A sworn statement filed in federal bankruptcy court alleges that leaders of the Vermont Roman Catholic Diocese approached a prospective financial officer in 2020 with a proposal to transfer assets into trusts before the organization filed for Chapter 11 protection, court documents show.

Celeste Heinonen, a Utah resident interviewed for the diocese’s chief financial officer position, claimed in her deposition that Bishop Christopher Coyne posed what she called an “ethical proposition” regarding the movement of funds. According to Heinonen’s account, Coyne explained that the diocese wanted to transfer assets “as quickly as possible so that it could file for bankruptcy.” John McDermott, who served as the diocese’s second-in-command at the time, also participated in discussions of the proposal with Heinonen. She was not hired for the position.

Heinonen later contacted a Burlington lawyer who represents clergy abuse claimants and provided her sworn statement. The allegation has now become central to a dispute playing out in federal court as the Vermont Diocese navigates bankruptcy proceedings that could affect how compensation is distributed to survivors of clerical misconduct.

The Trust Structure and Timeline

The diocese created trusts holding an estimated $500 million in parish assets in 2006, the organization stated was designated for “pious, charitable or educational purposes.” Over the following two decades, the diocese paid $34.5 million to settle 67 clergy misconduct lawsuits. An additional 119 claims remain pending, with some dating to 1950.

In fall 2024, the diocese filed for bankruptcy protection. By that point, the organization reported that past misconduct settlements had reduced its highest-level holdings to approximately $35 million. The diocese has spent $2 million in legal fees so far in the bankruptcy proceeding, according to court filings.

Questions About Asset Protection

A committee representing more than 100 clergy abuse claimants has challenged whether the trust arrangements complied with Vermont law, specifically questioning whether they constitute fraudulent transfers under state statute. The committee seeks access to the parish-level assets, arguing they should be available to compensate victims of abuse.

Federal bankruptcy law requires court approval and creditor consent for any reorganization plan. U.S. Bankruptcy Judge Heather Cooper scheduled a hearing on the parish trust question for July 28. She has directed both sides to attempt mediation by October 16, though she noted frustration with the diocese’s cooperation efforts. “At this point, we have what appears to be a debtor who is not willing or able to corral all of the parties to the table,” Cooper said.

Broader Pattern

The Vermont Diocese is one of 44 Catholic organizations in the United States that have sought Chapter 11 bankruptcy protection in recent years, largely in response to accumulated clergy abuse claims. The organization’s case hinges partly on whether assets placed in trust before the bankruptcy filing can be recovered for survivor compensation.

Bishop Coyne, who led the Vermont Diocese at the time Heinonen was interviewed, was appointed archbishop of the Archdiocese of Hartford, Connecticut in 2023. The diocese has not publicly responded in detail to the allegations in Heinonen’s statement, though its legal filings have stated that the trusts were established for legitimate charitable and religious purposes unrelated to bankruptcy strategy.

The outcome of the July 28 hearing and the mediation process will shape not only the Vermont case but potentially influence how other Catholic dioceses navigate similar disputes over asset protection and survivor compensation.

CATEGORY: America