Boy Scouts of America Considers Bankruptcy Filing Amid Sex-Abuse Lawsuits (#GotBitcoin?)
Nonprofit has hired law firm Sidley Austin for assistance in a possible chapter 11 bankruptcy filing. Boy Scouts of America Considers Bankruptcy Filing Amid Sex-Abuse Lawsuits (#GotBitcoin?)
The Boy Scouts of America is considering filing for bankruptcy protection as it faces dwindling membership and escalating legal costs related to lawsuits over how it handled allegations of sex abuse.
Leaders of the Boy Scouts, one of the country’s largest youth organizations, have hired law firm Sidley Austin LLP for assistance with a possible chapter 11 bankruptcy filing, according to people familiar with the matter.
Founded in 1910, the Boy Scouts group says that more than 110 million people have participated in its educational programs, which promote outdoors skills, character-building and leadership.
The Boy Scouts have been at the center of sexual-abuse scandals in the past, and the organization is facing a number of lawsuits that allege inappropriate conduct by employees or volunteers in incidents dating back as far as the 1960s. Filing for bankruptcy would stop the litigation and would give the nonprofit a chance to negotiate with those who have sued.
Other organizations facing similar legal pressure have also turned to bankruptcy protection in recent years. More than 20 Catholic dioceses and religious orders have filed for chapter 11 protection to negotiate payouts to thousands of victims. And last week USA Gymnastics, the governing body for the sport, filed for bankruptcy as it faces lawsuits from decadeslong sexual abuse by the national team’s former doctor Larry Nassar.
The Boy Scouts released a letter to its employees Wednesday that said it plans to “explore all options available to ensure that the local and national programming of the Boy Scouts of America continues uninterrupted.”
Participation in the organization’s programs has fallen in recent years, though the group opened some of its programs to girls and transgender boys. The Boy Scouts currently have more than 2.3 million youth members.
The Church of Jesus Christ of Latter-day Saints, formerly one of the group’s largest sponsors, has said it will withdraw from Boy Scout programs. The church said it would develop its own program for young men.
The Boy Scouts group has drawn scrutiny over its slow pace to become more inclusive, including by lifting a ban in 2015 on gay men and lesbians serving in leadership roles.
The group has also dealt with fallout from its decision last year to expand its recruitment of girls, putting it in competition with the Girl Scouts of the USA, a separate group that offers similar programming and has also seen membership fall.
In November, the Girl Scouts filed a trademark lawsuit against the organization, saying its push for girls to join caused confusion and led to instances in which parents mistakenly signed their children up for Boy Scouts programs.
A Boy Scouts spokeswoman said the group is reviewing the lawsuit and that the expansion came “after years of requests from families who wanted” to participate in its programs.
In recent years, the Boy Scouts group’s legal bills for work done by some outside law firms have grown. In 2017, the organization paid $7.6 million to labor and employment law firm Ogletree Deakins, according to public filings. It paid Ogletree $3.5 million in 2016 and $859,347 in 2015, the filings show.
In the group’s latest annual report, Boy Scout officials said its future financial situation will partly depend on the outcome of sex-abuse-related litigation and future damages awarded. One lawsuit unfolding in Idaho over alleged abuse by several former leaders is set for a jury trial in May.
The organization has said that it has never knowingly allowed a sexual predator to work with youth members and has put rules in place to strengthen protections.
In the annual report, officials said they were “aware of threatened and expanding litigation of a similar nature.” They added that the group’s financial health will also depend on how much of the litigation costs will be covered by insurance.
The organization has sued its insurers at least twice since 2013, accusing them of failing to cover costs related to previous sex-abuse lawsuits. In its annual report, organization leaders said the latest lawsuits could force the group “to pay damages out of its own funds to the extent the claims are not covered by insurance or if the insurance carriers are unable or unwilling to honor the claims.”
Boy Scouts Files Show Why Child Molesters Weren’t Stopped
Riley Gilroy says it took three decades for him to learn the Scouts kept detailed records on the man who later abused him. Now he and four others are suing.
In June 1979, Rex Black, an Idaho supervisor for the Boy Scouts of America, sent a letter to his supervisor. A child had accused Scout leader James Schmidt of multiple instances of sexual abuse, and Black reported he had confronted Schmidt about the allegations. Schmidt claimed innocence and was allowed to continue working with children.
In 1983, Schmidt was convicted of lewd conduct with a minor.
Schmidt was one of a group of Boy Scouts leaders in Idaho troops sponsored by the Mormon church who were accused of sexually abusing children in the 1970s and ’80s. Recently unsealed files from the Boy Scouts of America reveal that the organization was aware of allegations against these leaders for years, but allowed them to continue working with children. In one documented instance, an abuser was promoted but the Scout leader who reported him was dismissed.
The files form the basis for a new federal lawsuit brought by five former Boy Scouts who accuse the organization and the Church of Latter-day Saints of fraud for promoting scouting as a wholesome, safe activity while covering up pedophiles in their ranks.
Riley Gilroy is one of two named plaintiffs.
“They knew about him prior to me, so why didn’t they say anything?” Gilroy told The Daily Beast. “Why wasn’t he stopped? Why was he allowed to go back into scouting? They had complaints and documentation, and a moral obligation to take these complaints to the authorities and they chose not to.”
The BSA has faced publicized sex abuse scandals since the late 1980s, paying out $18.5 million to a single victim in a 2010 case. Since the ’80s, the organization has implemented new checks intended to prevent child abuse. In a statement to The Daily Beast, BSA leadership condemned the sexual abuse allegedly committed by Schmidt and other former scout leaders.
“In the many years since these actions occurred, we have continued to strengthen our efforts to protect youth,” BSA said. These efforts include “screening process for adult leaders and staff, criminal background checks, requiring two or more adult leaders be present with youth at all times during Scouting activities, and the prompt mandatory reporting of any allegation or suspicion of abuse.”
The LDS church said it was still reviewing the filing.
“We have only recently learned about this legal action, and will take time to understand it fully and to respond as appropriate,” LDS spokesperson Eric Hawkins told The Daily Beast.
The Mormon church has partnered with the Scouts since 1928 and by the 1970s heavily encouraged children and adults to join the group as part of their development, the lawsuit said.
“This is not an optional program,” LDS president Spencer Kimball said in 1978, according to the lawsuit. “Scouting is no longer on trial. It is an economically, socially, and spiritually sound program.’”
But it would be the promise of trustworthy male leadership that led Gilroy to join the Boy Scouts.
“It was my mother, my sister, and myself in a single-parent family. My mother wanted me to have a good, strong male role model in my life,” Gilroy said. He joined the Scouts with his best friend as a young child. “Our mothers were best friends and thought scouts could be a positive influence on us.”
Instead of being assigned to a trusted role model, Gilroy was placed in Schmidt’s troop. Over the course of two years, Gilroy claims Schmidt sexually and emotionally abused him and other boys.
Only by speaking with the other boys did Gilroy summon the courage to report the abuse, he said. Gilroy said he was 8 or 9 when he told his mother, who called the police. As a result of Gilroy’s efforts, he told The Daily Beast, Schmidt was arrested in 1983 and convicted of molesting him.
Three decades later, Gilroy learned that his ordeal could have been avoided entirely. In 2012, a court order made public thousands of Boy Scout files on leaders accused of sexual abuse. One of the files was about Schmidt.
“That’s why I’m coming forward now,” Gilroy said. “They had documentation about him, prior to him assaulting me, and they covered it up. The fact that they knew about that prior, and covered up.”
The Boy Scouts leadership kept “ineligible volunteer” files to “track a variety of transgressions” that adults committed against scouts. The files were subdivided into several categories including “perversion”—the category that encompasses child sexual abuse. Gilroy’s lawsuit claims that by 1972, BSA had thousands of perversion files, many of which were subsequently destroyed. According to Schmidt’s file, his reputation as a sexual abuser was known even by other scouts, who urged leadership to remove him from his position.
During a 1977 camping trip, according to the files, a scout claimed Schmidt tried to molest him and other boys. The boy claimed Schmidt had “stuck his hands” down two boys’ pants, the file said. “I knocked his hand away and rolled over,” the boy wrote.
That night, the boys slept in Schmidt’s tent, where he told them the Camp Tapawingo site was surrounded by wild animals. “I was scared because of this and because he said there was something out there,” the boy wrote. “He said it was a wolverine but I knew there were no wolverines around that area.”
Schmidt’s file also includes correspondence between BSA officials, letters from attorneys representing Schmidt’s accusers, and news clippings about the abuse allegations. The file reveals how Boy Scouts leadership initially responded to the allegations.
Black, the Idaho supervisor who first forwarded the complaint to the Boy Scouts’ national offices, wrote a letter in which he described confronting Schmidt.
“If he was guilty, he would probably back out” of the Scouts, Black wrote of his reasoning before discussing the allegations with Schmidt.
Instead, Black reported that Schmidt blamed his accuser.
“Jim said he was aware of the camp accusations but that they are two years old and that he had taken them to his lawyer and that he thought it had been cleared up,” Black wrote. “He claimed that the boys harassed him at the zoo and at other places.”
Black wrote he also reached out to the troop’s sponsor, who “felt that the accusations [against Schmidt] were unjust but agreed to be alert to the situation.”
Schmidt reportedly agreed to stay out of Camp Tapawingo, but said he wanted to continue working with his own troop. His request was granted. “As far as I know, everything is under control,” Black wrote.
Three years later, Schmidt allegedly began molesting Gilroy and other boys in his troop.
Gilroy’s story mirrors those of the four other plaintiffs, whose troop leaders were also accused of abuse and subsequently convicted of child molestation. The three other accused scoutmasters—Lawrence Libey, Doug Bowen, and Larren Arnold—were allowed to work with children for years before finally being removed from the Scouts program, according to the lawsuit.
Libey was even promoted after another scoutmaster reported him to the Elks Lodge board sponsoring their troop, the lawsuit alleged.
“The board chose Libey to lead the troop instead of the Scoutmaster who had reported his concerns,” the suit reads. “Shortly thereafter, Libey became the sole Scoutmaster of Troop 156.”
Gilion Dumas, one of the attorneys representing Gilroy and the other plaintiffs, said abusers had multiple ways of remaining in the program, even after they were accused of molestation. Leadership would regularly put scout leaders on probation instead of adding them to its growing pile of “ineligible volunteers,” Dumas told The Daily Beast.
“There was no set criteria for when they’d put somebody on probation,” she said. “They could put somebody on probation because he promised not to molest a kid again, or if he went into counseling, or if he was only caught showing kids pornography.”
After two years of good behavior, Dumas said, volunteers accused of abuse were reinstated and their probation files were destroyed.
“The only reason we even know that probation policy existed would be if someone was on probation and they got caught actually molesting kids, then there’d be a note in the permanent file that said they had been on probation,” Dumas said. An unknown number of permanent files were “systematically” destroyed in the ’70s in what Dumas described as a “purge.”
Dumas said Boy Scouts leadership has been keeping files on scoutmaster misconduct since the 1910s, but the oldest files only date back to 1946. BSA did not respond to a request for comment on this allegation.
“They used to have a policy of systematically destroying the files if they learned a perpetrator had died or if they determined, from the date, that the man had turned 70,” Dumas claims. “They just destroyed the file with the thought that, ‘Oh, he’s too old to abuse someone.’”
Gilroy said he hoped coming forward under his own name would encourage other victims to speak out.
“That’s why I’m using my name, that’s why I’m using my picture, is to embolden other victims to have the courage to step forward and say they were hurt, and not hide behind the shame,” he said. “Because there’s been a lot of shame about what happened, and now’s my chance to fix that. I know I have nothing to be ashamed of, but that doesn’t mean I don’t feel ashamed because of it.
“Now’s my chance to step up, step forward, and try to be a voice for a lot of people who are too afraid.”
Would A Permanent Ban From Ever Working With Children Be Too Harsh For Child Sex Abusers?
The Boy Scouts of America along with other organizations are facing legal pressure have all turned to bankruptcy protection in recent years. More than 20 Catholic dioceses and religious orders have filed for chapter 11 protection to negotiate payouts to thousands of victims. And last week USA Gymnastics, the governing body for the sport, filed for bankruptcy as it faces lawsuits from decades-long sexual abuse by the national team’s former doctor Larry Nassar.
When a perpetrator intentionally harms a minor physically, psychologically, sexually, or by acts of neglect, the crime is known as child abuse. This page focuses specifically on child sexual abuse and the warning signs that this crime may be occurring.
What Is Child Sexual Abuse?
Child sexual abuse is a form of child abuse that includes sexual activity with a minor. A child cannot consent to any form of sexual activity, period. When a perpetrator engages with a child this way, they are committing a crime that can have lasting effects on the victim for years. Child sexual abuse does not need to include physical contact between a perpetrator and a child. Some forms of child sexual abuse include:
• Exhibitionism, Or Exposing Oneself To A Minor
• Masturbation In The Presence Of A Minor Or Forcing The Minor To Masturbate
• Obscene Phone Calls, Text Messages, Or Digital Interaction
• Producing, Owning, Or Sharing Pornographic Images Or Movies Of Children
• Sex Of Any Kind With A Minor, Including Vaginal, Oral, Or Anal
• Sex Trafficking
• Any Other Sexual Conduct That Is Harmful To A Child’s Mental, Emotional, Or Physical Welfare
What Do Perpetrators Of Child Sexual Abuse Look Like?
The majority of perpetrators are someone the child or family knows. As many as 93 percent of victims under the age of 18 know the abuser. A perpetrator does not have to be an adult to harm a child. They can have any relationship to the child including an older sibling or playmate, family member, a teacher, a coach or instructor, a caretaker, or the parent of another child. According to 1 in 6, “[Child] sexual abuse is the result of abusive behavior that takes advantage of a child’s vulnerability and is in no way related to the sexual orientation of the abusive person.”
Abusers can manipulate victims to stay quiet about the sexual abuse using a number of different tactics. Often an abuser will use their position of power over the victim to coerce or intimidate the child. They might tell the child that the activity is normal or that they enjoyed it. An abuser may make threats if the child refuses to participate or plans to tell another adult. Child sexual abuse is not only a physical violation; it is a violation of trust and/or authority.
How Can I Protect My Child From Sexual Abuse?
A Big Part Of Protecting Your Child Is About Creating A Dialogue. Read More To Learn About Creating This Dialogue And Keeping Your Child Safe:
What Are The Warning Signs?
Child sexual abuse isn’t always easy to spot. The perpetrator could be someone you’ve known a long time or trust, which may make it even harder to notice. Consider the following warning signs:
• Bleeding, Bruises, Or Swelling In Genital Area
• Bloody, Torn, Or Stained Underclothes
• Difficulty Walking Or Sitting
• Frequent Urinary Or Yeast Infections
• Pain, Itching, Or Burning In Genital Area
• Changes In Hygiene, Such As Refusing To Bathe Or Bathing Excessively
• Develops Phobias
• Exhibits Signs Of Depression Or Post-Traumatic Stress Disorder
• Expresses Suicidal Thoughts, Especially In Adolescents
• Has Trouble In School, Such As Absences Or Drops In Grades
• Inappropriate Sexual Knowledge Or Behaviors
• Nightmares Or Bed-Wetting
• Overly Protective And Concerned For Siblings, Or Assumes A Caretaker Role
• Returns To Regressive Behaviors, Such As Thumb Sucking
• Runs Away From Home Or School
• Shrinks Away Or Seems Threatened By Physical Contact
Where Can I Get Help?
• If you want to talk to someone anonymously, call the National Child Abuse Hotline at 800.4.A.CHILD (422-4453), any time 24/7.
• Learn more about being an adult survivor of childhood sexual abuse
• To speak with someone who is trained to help, call the National Sexual Assault Hotline at 800.656.HOPE (4673) or chat online at online.rainn.org
More Than 12,000 Boy Scout Members Were Victims Of Sexual Abuse, Expert Says
An expert who has been working with the Boy Scouts revealed that there may have been as many as 7,819 allegedly sexually abusive troop leaders and volunteers in the storied organization, according to newly released court documents.
More than 7,800 individuals allegedly abused 12,254 victims, according to the court testimony.
These figures were released Tuesday by attorney Jeff Anderson, whose firm regularly represents victims of sexual abuse and has been involved in numerous clerical sexual abuse cases.
The new testimony was entered into the court record as part of a January trial about child sex abuse at a Minnesota children’s theater company.
One of the expert witnesses who testified was Dr. Janet Warren, who is a professor in the Department of Psychiatry & Neurobehavioral Sciences at the University of Virginia’s medical school.
Warren testified that she has been “on private contract” with the Boy Scouts of America for the past five years, evaluating its handling of sexual abuse within the organization from 1944 through 2016.
Warren testified that she and her team worked with the group’s ineligible volunteer files, which have sometimes been referred to as perversion files.(
In her January court appearance, Warren said that she and her team have coded through all of those files, determining that there were “7,819 perpetrators who they believe were involved in sexually abusing a child.”
“From reviewing all these files, we identified 12,254 victims,” Warren said.
Anderson publicly released those numbers at a news conference Tuesday, saying 130 of those perpetrators are in New York and could face legal repercussions. Earlier this year state lawmakers passed the Child Victims Act, which allows claims of sexual abuse from any time period to be brought forth in spite of existing statutes of limitations for one-year period starting last August.
“The disclosure made by Dr. Janet Warren really sounded the alarm to us,” Anderson said.
The Boy Scouts of America released a statement after the disclosure, expressing sympathy for the victims and noting the work the organization has done to protect children.
“We care deeply about all victims of child abuse and sincerely apologize to anyone who was harmed during their time in Scouting. We believe victims, we support them, and we have paid for unlimited counseling by a provider of their choice,” the organization said in a statement to ABC News. “Nothing is more important than the safety and protection of children in Scouting and we are outraged that there have been times when individuals took advantage of our programs to abuse innocent children.”
The organization confirmed it has maintained the Volunteer Screening Database since the 1920s and “at no time have we ever knowingly allowed a perpetrator to work with youth, and we mandate that all leaders, volunteers and staff members nationwide immediately report any abuse allegation to law enforcement.”
In the statement, officials also confirmed that Warren has worked with the Boy Scouts of America since 2013 to conduct ongoing research about the database and provide recommendations for improvement.
The existence of the abuse database is not new but the scope of the abuse is. In 2012, more than 14,000 pages of documents relating to abuse by 1,247 scout leaders was released in connection to a case in Oregon. That same year, The Los Angeles Times created a database detailing about 5,000 men and a small number of women tied to the Boy Scouts who were expelled in connection to sexual abuse.
Warren’s number shows a significant jump in that number and Anderson is calling for the Boy Scouts of America to make the list public.
“This is information that the Boy Scouts has and has had for several years… [and is still] keeping secret today,” Anderson said.
The Boy Scouts said “every instance of suspected abuse is reported to law enforcement.”
“Additionally, all of the names on the ‘Anderson List’ are publicly available; all of these individuals were removed from Scouting and reported to law enforcement,” the Boy Scouts said in a statement.
Critics, like Anderson, urge the Boy Scouts of America to be more transparent with the information they hold about the individuals facing allegations.
“The Boy Scouts of America have never actually released these names in any form that can be known to the public … they never alerted the community that this teacher, this coach, this scout leader … is known to be a child molester,” Anderson said.
The Boy Scouts did not respond to a request for comment on Anderson’s claims that the entire list of 130 previously disclosed alleged abusers in New York should be made public.
Boy Scouts Tap Outsider CEO to Navigate Legal Crisis
The organization hired a former human-resources officer as chief executive as it weighs a possible bankruptcy to cope with sex-abuse lawsuits.
The Boy Scouts of America hired a former energy executive as CEO, reaching for an external leader as the group struggles to attract a new generation of youth and navigate a wave of sex-abuse lawsuits.
The organization’s national executive board named Roger Mosby, the longtime top human-resources officer at energy company Kinder Morgan Inc., as chief executive and president, according to a memo sent Sunday to Boy Scouts volunteers.
His hiring comes at a crisis point for the Boy Scouts, founded in 1910, as the group faces lawsuits alleging sexual misconduct by employees and volunteers dating back as far as the 1960s. The cases have been fueled by state laws that have extended the statute of limitations for victims to sue.
Facing mounting legal exposure, the Boy Scouts have explored filing for bankruptcy to create a centralized forum for negotiations, set a deadline for alleged victims to come forward and alleviate the cost of defending hundreds of sexual-misconduct claims simultaneously.
The organization said it hasn’t decided whether to pursue bankruptcy, but officials have acknowledged the increasing number of lawsuits has put financial pressure on the Boy Scouts. Some alleged victims have opted to settle with the organization in expectation of a bankruptcy filing. Others are waiting, hoping they can marshal the organization’s assets with help from a bankruptcy court and obtain a better settlement, according to lawyers suing the Boy Scouts.
The group is also confronting declining membership numbers and shifting cultural norms that are testing its place in American society. The Boy Scouts have more than 2.3 million youth members.
To stay relevant, in recent years it has opened its doors to girls, transgender youth and gay scout leaders while changing its flagship program name in an attempt to be more inclusive.
Some of those efforts have alienated a core partner, the Church of Jesus Christ of Latter-day Saints, which is officially parting ways with the Boy Scouts on Tuesday.
The appointment of Mr. Mosby marks a departure from the organization’s past practice of promoting internally to fill its top ranks.
Although he hasn’t worked for the organization Mr. Mosby is a longtime volunteer with regional Boy Scouts councils. He succeeds Mike Surbaugh, who took a medical leave of absence in November after a four-year tenure as CEO.
“Most of my career was spent learning to adapt to and manage change,” Mr. Mosby told The Wall Street Journal. “In my experience, a successful organization’s values don’t change, but it has to be flexible so it can meet the needs of a changing world.”
After retiring from Kinder Morgan in 2015, Mr. Mosby ran his own consulting firm focused on executive coaching. He said he hoped to “lead the Boy Scouts out of some current challenges and into a new decade serving more youth, families and communities across America.”
The organization’s survival depends on developing a strategy to cope with a wave of lawsuits alleging sexual misconduct and abuse.
Other organizations under pressure from sexual-misconduct claims have used chapter 11 reorganizations to stay viable and to repay victims. More than 20 Catholic dioceses and religious orders facing abuse claims have filed for bankruptcy, as did USA Gymnastics after decades of sexual abuse by its national team’s former doctor was exposed.
The Boy Scouts organization has defended its record of protecting children, pointing to expert analysis that it said showed less incidence of sexual abuse in the organization than in society as a whole.
California in particular is expected to generate new exposure for the Boy Scouts after the state created a three-year window, beginning Jan. 1, during which lawsuits can be filed regardless of when the alleged abuse occurred.
New York, New Jersey and North Carolina have also passed laws opening the courthouse doors for claims that would otherwise be barred. Defending these claims has put financial pressure on the Boy Scouts, in both legal expenses and settlement payouts.
Bankruptcy would also stop the process of discovery in current lawsuits and stop them from progressing further. Tim Kosnoff, a lawyer for hundreds of alleged abuse victims, said the organization is bankrupt already and “needs to file its papers now and get on with it.”
Some victims’ lawyers have been reluctant to assign a dollar value to sex-abuse claims in talks with the Boy Scouts’ lawyers before the full extent of the organization’s liabilities is known.
“They didn’t realize the gravity of the problem against them in financial terms,” said Paul Mones, a lawyer who won a nearly $20 million jury verdict against the Boy Scouts in 2010 in a case that shed light on the organization’s internal files on sex-abuse allegations.
A representative for the Boy Scouts said “we steadfastly believe that one incident of abuse is too many and we are continually improving all of our policies to prevent abuse.”
Boy Scouts Face Landmark Sex-Abuse Lawsuit In Washington, D.C.
Plaintiffs hope district’s new statute-of-limitations law can apply to abuse that occurred in other states.
A group of men who allege they were sexually abused when they belonged to the Boy Scouts of America filed a lawsuit in Washington, D.C., against the organization, testing the limits of the district’s new statute-of-limitations law.
The district recently enacted a measure allowing child sex-abuse victims who hadn’t been able to file civil claims because of statutes of limitations to sue the people responsible for the offense and the organizations to which they belonged. The law opened a two-year period, which began in May, to file a claim and generally applies to child sex-abuse victims up to the age of 40.
Eight plaintiffs, who filed the lawsuit in federal court in Washington on Monday, say they were abused in states that still have statute-of-limitations laws preventing them from suing. Their lawyers said the district is the appropriate place to file the lawsuit, in part, because the Boy Scouts were incorporated and domiciled there.
It will be up to the courts to determine whether the new law can apply to civil claims for sex abuse that took place outside the district’s jurisdiction.
One plaintiff alleges he was abused by an assistant scoutmaster in the Boy Scouts in Florida during the 1990s. That state’s statute of limitations blocks him from filing a lawsuit there.
The strategy applied in the new lawsuit might be the only way for some victims to seek redress, the lawyers said. If the plaintiffs succeed, it could expose the Boy Scouts to a new wave of lawsuits.
“If they didn’t have this option because of the vagaries of where they happen to live or where the abuse happened, they wouldn’t have any other remedy,” said Aitan Goelman, one of the plaintiffs’ lawyers. “It really doesn’t make a lot of sense, with child sex abuse being the national or international problem that it is and the Boy Scouts of America being the national organization that it is.”
The attorneys, who represent about 1,600 clients who allege they were sexually abused in the Boy Scouts, said they plan to file more lawsuits against the organization in the district on behalf of hundreds of clients.
“We care deeply about all victims of child abuse and sincerely apologize to anyone who was harmed during their time in Scouting. We are outraged that there have been times when individuals took advantage of our program to abuse innocent children,” the Boy Scouts said in a statement. “We steadfastly believe that one incident of abuse is one too many, and we are continually improving all of our policies to prevent abuse.”
The organization has also said it has put measures in place that protect children who join the Boy Scouts.
Nine states passed similar laws in 2019 creating temporary time periods allowing sex-abuse victims to pursue financial claims regardless of when the abuse occurred. California and North Carolina’s laws went into effect in January. New Jersey’s measure went into effect in December.
The Boy Scouts of America has said it supports retroactive changes to civil statutes of limitations if an organization knowingly concealed or otherwise withheld evidence of wrongdoing.
But the group has concerns with new laws that impose retroactive liability on organizations that didn’t have knowledge of the specific misconduct underlying an allegation of abuse, Boy Scouts officials have said.
The organization, which has also been grappling with a decadeslong drop in membership, has also said it is considering filing for bankruptcy because of the surge of lawsuits expected. A bankruptcy filing would temporarily halt existing lawsuits and block new ones.
The Boy Scouts also recently tapped Roger Mosby, a former executive from Kinder Morgan Inc., to serve as the organization’s chief executive and president. The leadership change followed the retirement of Michael Surbaugh, who held the chief executive and president post for more than four years.
Boy Scouts Bankruptcy Strategy Would Pay Victims But Protect Most Assets
Facing hundreds of sexual-abuse lawsuits, the Boy Scouts are preparing to shield local councils and the assets they hold during a potential bankruptcy.
The Boy Scouts of America has drawn up a strategy for coping with a wave of sexual-abuse claims through a possible bankruptcy filing while protecting local scouting councils and the billions of dollars in assets they hold, according to people familiar with the matter.
Inundated with roughly 300 lawsuits alleging sexual misconduct by employees and volunteers, the Boy Scouts are considering a bankruptcy filing covering the national governing body but excluding 261 local councils, these people said.
A bankruptcy filing would represent a dramatic step by the Boy Scouts, founded in 1910, to protect their financial wherewithal and compensate alleged victims of sexual abuse as shifting cultural norms test the group’s appeal to the next generation of American youth. The Wall Street Journal reported in late 2018 the Boy Scouts were considering bankruptcy.
While the organization hasn’t decided whether to begin chapter 11 proceedings, it said on an internal conference call Monday that a committee of local councils would be formed to represent their interests in a potential bankruptcy, the people said.
Membership numbers are declining, and some of the Boy Scouts’ efforts to broaden their appeal, such as opening their doors to girls, transgender youth and gay volunteers, have backfired.
Meanwhile states including California and New York have extended the statutes of limitation for sexual-abuse claimants, opening the courthouse doors for former scouts claiming they were sexually abused, regardless of when the alleged misconduct occurred.
The extended deadlines have fueled a wave of lawsuits, stressing the Boy Scouts’ finances. The national organization historically has picked up the cost of defending and settling claims against local councils when they too are named as defendants, people familiar with the matter said.
By placing the national organization but not the local councils into bankruptcy and funneling sexual-abuse claims to a compensation trust, the Boy Scouts are following a strategy of religious nonprofits that moved through bankruptcy over the past 15 years and limited the assets available to creditors using trusts, separately incorporated entities and other financial devices.
Lawyers for former scouts alleging they were sexually abused believe there isn’t enough money to fund the trust properly without dipping into the assets of the local councils, which are separate nonprofits with their own boards, properties, investments and endowments.
These regional groups hold roughly 70% of the Boy Scouts’ wealth, according to a Wall Street Journal analysis. A bankruptcy filing by only the national council could erect barriers to victims trying to collect from local councils. Some councils facing significant abuse claims still could contribute to the victims’ trust, but their participation would be voluntary, according to people familiar with the matter.
Tim Kosnoff, an attorney representing hundreds of alleged victims, said “there is an extremely compelling argument” that local council assets can’t be placed off limits from alleged victims.
“The bankruptcy court is going to have to resolve this issue, which is, are those assets available to pay the claims of creditors?” Mr. Kosnoff said. “I feel more confident in our argument than in theirs.”
The national Boy Scouts council holds $1.4 billion in assets, according to the latest tax filings. But other affiliated nonprofits including the local councils separately hold about $3.3 billion in assets, according to a Wall Street Journal analysis of the most recently available Internal Revenue Service data, which largely covers 2018 tax filings. The Journal tallied assets for almost 400 nonprofits registered with the IRS under the Boy Scouts’ umbrella.
Placing the national council in bankruptcy would make its unencumbered assets available to fund a victims’ compensation trust. However, some major Boy Scouts assets are already pledged as collateral securing loans. That includes the 140,000-acre Philmont Ranch in New Mexico, one of four major adventure bases that feed significant revenue to the national council, along with events like the National Jamboree, tax records show.
With $151 million in assets, the Sam Houston Area Council in Texas is the largest of the local councils, followed by the Atlanta Area Council, which has more than $78 million in real estate, investments, equipment and other assets, and the Michigan Crossroads Council, at $59 million in assets. In New York and New Jersey, local councils and affiliated nonprofits control, in the aggregate, more than $200 million in assets that are potentially vulnerable due to laws that opened the window on lawsuits in those states.
The committee of local councils is represented pro bono by Wachtell, Lipton, Rosen & Katz LLP and led by Richard Mason, a bankruptcy attorney at the firm and president of the Greater New York Councils.
The Boy Scouts said they are committed to equitably compensating victims and “had hoped to achieve that vital outcome through negotiations over the last year.”
“Unfortunately, we have not yet been able to reach an agreement with victims’ attorneys and are asking local councils to share information, so all parties are working with facts, rather than speculating,” the Boy Scouts said.
Like the Catholic dioceses and religious orders that have used bankruptcy to tamp down claims from victims of sexual abuse, the Boy Scouts can take advantage of nonprofit accounting rules to push assets out of view, said Marci Hamilton, a constitutional law scholar and founder of Child USA, a Philadelphia-based nonprofit focused on child abuse and medical neglect.
The bankruptcy system was designed to preserve businesses while victims of alleged sexual abuse take a back seat, said Ms. Hamilton, who has consulted on some diocesan bankruptcies.
Filing for chapter 11 would supply the Boy Scouts with a centralized forum for negotiations while potentially alleviating the cost of defending hundreds of sex-abuse claims simultaneously. Under bankruptcy protection, the Boy Scouts could also curtail the newly expanded statutes of limitations, setting a deadline by which alleged victims must come forward or be forever barred from collecting.