The Catholic archdiocese of New Orleans is planning to default on a nearly $1 million interest payment on more than $41 million in bonds it sold in 2017, leading lawyers for the people who purchased the church’s debt to allege in open court that the archdiocese had engaged in “the definition of securities fraud.”
An attorney for the archdiocese counters that the allegation is “an extreme stretch.” But whatever the case, the dispute pitting the US’ second-oldest Catholic diocese against people who purchased debts the New Orleans church took on to rebuild after Hurricane Katrina could complicate efforts to settle more than 600 clergy abuse claims.
Lawyers for investors who purchased the church’s debts on the bond market made the securities fraud accusations in front of US Bankruptcy Judge Meredith Grabill on Friday.
Bondholder attorney Colleen Murphy said various archdiocesan representatives – including Archbishop Gregory Aymond, Vicar of Finance Patrick Carr and church-hired bankruptcy lawyer Lisa Futrell – had said in the press and on calls with bond holders that the archdiocese would “pay 100%” of its debts despite filing for Chapter 11 protections. Murphy added that the archdiocese reassured bond holders by citing its obligation to comply with canon, or church, law to “pay all your debts in full when they come due.”
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