wrote in legal findings that shielding property in trusts has been a strategy pursued by Catholic Dioceses in other parts of the U.S. including Milwaukee.

"It was part of a comprehensive strategy to deal with emerging issues of sexual abuse," Kugler said Wednesday of the 2009 transfer. "I've been involved in a number of these cases. The transfers and the timing of the transfers are remarkably consistent across the country."

According to Kugler, the abuse survivors he represents feel gratified and empowered by the ruling. Barring a resolution, he expects the pursuit of the assets held in trusts might take the next year to play out.

As the current bishop designated by the pope, Bishop Ron Gainer is the trustee of each trust for the Harrisburg Diocese, court records show. However, the Most Rev. Kevin C. Rhoades was bishop at the time the trusts were established.

Van Eck's opinion found that the Diocese appears to be both the settlor and beneficiary of the trusts, "hallmarks of a self-settled trust" that wouldn't protect the assets from creditors in this case, according to court records.

Ruling against the Diocese's defense, Van Eck found that state law allows an unincorporated religious entity to hold title to property, and that the statute of limitations was met because claimants couldn't reasonably know the assets were transferred until after bankruptcy was declared.