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Boy Scouts of America files for bankruptcy amid wave of potential lawsuits

Facing a wave of lawsuits over allegations of sexual abuse, the Boy Scouts of America has filed for bankruptcy.

The long-anticipated Chapter 11 bankruptcy filing will allow the Boy Scouts to keep operating as it reorganizes its finances and handles claims from hundreds of potential victims. It will also give alleged victims a limited amount of time to come forward before being barred indefinitely from seeking compensation.

“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, the president and CEO of the Boy Scouts of America, said in a statement released around 1 a.m. Tuesday. “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 filing early Tuesday punctuates a tumultuous time for the 110-year-old organization, which continues to be one of the largest youth groups in the United States.

Youth membership has declined more than 26 percent in the past decade. This dramatic drop in numbers, coupled with the loss of a key partnership with the Church of Jesus Christ of Latter-day Saints, has left the Boy Scouts struggling to find ways to remain relevant. Last year, it began accepting girls into its namesake program, setting off a recruitment war with the Girl Scouts.

Meanwhile, over the past decade, lawsuits and media investigations have revealed internal Boy Scout documents detailing generations of alleged abusers accused of preying on Scouts. Amid other high-profile child abuse scandals and the #MeToo movement, several states and the District of Columbia have overhauled their statute-of-limitations laws concerning child sexual abuse, opening the door to scores of potential lawsuits against the Boy Scouts.

Lawyers throughout the country have begun representing hundreds of clients and have filed lawsuits in states such as New York and Pennsylvania.

“In a way, this is an acknowledgment finally on the part of the Boy Scouts that they had this enormous problem and the problem is so large that they can’t deal with it themselves,” said Michael Pfau, a lawyer who said he represents about 300 victims. “It is a bit of a day of reckoning for the Boy Scouts.”

But a bankruptcy filing may also limit alleged victims’ ability to “have their story heard in court and their claim ultimately decided by a jury of their peers,” Pfau said.

But Pamela Foohey, an associate law professor at Indiana University who specializes in bankruptcy issues, said the proceedings could allow alleged victims to have a collective voice, to negotiate with the Boy Scouts and its insurance companies to figure out how much property the organization truly has, and how much compensation should be paid out.

But given the deadline for claims, which could come within months of the filing, the bankruptcy process might require alleged victims to come forward before they feel ready to do so, Foohey said.

“If you’re not ready to come forward by then … then you do lose your claim, and you lose your voice,” Foohey said. “That’s part of why bankruptcy is useful for the Boy Scouts. It cuts off the claims.”

Experts and lawyers drew parallels between the Boy Scouts and other embattled institutions that have used bankruptcy to handle costly lawsuits over abuse allegations. Numerous Catholic dioceses filed for bankruptcy after clergy were accused of sexually abusing children. USA Gymnastics filed for bankruptcy in 2018 as it faced 100 lawsuits from more than 350 sexual assault victims of team physician Larry Nassar.

A key question will be whether the Boy Scouts of America will be able to protect the assets of the local councils, which own camps and properties in prime real estate throughout the country. The local councils are incorporated separately but hold 70 percent of the Boy Scouts’ wealth, according to a Wall Street Journal analysis.

Pfau and other lawyers bringing abuse lawsuits against the Boy Scouts said they were skeptical the organization would be able to shield the local councils.

“That is wishful thinking, because in every Boy Scout case we file, the local councils are named,” along with the local sponsoring organizations, such as local churches or schools, Pfau said. Many of these institutions could be implicated in the claims, making for an even more complicated bankruptcy case, said Phau, who specializes in representing victims in abuse cases against institutions such as the Boy Scouts and Catholic dioceses.

“The councils are creatures of the Boy Scouts of America,” said Paul Mones, another lawyer representing victims of alleged abuse. For example, each year, the councils pay annual dues to the national organization and must renew their charters with the national organization.

“How is that going to be teased out?” Mones said. “I think that the Boy Scouts are going to be left with a very serious problem which is what’s going to happen to these councils.”

But in the same way that Catholic dioceses filed for bankruptcy, rather than individual parishes, the Boy Scouts of America national organization is the legal entity that is filing, Foohey said. The local councils should not be part of the case, she said.

“It’s hard to tell exactly who’s on the line for some of these claims,” she added. “The Boy Scouts organization is not very transparent about how it’s set up.”

The bankruptcy process, she said, could help bring more of that transparency.

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Copyright 2019 John B. Wells