February 12 2018 - 11:04AM
Ben Schneiders, Royce Millar, Chris Vedelago
After a lifetime contributing to the Catholic Church, Neil Ormerod could give no more.
Following a Sunday mass in 2014, the Australian Catholic University theology professor told his parish priest he no longer trusted the church to use its resources in a way Jesus Christ would approve.
The trigger for his rebellion was the Royal Commission into Institutional Responses to Child Sexual Abuse in 2014 - in particular, Cardinal George Pell’s testimony about the church’s brutal legal assault on John Ellis, a former altar boy abused by a priest in the 1970s.
When Ellis finally confronted the Sydney archdiocese in 2002, then led by Pell, it offered him $25,000 in compensation, which he rejected.
The church then dismissed Ellis’s proposal for a $100,000 settlement, instead spending $800,000 fighting him in court, successfully arguing it could not be sued because it did not exist as an entity.
The church threatened to pursue Ellis for its legal costs.
"That money was the accumulated wealth of generations of good faithful Catholics who gave with the best will in the world," says Ormerod. "It was used in an immoral attack on an abuse survivor and church member."
Ormerod’s faith in God remained strong, but his belief in the institutional church was severely shaken. The church leadership had forfeited its right to his support.
Neil Ormerod no longer trusts the church to spend its wealth morally. Photo: Wolter Peeters
What about the wider community’s assessment of the church and its finances?
While the Catholic Church may not exist legally, it has nonetheless accumulated staggering wealth through a huge property portfolio, insurance and investment arms, and its own internal banks.
And while it’s facing a crisis of trust, governments continue to exempt it from almost all rates and taxes, and tip billions of dollars annually into its vast network of schools, hospitals, health, employment and welfare agencies.
In return, the church allows minimal insight into its finances, and has fought government attempts to prise open its accounts.
What exactly is the Catholic Church in Australia? And what should we now make of the privileges afforded to one of the richest and most powerful, but most secretive and troubled, institutions in the country?
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A parallel state
The church is everywhere, its Gothic cathedrals prominent on city skylines, its parish churches dotted through suburbs and towns.
In its humble early days - Australia’s first Irish Catholics arrived in chains and were a persecuted minority - the church was the champion of the underdog, an integral part of the labour movement.
Now it’s entrenched in the establishment, even in the once Protestant bastion of the Liberal Party.
And it’s rich. As Fairfax Media reveals today, the church in Victoria holds assets worth more than $9 billion. Nationally, the figure is more than $30 billion.
It’s the largest non-government property owner, by value, in Victoria, and close to the largest in Australia, rivalling Westfield with its vast network of shopping centres.
But the church’s presence in Australia is far more than bluestone, bricks and mortar.
One in five Australian students - nearly one in four in Victoria - is educated in the Catholic system, including some of our most prestigious schools such as St Kevin’s College in Melbourne and saint Ignatius' College Riverview in Sydney.
The ill are often treated at St Vincent’s, St John of God, Mercy or Cabrini hospitals; the elderly at one of hundreds of nursing homes, all controlled by Catholic religious orders.
And when in need, or when we donate, we often turn to St Vincent de Paul or Sacred Heart Mission, just two of many Catholic-run charities and welfare agencies.
Arguably, the church is more present in our lives than ever before.
It is a massive decentralised network of 3000 organisations, from the Jesuits to the Sisters of Mercy.
Its elaborate, labyrinthine structure has been built up over centuries. Hundreds of religious orders have their own traditions and structure, drawing authority often directly from Rome.
It has its own banks, superannuation fund, insurance company, university, news service and telecommunications provider. It’s like a parallel state with its own vertically integrated economy.
The church itself says it has a 220,000-strong workforce, as big as the country’s largest private sector employer (Wesfarmers), and almost the size of the Commonwealth.
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The secret state
Yet, in a 2007 judgment, the NSW Court of Appeal found the Catholic Church did not exist in a legal sense. Its vast property portfolio was held by a trust which, the court found, is immune from legal action.
This was the outcome of John Ellis’s long attempt to sue the church for compensation. It became known as "the Ellis defence".
To Ellis himself, the court’s decision is nonsense. "I don’t think it’s unfair for people to see the church as the church,'' he says.
"It’s like any other group of companies - you may be dealing with one particular entity or one particular part of the group, but if they’re all under one umbrella the ultimate responsibility needs to stop with the head or director of the parent company, so to speak."
The Ellis defence puts Australia alone among common law nations, including the US, Canada, Britain and Ireland, in allowing religious institutions such immunity.
It graphically highlighted the church’s tendencies in Australia towards meanness and unaccountability.
The consequence has been abuse survivors left with little option but to accept the church’s much-criticised in-house "redress" schemes.
Under the national Towards Healing compensation program, payments to survivors have averaged $49,000 since 1996; under the Melbourne Response, the average is $35,000.
Total payments have been $57.4 million in Sydney and $11.3 million in Melbourne during nearly two decades to 2015.
Melbourne archdiocese media director Shane Healy says that since the Royal Commission report the archdiocese has paid an extra $17.2 million to survivors.
To put those figures in perspective, in 2005 the Sydney archdiocese spent $33 million to buy the Sydney office tower where it now has its headquarters, and in 2015 the Melbourne archdiocese outlaid $39 million on a new headquarters for itself - a premium, heritage-listed East Melbourne office block opposite St Patrick’s Cathedral.
Yet, when quizzed by the royal commission about its capacity to pay more in compensation, senior church officials from Sydney and Melbourne cautioned that bigger payments could force cuts to its social work.
True or not?
Until today’s revelations by Fairfax about the church’s wealth, it would have been impossible to say. Such has been the secrecy around the finances of Catholic Inc.
Through its considerable legal powers, the royal commission did manage to flush out some financial details; among them, the accounts of the church’s internal bank, commonly known across the various dioceses as the Catholic Development Fund.
The fund in Melbourne alone has more than $1 billion in assets. It takes deposits and lends money to parishes, schools and other church-related activities, at interest, and last year made a profit of $26.5 million. The Sydney equivalent is similar with just shy of $1 billion in assets.
Yet the bank is exempted from oversight by the national financial industry regulator, and it pays no tax - just one of many church agencies and businesses beyond the purview of government watchdogs and the tax office.
Where it has come under official pressure to open its books, the church has resisted.
Catholic church Photo: Darrian Traynor
In 2013, during the closing days of the Victorian parliamentary inquiry into the handling of child abuse by religious and other organisations, the committee requested - on notice to Archbishop Denis Hart and his executive officer, Francis Moore - details about church assets.
The church’s response has never been made public, but Fairfax Media can reveal that, even though the committee later wrote to Hart and Moore reminding them of their obligations to the Parliament, the information was never provided.
Members of the committee from across the political spectrum have told Fairfax Media how they were taken aback by the church’s imperious response to the inquiry. "At times there was a sense of real frustration," says Liberal MP Crozier, who chaired the parliamentary committee.
The royal commission also asked the Melbourne archdiocese about its money. But as Fairfax Media reveals today, the information supplied was scant at best.
The Melbourne church tabled a financial report for its Roman Catholic Trusts Corporation for 2012-2013. It valued the church’s properties at just $109.2 million.
However, the report’s fine print shows the properties were valued at "historical cost" - the amount paid when the properties were first acquired, often in the 1800s or early 1900s. Many were land grants from state governments. The figure is a gross underestimate of the real, current value of the assets. Who would insure their house for its historical cost after all?
The church doesn't. The Melbourne and Sydney archdioceses have confirmed they insure their properties at "replacement cost".
In fact, as Fairfax Media has discovered in its investigation of church assets, the archdiocese owns about $115 million of property in Melbourne's south-eastern municipality of Greater Dandenong alone.
When asked by Fairfax Media to provide a figure for the value of assets held by the church and associated entities, both the Sydney and Melbourne archdioecese responded that ''this information is not available''.
In the 2000s, many in the charity world had hoped accountability of all churches would improve under Labor’s proposed new regulator, the Australian Charities and Not-for-Profits Commission (ACNC) which was eventually established in 2012.
But a 2013 Fairfax Media investigation revealed how a lobbying campaign by churches - the office of then Sydney Archbishop Cardinal George Pell was a key player - had been instrumental in restricting the new regulator.
The churches had demanded of the then Labor government that the ACNC bill exempt "basic religious charities" - the large, unincorporated churches, including the Catholics and Anglicans - from annual financial reporting requirements and from the ACNC governance standards.
They argued that such reporting was an unreasonable burden on overworked local parishes, an argument that never washed with the experts. "Of course they know how much money they’ve got," says Professor Ann O’Connell from the Melbourne Law School, a specialist in charities and taxation and an adviser to the Australian Taxation Office.
Fairfax Media has obtained annual financial reporting forms that Melbourne’s parish priests are required to complete for the church's head office. They ask for at least as much financial detail as the statements the regulator requires from non-exempt charities.
But the Catholic church was not just worried about the reporting burden on parish priests. In 2013, parts of the church - the Sydney archdiocese in particular - wanted the ACNC abolished entirely, a promise the Coalition was happy to give ahead of the federal election that year.
World Vision chief advocate and Baptist minister Tim Costello recalls a meeting with then opposition leader Tony Abbott in which Pell drove the church’s argument to a sympathetic, budding prime minister.
Only a hostile senate prevented the Abbott government from acting on its promise to do away with the commission.
"After God, the priest is everything," French Saint John Vianney declared hundreds of years ago.
This is clericalism - the belief that clergy are mystical beings, accountable to the Pope and God, not to civil society nor their own "flock". In the modern church this is reflected in the tight knit, all male, impenetrable club that is the clergy.
Church business - and especially church wealth and its use - is nobody else’s.
"They all go through the same training," says Neil Ormerod, a one-time teacher of priests. "There’s a real camaraderie. You rarely see a priest break ranks and display anger at abuser priests."
This culture is reinforced by the fact that the church has its own law - canon law - and as the royal commission found, when canon and civil law come into conflict within the church, canon law prevails.
Among the many orders made by the Vatican under canon law is Secreta Continere, issued under Pope Paul VI in 1974. Otherwise known as the Pontifical Secret, it imposes a permanent silence on clergy on a range of matters, including child sexual abuse by priests.
Belatedly in 2010, 14 years after the church established its Toward Healing and Melbourne Response redress schemes, Pope Benedict XVI permitted that, in states where civil law specifically required the reporting of abuse, the church would abide by it. In Australia, only NSW and Victoria specifically require such reporting.
Peter Johnstone is a life-long church goer, former CEO and senior government manager at federal, state and local levels. He is now a consultant specialising in governance.
He says the clericalist culture and Pontifical Secret contributed to the “most dysfunctional governance’’ he has ever seen.
And it leaves big questions over financial priorities.
It’s a culture evident in the church’s own internal records. Especially when it comes to assets.
Fairfax Media has pored through hundreds of pages of formerly secret church minutes made available through the royal commission.
They show the church responding to the emerging abuse scandal in the late-1980s and early-1990s - code-named Special Issues - by focusing on the protection of clerical reputations and church assets. Victims rarely rated a mention.
Then, as public scandal escalated, the minutes themselves became a problem: “Too many people are keeping too many records,"warns a minute from a 1992 meeting of the Australian Catholics Bishops Conference.
Written comments about "special issues" should be "kept to a minimum", noted the minutes from a Melbourne archdiocese meeting.
"Special issues" were often discussed, internally, in conjunction with asset protection strategies.
In its findings, the royal commission slammed such secrecy: "It is clear to us from those minutes that the purpose of not recording information was to protect the assets of the archdiocese in the event of a claim being made against it."
A moral crisis
The royal commission found that 4444 people alleged incidents of child sexual abuse at Catholic institutions.
It calculated that 7 per cent of Catholic priests had been accused of abusing children in the six decades from 1950 to 2010. In some Catholic religious orders the figures were much higher: 40 per cent for the St John of God Brothers and 22 per cent for the Christian Brothers.
Even the church acknowledges these figures are an understatement because many victims have never come forward and never will.
Francis Sullivan, the head of the church’s own Truth, Justice and Healing Council, has described the figures as evidence of a "massive failure" by the church. "As Catholics we hang our heads in shame," he says.
This crisis of moral authority has reinforced the long-term drift from organised religion in Australia.
The National Church Life Survey shows Sunday mass attendance numbers starting to dwindle amid the social revolution of the 1960s, from 53 per cent regularly attending in 1961 to 12.2 per cent in 2011. More than half regular churchgoers are now aged over 60.
"The decline is at one level, in public participation - in going to Mass on Sunday," says former priest and prominent Catholic liberal Eric Hodgens. "The next level is the decline in the acceptance of the [church] line."
That includes touchstone moral questions such as same-sex marriage.
It’s a decline that’s been masked to a degree by the expansion in the church’s welfare and other services, a by-product in part of the trend to privatisation and outsourcing since the 1980s.
But while the church’s hospitals, retirement villages, employment and social welfare agencies probably care for more Australians than ever before, there is often little distinguishing them from their public or pivate-for-profit equivalents.
The days of nuns treating patients at St Vincent’s hospitals are long gone. Catholic schools, once run by devoted brothers and sister are now largely staffed by lay workers - many not even Catholic. Ditto the students.
Out of a deep, historic trust in the church’s good works, governments continue to fund its schools, health and welfare agencies - $7.9 billion went on school funding alone in 2015.
We demand transparency from government, business, unions and other not-for-profits, yet we continue to make major exceptions for a handful of religious organisations, both in accountability and tax. Even life-long Catholics say it no longer makes sense.
"It is extraordinary how little we Catholics know about our church finances and decision-making," says Johnstone. "It’s time we knew much more."
In a written statement to Fairfax Media, Mr Healy says the church meets "its legal and reporting obligations" to the regulatory authorities to which it is subject.
Coming to account
John Ellis is no longer a practising Catholic.
The end came when the Sydney archdiocese threatened to pursue him for legal costs over his failed bid for justice through the courts.
"I realised there is nothing special or different about the church ... They act like any other ruthless wealthy organisation," says Ellis. "The more money they’ve got, the more ruthless they will be with it."
John Ellis was abused by a priest when he was an altar boy in the 1970s. Photo: Louise Kennerley
Despite a seismic, five-year royal commission, the latest in a slew of such inquiries around the world, the church is still to give ground in key areas deemed crucial for reform by its army of critics.
Many of the church’s more structural problems - its top-down autocracy, male domination, obsession with secrecy - are ancient and can only be finally dealt with in Rome. But the local church does have power to reform in key areas such as financial accountability to abuse survivors, regulators and taxpayers.
There are hints of progress. In Adelaide, the church in 2016 released a brief financial report disclosing key assets. Elsewhere, where the organisation is much larger - Sydney and Melbourne, in particular - finances remain as opaque as ever.
Governments have been reluctant to impose change. The church’s lobbying power is formidable, its campaigning fierce - as shown recently in its fight with the Turnbull government over needs-based school funding.
Among the initiatives the federal government has taken is the proposal for a national redress scheme for abuse survivors covering all government and non-government institutions.
But survivors groups and lawyers who work with them insist the scheme is unacceptable in its current form. Few are likely to be granted the scheme’s maximum $150,000 cap, already $50,000 lower than recommended by the royal commission. Those who seek redress through it are required to sign away their right to sue.
For survivors who try their luck in the courts, the church has promised to establish special entities that can be sued and pledged not to invoke the Ellis defence. But details are sketchy and survivors and their lawyers are wary.
Notably, neither element of the proposed redress scheme would expose the church’s billions of dollars in assets.
Ellis proposes the repealing of the historic acts that have allowed the church to immunise its assets from legal action - the key stumbling block in his own case. That way, as in the US and elsewhere, the churches would have to incorporate under general law, making them sueable.
Pressure is also growing for church accountability to the wider community.
The federal government is currently reviewing the Australian Charities and Not-for-Profits Commission, five years after its creation. Tax expert professor Ann O’Connell says the review is an opportunity to scrap the exemption for churches from financial reporting to the regulator.
"We expect the 50,000 other charities to complete a very simple annual information statement, why do we exclude the religious charities?" O’Connell says. "If the local tennis club has to account for it then why shouldn’t a parish church?"
Both the Melbourne and the Sydney archdiocese say they support the retention of the charities commission but oppose changes that would require them to lodge annual financial statements.
Peter Johnstone says government departments should now demand that the church properly accounts for its own wealth and how it uses public funds.
"If I was running the Education Department I would be advising the government to say ‘If you’re going to get his money, here are the details we need from you to ensure our own public accountability'."
Then there is the vexed question of tax.
Victorian upper house MP and Reason Party leader Fiona Patten is finalising a bill seeking to ensure tax exemptions for charities only apply to organisations engaged in "objectively charitable works".
Such legislation would overturn centuries of tax exemptions for the churches. The bill is unlikely to have the numbers to pass, but it reflects the crisis of legitimacy facing the church. It should ring alarm bells.
Mr Healy did not respond to a question about whether any of the church's activities should be taxed.
Four years after he put a stop on his direct debit contributions, Neil Ormerod has started donating again.
He’s still not sure, though, that he’s doing the right thing.
"The church has to do much more to win back my trust."