A nationally renowned business-turnaround expert hired to help resolve the Roman Catholic archdiocese of New Orleans’ contentious and costly bankruptcy – which has ensnared hundreds of clergy molestation survivors – is now facing scrutiny from the FBI after his conduct in a separate case raised ethics-related questions.
The Wall Street Journal published reporting on the FBI and Mohsin “Mo” Meghji on Wednesday, the day he was due to complete an assessment on the viability of two competing archdiocesan restructuring plans drafted by the church as well as those to whom it is indebted, among them hundreds of victims of sexually abusive clergymen.
Church bankruptcy attorneys are proposing to settle the case – filed in 2020 – by paying about $125,000 to each of more than 500 molestation claimants, who in turn are demanding $2m per claim.
Meghji’s report, ordered in August by New Orleans federal bankruptcy judge Meredith Grabill at the price of $350,000, is scheduled to be publicly released by 23 October. Neither he nor Grabill responded to comment requests.
The FBI declined to comment on WSJ’s piece, whose contents have not gone over well among some attorneys representing abuse claimants in the New Orleans church bankruptcy.
They privately said it was ironic that the archdiocese whose finances were under review by the New York-based Meghji and his associates is itself under law enforcement scrutiny. In April, at least one FBI agent accompanied Louisiana state police troopers as they served a search warrant on the archdiocese amid an investigation into whether the organization’s leadership had run a child sex-trafficking ring responsible for “widespread sexual abuse of minors dating back decades” that was “covered up and not reported to law enforcement”, according to criminal court documents filed under oath.
As the Journal tells it, citing sources, Meghji caught the FBI’s attention after hosting a 2022 banquet at one of the priciest restaurants in Manhattan that listed then bankruptcy judge David Jones as a guest of honor. Bankruptcy attorney Ken Rosen – who is not involved in the matter – told the Guardian that it was ethically improper to host such a banquet because in essence it signaled to potential clients a special relationship with a judge.
Meghji later steered a San Diego-based biotech client’s chapter 11 bankruptcy case to Jones’s courtroom in Houston – where the company had never done business – in conjunction with various attorneys, including one with whom the judge was having a sexual relationship.
Jones soon authorized the biotech outfit, Sorrento Therapeutics, to borrow $30m at Meghji’s urging to pay its employees and professional advisers, as the Journal reported in September. Sorrento’s shareholders objected to the loan and its expensive terms to no avail.
Eventually, Jones resigned as a bankruptcy judge – and has since been subjected to an FBI investigation – after a lawsuit revealed his romantic relationship with former Jackson Walker law firm attorney Elizabeth Freeman. Freeman had worked on Sorrento’s bankruptcy case and others that had been before Jones.
Meghji and a top attorney for the Latham & Watkins law firm with which Meghji’s M3 Partners group often works each provided sworn statements denying that they knew of Jones’s affair with Freeman. The case was subsequently reassigned to Houston federal bankruptcy judge Christopher Lopez, another guest of honor at the 2022 Manhattan banquet that feted Jones.
Lopez refused calls to dismiss Sorrento’s chapter 11 case, concluding the biotech company landed in a bankruptcy courthouse with a pro-business reputation by legal means rather than fraudulent ones. Sorrento, which entered its bankruptcy with a reported $1bn in assets, was essentially disassembled.
Since then, the Journal reported on Wednesday, the FBI has sought information about certain attorneys from Latham & Watkins, Jackson Walker, Meghji and others amid an investigation into whether Jones had coordinated with bankruptcy restructuring professionals in a way that interfered with the fair administration of chapter 11 cases. The Journal said it “couldn’t determine whether particular restructuring professionals are targets of the investigation or potential witnesses”.
Meghi had previously won acclaim for leading restructurings at Barneys, Vice Media and other troubled companies. Grabill appointed him, M3 Partners and Latham & Watkins to the New Orleans archdiocese’s chapter 11 case after some clergy abuse survivors’ attorneys urged her to appoint a trustee to strip away control of church finances from the local archbishop, Gregory Aymond. That plea came after the Guardian and WWL Louisiana revealed that Aymond’s hand-selected corporate representative in the bankruptcy, Lee Eagan, testified in legal depositions that he had no relevant expertise for his role and had suffered cognitive impairment after a 2022 car crash.
Aymond’s attorneys have argued that taking control of the archdiocese’s finances away from him would violate the separation of church and state called for by the US constitution. Grabill had not yet ruled on that issue on Friday.
The New Orleans archdiocese’s bankruptcy has incurred more than $40m in costs that have mostly gone to its own attorneys and other professional advisers. Aymond initially estimated the church could resolve the bankruptcy for about $7.5m, including a settlement with clergy abuse survivors.
Meanwhile, Jones is connected to one of the more controversial rulings in the New Orleans church bankruptcy, which affected a group of clergy abuse survivors whose attorney has been one of the archdiocese’s most vocal critics. Publicly available transcripts show Grabill spoke with Jones and another judge before deciding to impose a $400,000 fine on attorney Richard Trahant, who advised the principal of a New Orleans Catholic high school that its chaplain had a stained past.
The archdiocese later admitted to the school that the chaplain had molested a teenage girl in the 1990s, though he avoided meaningful punishment through technicalities. The clergyman – who has since died – immediately retired and lied about how that was solely for health reasons.
Grabill ruled that the episode violated a confidentiality order governing much of the information associated with the bankruptcy, fined Trahant exactly two years ago Friday and removed four of his clients from a committee advocating on behalf of molestation victims’ interest in the case.
