A trust fund set up by the Roman Catholic Church in Victoria for elderly nuns' pensions was used for secret investments in Arabian race horses that have left the diocese with a crippling $17-million debt.
The fund, known as the Priory Trust and worth an estimated $1.1-million, was wiped out after a failed $2-million investment in race horses in Washington state in the late 1980s.
A church official in Victoria and a chief investigator in Ottawa, looking into the B.C. diocese's financial woes, said more than half the money used for the unauthorized $2-million loan to buy the horses was taken from the nuns' fund.
"The bank account is gone," said Vernon McLeish, the diocese's new financial administrator. "Everything disappeared. Everything went."
Mr. McLeish said he does not know where the remaining money for the $2-million investment came from because there was no record on the diocese's books for the loan, now being blamed for a scandal that has rocked the Roman Catholic Church in British Columbia.
Monsignor Peter Schonenbach, one of three people appointed by the church to investigate the debt, said the nuns' fund is a key finding in the canonical inquiry's report.
The report by Father Schonenbach, Rev. Bill Woestman, a church-law expert at St. Paul's University in Ottawa, and Bill Broadhurst, chancellor of temporal affairs in the archdiocese of Toronto, is soon to be released.
Father Schonenbach said the Priory Trust was used for the loan in the late 1980s to Joseph Finley, a U.S. lawyer and developer, to invest in Arabian race horses.
According to Mr. McLeish, the trust was set up by the diocese in 1976 under Bishop Remi De Roo to look after an order of nuns called The Sisters of the Society of the Love of Jesus.
The bad investments were only discovered after Bishop De Roo, 76, retired after 37 years as head of the Victoria diocese last year.
In a public apology to his successor, Bishop Raymond Roussin, Bishop De Roo referred to the fund when he accepted blame for the diocese's financial troubles.
"I acknowledge that the Priory Trust could have been treated as part of the diocesan administration and made subject to diocesan financial reporting," he wrote in the two-page letter.
The society of nuns transferred $1.1-million to the diocese 24 years ago on the agreement it would administer their pensions and use the money for "educational purposes," Mr. McLeish said in an interview.
Only a few of the nuns are still alive and are being well cared for by the diocese, he said. They have received monthly pensions out of the diocese's funds since their trust was emptied, he said. "The diocese is making good," he said. "The nuns were always looked after. There's no question they were ever abandoned. . . . [Bishop De Roo]kept to his word that he would always look after them."
The diocese took over the nuns' trust fund after a Vatican-ordered sale of the assets controlled by a controversial nun who ran an animal shelter outside Victoria.
Mother Cecilia Mary Dodd, mother superior of the Society of the Love of Jesus, twice defied Vatican orders in 1964 to abandon the Good Shepherd shelter in nearby Mill Bay.
She led a small group of nuns who staged a seven-month sit-in in the early 1970s in a dispute to keep control over the society but lost their appeal against the church in B.C. Supreme Court.
The society's assets were transferred to the Victoria diocese, which oversees 37 churches on Vancouver Island. The trust fund was later set up, Mr. McLeish said, to care for six remaining nuns left in the order at that time and for church education programs. Mother Cecilia died in 1989, two months short of her 100th birthday.
"The rationale for using this money was to make more money for this fund," said Father Schonenbach, the general secretary of the Canadian Conference of Catholic Bishops in Ottawa.
But the horse venture failed and the $2-million loan was never repaid. The diocese attempted to recoup the money a decade later in a land deal in Lacey, Wash., by guaranteeing a loan, now amounting to $12-million. The plan was to sell the land for a quick profit, but it never sold and the church says its total debt is $17-million.