June 20, 2009
Donors, bishop sue nuns who ran Loretto High
By Julie Sly
Herald editor
Seven donors to the Loretto High School in Sacramento and Bishop Jaime Soto are suing the nuns who closed the all-girls school in June.
A group of financial contributors to Loretto High School in Sacramento and
Bishop Jaime Soto are suing the nuns who closed the all-girls school in
June.
The bishop and seven other donors contend in the lawsuit, filed June 10 in Sacramento Superior Court against Loretto High School and the Institute of the Blessed Virgin Mary, that the nuns want to use proceeds from the sale of the school to help fund their retirement at their motherhouse in Wheaton, Ill., rather than keep the money in Sacramento for Catholic education.
Kevin Eckery, spokesman for the Sacramento Diocese, said the suit was filed after donors and church leaders have tried repeatedly since February to negotiate with the Loretto Sisters through letters and attempts at meetings.
“We want to make sure that funds which were given in good faith go to support schools in Sacramento,” he said.
The lawsuit does not seek to stop the sale of Loretto High School to Aspire Public Schools, a statewide charter, which is now in escrow for a reported $8 million and is expected to close on July 15. The plaintiffs are asking the court to hold the proceeds of the sale and assign an arbitrator to determine how to allocate the money.
On June 12, Superior Court Judge Shelleyanne Chang set the case for proceedings on July 14 to determine whether to grant the plaintiffs’ request for a temporary injunction that would keep the money in escrow while the lawsuit moves forward.
The plaintiffs are seeking a temporary injunction to “facilitate a full, fair and thorough review as to the proper disposition of approximately $6 million in charitable funds,” according to the application complaint filed with the court.
Loretto Sister Rosemary Lynch, U.S. provincial of the Institute of the Blessed Virgin Mary, declined comment to The Herald about the lawsuit when reached by telephone June 12 at her office in Wheaton, Ill. The Herald’s calls to Russell Austin, a Sacramento attorney representing the Institute of the Blessed Virgin Mary, were not returned.
In January, Loretto school officials surprised students, alumnae and donors when they said declining enrollment would force them to close the school after educating three generations of women. Enrollment at the 9.28 acre campus on El Camino Avenue had dropped from 559 students to 389 in three years.
A collation of parents, students and alumnae rallied to save Loretto, but their efforts failed when Sister Lynch issued a statement in late February that the decision to close the school was final.
According to the lawsuit, representatives for the religious order said that the Loretto Sisters intend to pay off outstanding debts related to Loretto High School and use the rest of the money to provide for retired members of the order in Illinois.
Loretto High School was originally established in 1955 by the Institute of the Blessed Virgin Mary, but with the permission of then-Bishop Joseph McGucken and the current campus is on a site donated by the bishop, according to the lawsuit. The Loretto nuns ran Loretto High School since its inception.
The lawsuit states that since 1955, diocesan officials have regularly reiterated to the Institute of the Blessed Virgin Mary that “all gifts of real property, cash donations, loan forgiveness, and in-kind contributions were made to the IBVM and/or Loretto for the education of young women in the Catholic tradition” and not for any other purpose.
Since 1983, the diocese has donated approximately $1.5 million in cash, loan forgiveness and scholarship contributions “for the express purpose of educating young women of high school age in the Sacramento region,” according to the suit.
“It’s too bad that we haven’t been able to resolve this,” said James Sweeney, attorney for the diocese. “Cases such as this between religious institutions can usually be settled.”
“The critical message is that the church respects donor intent with regard to restricted-purpose gifts to its institutions,” he added. “We will take all the steps necessary to ensure that donor intent is fully respected by all church institutions, consistent with canon law and civil law.”
Other plaintiffs in addition to the bishop listed in the lawsuit are Agnes Anderson, Mary Anderson, Jeanne Anderson-West, Robert Biko, John Frisch, Kent Daft and Bruce Stimson.
Agnes and Mary Anderson, two sisters who live in Sacramento, and their respective families have collectively donated approximately $2 million to Loretto High School over the years, according to the lawsuit. Agnes Anderson also served as a trustee of the Loretto Endowment, a perpetual endowment trust fund to support scholarships and financial assistance for needy students to attend Loretto High School.
Anderson-West, a graduate and benefactor of Loretto, served as co-chair of the “Campaign for Loretto,” a capital campaign that raised nearly $5 million in 1999-2001 to support the educational work of the high school.
Agnes Anderson and her late husband, Walter, donated $500,000 to the Campaign for Loretto and the science center at the school was named after the couple after the school underwent a major expansion that was completed in 2003.
Biko served as president of the board of trustees of Loretto in 1996-1997, co-chair of the Campaign for Loretto, and is chairman of the trustees of the Loretto Endowment.
The lawsuit also alleges that Loretto officials began withdrawing funds at the end of 2008, “without the knowledge or consent of the board of trustees of the Loretto Endowment” to pay off debt for Loretto High School and the nun’s order and to pay operating expenses for Loretto.
The suit states that the plaintiffs are informed, believe and allege that as of mid-2008, the Loretto Endowment fund balance was approximately $1.5 million, with more than $1 million in the corpus and the remaining balance in earnings.
The application to the court for a temporary restraining order until the litigation can progress also alleges that there were never any discussions among members of the Loretto board of trustees or the capital campaign committee about campaign funds being used “for any purpose other than the education of young women and the improvement and expansion of the school’s teaching and educational facilities.”
“The prospect of capital campaign funds being put toward any other purpose in Sacramento, let alone about the possibility of diverting the funds to a use in Illinois unrelated to the education of young women, was never, ever contemplated,” the application states.
