Bishop Bad Boy

Santa Rosa's charismatic Catholic bishop got busted shaking down a priest for sex. But he had friends in high places -- and they served him well.

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.

Better Times: Bishop G. Patrick Ziemann, before he 
resigned his Santa Rosa post in 1999.
Courtesy of the Press Democrat
Better Times: Bishop G. Patrick Ziemann, before he resigned his Santa Rosa post in 1999.
Levada gets an earful from whistle-blower Sister Jane 
Kelly in 1999.
Courtesy of the Press Democrat
Levada gets an earful from whistle-blower Sister Jane Kelly in 1999.

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.

During more than a decade in which the diocese and the Scrip Center were joined at the hip, the man who held the corporation's purse strings was its president and CEO, Keys, who is also widely credited with getting it off the ground. At the same time he ran NSC, Keys also controlled the diocese's money, serving not only as vicar-general but as finance director, giving him the kind of clout that some say approached even that of the bishops he served.

"There's never been any doubt in my mind that Keys was the real player when it came to the money, not Ziemann," says Bob Coyle Jr., a Fresno businessman whose late father was a partner with Keys in developing the scrip idea. John van der Zee, author of a book about the Santa Rosa scandal called Agony in the Garden, agrees. "Ziemann is a very complex character, a man with great gifts and weaknesses," he says. "But as far as the money goes, I don't think he was paying attention to what was going on around him." Keys declined to be interviewed for this article, as did the Scrip Center's current CEO, David C. Carrithers.

A native of Ireland who came to the diocese in 1970 and quickly climbed the administrative ladder, Keys was the mastermind behind merging diocesan funds in a single account. It was this so-called "Consolidated Account," which critics say was tailor-made for commingling with funds from the Scrip Center, that collapsed under the weight of what the diocese's auditors say was unbridled (and apparently unmonitored) spending during the waning months of Ziemann's tenure. A few weeks before Levada went to Ukiah to meet with the assembled priests, auditors delivered some disturbing news: The account was empty.

If criminal acts were to blame, it was not for authorities to find out. As Levada conducted parish hall meetings around the diocese, his forget-and-move-on approach received an increasingly cool reception from Catholics angry that money they had donated for schools and parishes had vanished. Even his priests were agitated. Several dozen clerics signed a letter asking the archbishop "to tell our people the total story about what happened throughout [Ziemann's] administration," including "the role of the bishop, the vicar-general, the diocesan finance committee, the administrative staff and the scrip center in creating our present situation." But according to one of those priests, who spoke with SF Weekly on condition of anonymity, there was never a satisfying answer.

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