The Roman Catholic archdiocese of New Orleans is facing a contentious situation as it plans to default on a nearly $1 million interest payment on over $41 million in bonds sold in 2017. Lawyers representing bondholders have alleged in court that the archdiocese engaged in securities fraud by reneging on its promise to pay debts in full despite filing for chapter 11 bankruptcy protection.

The dispute has arisen amidst efforts to settle a federal financial reorganization primarily focused on over 600 clergy abuse claimants. Bondholder attorneys accused archdiocesan representatives, including Archbishop Gregory Aymond, of misleading bondholders by assuring them that all debts would be paid, citing compliance with church law.

However, the archdiocese notified bondholders of its decision not to make the interest payment due on July 1, citing a proposed bankruptcy settlement that had not yet been approved. Bondholders were further informed that the church intended to lower the value of their investment through the settlement, raising concerns about potential violations of securities laws.

The archdiocese’s financial disclosures indicated a liquidation value of $315 million, with limited funds available for abuse survivors and other creditors. The situation has led to accusations of securities fraud by bondholder attorneys, prompting a heated exchange in court with the archdiocese’s legal representatives.

As the archdiocese navigates its financial challenges, including the ongoing clergy abuse scandal and bankruptcy proceedings, the resolution of the bond debt issue remains a key factor in finalizing a settlement agreement with claimants. The proposed settlement, which includes payments to abuse survivors and other creditors, is set to be discussed in court in the coming weeks.