Boy Scouts files Chapter 11 bankruptcy in the face of thousands of child abuse allegations
Boy Scouts of America filed for bankruptcy protection early today amid declining membership and a drumbeat of child sexual abuse allegations that have illuminated the depth of the problem within the organization and Scouts’ failure to get a handle on it.
After months of speculation and mounting civil litigation, the Chapter 11 filing by the scouting organization’s national body was unprecedented in both scope and complexity. It was filed in U.S. Bankruptcy Court in Delaware overnight.
The exact effects on Boy Scouts’ future operations are unknown, leading to speculation about the organization’s odds for survival, the impact on local troops and how bankruptcy could change the dynamic for abuse survivors who have yet to come forward. Some fear that at a minimum it will prevent survivors from naming their abuser in open court.
“They’re going into bankruptcy not because they don’t have the money,” said Tim Kosnoff, who has tried thousands of child abuse cases, including many against the Boy Scouts and Catholic Church. “They’re going into bankruptcy to hide … a Mount Everest in dirty secrets.”
In court filings, the Boy Scouts said it faces 275 abuse lawsuits in state and federal courts around the country, plus another 1,400 potential claims.
In a statement, the organization said: “The BSA cares deeply about all victims of abuse and sincerely apologizes to anyone who was harmed during their time in Scouting.”
“The BSA intends to use the Chapter 11 process to create a Victims Compensation Trust that would provide equitable compensation to victims.”
The group said it paid $150 million in settlements and legal costs from 2017 to 2019.
The organization said scouting programs will continue “throughout this process and for many years to come. Local Councils are not filing for bankruptcy as they are legally separate and distinct organizations.”
It is exactly that distinction that victims’ attorneys say will form the core of the legal battle ahead over which assets Boy Scouts must use to pay legal settlements and which can be shielded. The primary debate, they say, will center on property owned by the 266 regional councils and local troops.
Reports of a potential bankruptcy first emerged at the end of 2018, with rumors that the nonprofit youth organization would follow in the footsteps of the Catholic Church, which has faced similar claims of abuse. But unlike the Catholic bankruptcy cases, in which more than 20 individual dioceses have filed for protection, the Boy Scouts’ case will play out on a national level.
Many saw the Scouts’ increase in annual membership fees in October, from $33 to $60, as evidence of financial trouble.
Then on Jan. 1, the Church of Jesus Christ of Latter-day Saints – which for 100 years was among Boy Scouts’ largest partners – followed through on its plan to pull hundreds of thousands of Mormon youth out of Scouts in favor of its own youth program. That withdrawal caused an 18% drop in membership overnight, to fewer than 2 million.
But the nonprofit organization’s chief financial concern, according to victims’ attorneys and bankruptcy experts, is rising liability from abuse lawsuits. The suits have led to battles with insurance carriers, who refused to pay out claims saying the Scouts failed to take effective preventive measures to stop the abuse. In 2018, Boy Scouts sued six of its carriers.
“The problem with Boy Scouts is they’re caught in a vice grip of, on one hand, having insurance companies not paying on these claims that Boy Scouts have already settled, and second having dwindling economic resources on account of paying out money for sexual abuse settlements,” said attorney Paul Mones, who has tried dozens of high-profile cases against Boy Scouts.
The scouting organization has been mired in civil litigation since a landmark case in 2010 that resulted in $19.9 million in damages, the largest ever for a single individual against the Boy Scouts. That case triggered the release of more than 20,000 confidential documents, which became known as the “perversion files.”
Those records named more than 1,000 banned volunteers, revealing that the 100-year-old organization had kept track of suspected and known abusers and failed to consistently report them to police or inform parents or the public of the extent of the problem.
Critics say bankruptcy could thwart public safety
While the bankruptcy filing has long been viewed by some legal experts, and even victims’ attorneys, as the best and most likely course of action, it’s a controversial move for one of the country’s most influential youth organizations.
Boy Scouts currently faces hundreds, if not thousands, of abuse lawsuits. New allegations poured in as efforts to extend the civil statute of limitations for survivors of child sexual abuse gained momentum in recent years.
Thirty-eight states have amended their statute of limitations since 2002, with 10 eliminating civil statute of limitations altogether and 16 reviving expired statutes, according to CHILD USA, a think tank focused on preventing child abuse and neglect.