Sex Abuse Claims Drive Boy Scouts of America to Seek Bankruptcy
(Bloomberg) -- The Boy Scouts of America filed for bankruptcy to protect itself from a rising tide of claims tied to sexual abuse of children in its ranks.
The group filed under Chapter 11 of the bankruptcy code, which allows the organization to keep operating while it works out a plan to pay its debts and design a recovery plan.
Court papers filed in Delaware listed liabilities of up to $1 billion and assets as much as $10 billion. The group said it's setting up a trust fund to compensate victims.
"The BSA cares deeply about all victims of abuse and sincerely apologizes to anyone who was harmed during their time in Scouting. We are outraged that there have been times when individuals took advantage of our programs to harm innocent children," Roger Mosby, chief executive officer, said in a statement. "While we know nothing can undo the tragic abuse that victims suffered, we believe the Chapter 11 process - with the proposed Trust structure - will provide equitable compensation to all victims while maintaining the BSA's important mission."
The Boy Scouts are the latest non-profit group to go bankrupt after allegations that they turned a blind eye to widespread sexual abuse of children in their care. USA Gymnastics and more than 20 dioceses of the Catholic Church sought court protection after facing similar claims.
The national Scout organization could seek to adopt tactics used by corporations and the church to shield their local units from hundreds or even thousands of damage claims. The group said in its statement that the local councils haven't filed for bankruptcy.
The Wall Street Journal estimated that local councils hold about $3.3 billion in assets, citing tax filings for almost 400 nonprofits registered under the Boy Scouts' umbrella with the Internal Revenue Service.
Organizations facing mass individual claims, such as opioid maker Purdue Pharma LP and Catholic dioceses, have resorted to bankruptcy because it provides a controlled process for settling a large number of lawsuits while allowing them to hold on to as many assets as possible.
Such claims have been swelling. Seven states and the District of Columbia passed laws in 2019 that suspend the time limit to file civil sex abuse suits, adding to about half a dozen that already had so-called window statutes. A bankruptcy filing could short-circuit those laws by putting a final deadline on claims.
The Boy Scouts organization was founded in 1910, and until 2020, it had about 2.2 million members. But mounting lawsuits have drained its finances, forcing the Scouts to raise fees, and membership has dwindled.
The group suffered another blow at the start of 2020 when one of its biggest supporters -- The Church of Jesus Christ of Latter-Day Saints -- started its own youth organization and pulled 400,000 members out of the Scouts.
The case is Boy Scouts of America, 20-10343, U.S. Bankruptcy Court for the District of Delaware.
To contact the reporter on this story: Rick Green in New York at [email protected]
To contact the editors responsible for this story: Rick Green at [email protected], Andrew Monahan, Shannon D. Harrington
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