Peter Isely, left, the Milwaukee-based director of a sex abuse survivors group, speaks outside the Vatican on Thursday. (Alessandro Bianchi /Reuters)

The Vatican denies there was a coverup in the church's handling of a priest accused of molesting as many as 200 deaf boys in Milwaukee.

The New York Times reported Thursday that two Wisconsin bishops urged the Vatican office led by Cardinal Joseph Ratzinger — now Pope Benedict XVI — to let them conduct a church trial against accused priest Rev. Lawrence Murphy, but the Vatican ordered the process halted.

The Vatican newspaper L'Osservatore Romano dismissed the story, saying there was a "clear and despicable intention" to smear Benedict "at any cost."

Murphy, who died in 1998, worked at the former St. John's School for the Deaf in St. Francis, Wis., from 1950 to 1975.

In 1996, then-Milwaukee Archbishop Rembert G. Weakland sent letters about Murphy to the Vatican office called the Congregation for the Doctrine of the Faith, which was led from 1981 to 2005 by Ratzinger.

Weakland received no response from Ratzinger, according to documents obtained by the Times.

Eight months later, the second-in-command at the doctrinal office, Cardinal Tarciscio Bertone — now the Vatican's secretary of state — told the Wisconsin bishops to begin secret disciplinary proceedings, according to the documents.

But Bertone halted that process after Murphy wrote to Ratzinger saying that he already had repented, was ailing and that the case's statute of limitations had run out, the Times reported.

No response

The documents contain no response from Cardinal Ratzinger.

On Thursday, a group of clerical abuse victims, including some from Milwaukee, staged a news conference outside the Vatican to denounce Benedict's handling of the case.

"The goal of Cardinal Ratzinger, now Pope Benedict, was to keep this secret," said Peter Isely, Milwaukee-based director of SNAP, the Survivors Network of Those Abused by Priests.

During the news conference, a police officer asked for their documents and the protesters were subsequently detained, police said.

The emerging story of abuse in Milwaukee added fuel to an already swirling scandal about the way the Vatican in general, and Benedict in particular, handled reports of priests abusing children over the years. The Pope last week issued an unprecedented letter to Ireland addressing the 16 years of church coverup scandals there.

But he has yet to say anything about his handling of a case in Germany known to have developed when, as cardinal, he oversaw the Munich Archdiocese from 1977 to 1982.

Rev. Federico Lombardi, a spokesman for the Vatican, said in a statement the Vatican was not told about the abuse allegations against Murphy until 1996, years after civil authorities had investigated and dropped the case.

Fraud alleged

Lombardi also said Murphy's age, poor health and a lack of more recent allegations were factors in the decision not to defrock him.

Documents indicate the Vatican knew of abuse allegations against Rev. Lawrence Murphy of Milwaukee. (CBC News)

The Times obtained the Murphy documents from Jeff Anderson and Mike Finnegan, lawyers for five men who have sued the Milwaukee archdiocese alleging fraud. The newspaper said the documents included letters between bishops and the Vatican, victims' affidavits, the handwritten notes of an expert on sexual disorders who interviewed Murphy and minutes of a final meeting on the case at the Vatican.

After Murphy was removed from the school in 1974, he went to northern Wisconsin, where he spent the rest of his life working in parishes, schools and, according to one lawsuit, a juvenile detention centre.

Previously released court documents show Weakland oversaw a 1993 evaluation of Murphy that concluded the priest likely assaulted up to 200 students at the school.

Weakland resigned as archbishop in 2002 after admitting the archdiocese secretly paid $450,000 to a man who accused him of sexual abuse.