Bishop Bad Boy

Less than enthusiastic reviews greeted the archbishop's first public appearance after the resignation, in which he delivered a homily at St. Eugene's Cathedral in Santa Rosa the month after Ziemann's departure. Referring to Ziemann as "our brother and your former shepherd," Levada expressed sorrow and compassion for his friend and urged the faithful not to let the sex scandal distract them. "It was more than a little too convenient," says Hoard, the children's advocate. "People wanted answers, and all Levada wanted to do was preach 'forgive and forget.'"

The archbishop sounded a similar note in Ukiah during a special visit to Hume's old church. There, during a closed-door meeting with 90 priests that lasted two hours, Levada disclosed that the diocese was broke and $16 million in debt. Afterward, he gave a condensed version to reporters waiting outside. Among other things, he said, the diocese had overspent on its programs, frittered away money in poor investments, and -- intriguingly -- paid out $5.3 million to settle sex-abuse claims against some of its priests. To restore fiscal order, he announced a combination of budget cuts and loans from both banks and other dioceses (Mahony's L.A. Archdiocese was good for $1 million).

But Levada's numbers left some skeptical. The Santa Rosa chancery had been inundated with claims from abuse victims based on years of letting wayward clerics run amok. Michael Meadows, a Walnut Creek attorney, heard the $5.3 million figure and was surprised. His clients alone had received nearly $4 million in settlements from the diocese stemming from the antics of just one priest, Father Gary Timmons, who had been harbored by two of Ziemann's predecessors.

Had Levada chosen to open the diocese's books, there would have been plenty to explain, starting with Monsignor Keys, whom the archbishop had initially retained as the diocese's vicar-general and chief finance officer. After an internal audit revealed the diocese to be penniless, Keys resigned both posts. But he was hardly without portfolio. He remained pastor of the diocese's most affluent parish, Star of the Valley, in the community of Oakmont.

More important, Levada left Keys in place as president and chief executive officer of the National Scrip Center, the position that had made him a power behind three successive bishops, including Ziemann.

The largest operation of its kind in the United States, NSC facilitates the sale of scrip -- gift certificates and coupons from department stores and other retailers -- that has become immensely popular as a source of income for nonprofit entities such as schools and churches. NSC essentially buys scrip at a discount and sells it for a slightly higher price to participating nonprofits, which in turn generate revenue by selling it to customers at face value.

NSC's 260-plus merchant partners are a who's who of American commerce, including Home Depot, JCPenney, and Macy's. It claims to have helped nonprofit organizations raise more than $180 million in the past 15 years. Using $25,000 in seed money from the Santa Rosa Diocese, the Scrip Center was conceived in 1987 as a way for the Petaluma parish to save a financially troubled high school. In the early days it was run from a rectory with a few women filling orders by hand. It now occupies a sprawling office building in a corporate park next to Santa Rosa's regional airport. Over the years its assets have grown into the many millions of dollars, and NSC is widely perceived to be a cash cow for the diocese.

Since it's a private corporation, NSC's financial dealings have long been enmeshed in secrecy, as have those of the diocese, which as a religious entity also is not subject to public scrutiny. In 1998, when the Scrip Center bought out its largest competitor, the diocese provided the $5.1 million loan guarantee for the purchase. Historically, the bishop of Santa Rosa (as well as Levada, after stepping in for Ziemann) has served as the Scrip Center's chairman, appointing its board of directors. That changed in 2001, when, in the aftermath of the financial scandal, the diocese severed its relationship with the corporation. NSC also forgave a $2.1 million debt owed by the diocese, the circumstances of which were never explained.

Even now, NSC's board is made up of people with long-standing ties to the diocese. Such ties, and the secrecy surrounding the relationship between the diocese and the Scrip Center, have long fueled speculation, never proven, that the diocese used NSC to bankroll secret payments to victims of priestly sex abuse, including the cost of therapy and other medical expenses, as a way of keeping such items off the diocese's books.

"The bottom line is that the diocese in the past has been able to use the Scrip Center any way it pleased and, because of the secrecy, no one really knows how," says Kelly, the nun.