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Puerto Rico archdiocese files for bankruptcy after teachers’ pension award

A statue depiicting Christ carrying the cross stands in San Juan Cathedral, Puerto Rico.

The Roman Catholic Archdiocese of San Juan, Puerto Rico, filed for bankruptcy Wednesday following a $4.7 million judgment in a case brought by pension plan participants against the Superintendence of Catholic Schools of the Archdioceses of San Juan.

Before the bankruptcy filing, the Puerto Rico Supreme Court authorized the immediate seizure of church assets from across the island, including bank accounts, cars, works of art, furniture and real estate to pay the judgment, prompting the archdiocese's bankruptcy filing to stay all litigation. An earlier attempt by the pension plan to declare bankruptcy was denied by the court.

The archdiocese's filing for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Puerto Rico listed both total assets and total liabilities as from $10 million to $50 million each.

A petition to the U.S. Supreme Court to stay the pension case was also denied Wednesday, without explanation.

In addition to the case filed in Puerto Rico court that resulted in the $4.7 million judgment, several groups of past and current participants in the catholic teachers' pension plan sued the archdiocese in 2016 in U.S. District Court in San Juan for terminating the plan in violation of the Employee Retirement Income Security Act, and then claiming exemption from ERISA as a church plan. The plaintiffs alleged that since 2009, plan officials have failed to send annual financial reports and other documents required by ERISA, and to pay premiums to the Pension Benefit Guaranty Corp. Participants were led to believe the plan was covered by ERISA.

The lawsuit also sought to recover $50 million in unpaid benefits, plus statutory penalties for the disclosure lapses, and court costs, as well as a temporary restraining order. The lawsuit also sought $50 million in alleged losses related to the plan investing more than 80% of its assets in Puerto Rican bonds, which lost significant market value.

On Monday, U.S. Magistrate Judge Bruce McGiverin denied the plaintiff's motion for summary judgment on the church-plan issue, saying they did not provide sufficient proof. "The court may not grant summary judgment 'if the evidence is such that a reasonable jury could return a verdict for the non-moving party,' " Mr. McGiverin said.

Calls to the archdiocese's attorney, Carmen Conde Torres, were not returned at press time.