Sex-Abuse Victims Duel With Boy Scouts for Right to Steer Bankruptcy

Wall Street Journal [New York NY]

April 2, 2021

By Peg Brickley

Victims of childhood sexual abuse want to offer a rival reorganization plan for the Scouts, saying they haven’t come up with a viable settlement

Victims of childhood sexual abuse are challenging the Boy Scouts of America for control of the youth group’s multibillion-dollar bankruptcy case, saying they can save scouting’s future while compensating those who have suffered from its history of abuse.

An official committee representing sex-abuse victims said that because the Boy Scouts have been unable to come up with a viable settlement offer, victims themselves should be able to float a competing chapter 11 plan.

“The committee filed this motion because abuse survivors are not fairly treated under the Boy Scouts proposed plan,” said James Stang, lawyer for the committee.

The Boy Scouts have said they need to exit chapter 11 by the end of the summer for financial reasons, but don’t have the support of victims’ groups, which have largely rejected an opening settlement offer.

“We wholeheartedly share the official tort claimants’ committee’s determination and commitment to equitably compensate survivors,” the Boy Scouts said in a statement.

Companies and nonprofits that file for bankruptcy most often retain the exclusive right to propose repayment terms. The committee’s challenge to extended exclusivity for the Boy Scouts amounts to a nuclear option in bankruptcy court that, if approved, could take the chapter 11 case in a radically different direction.

In court papers filed Thursday, the committee sharpened its criticism of the Boy Scouts plan as legally flawed and financially insufficient for the nearly 84,000 men who have stepped forward seeking compensation.

To settle with victims, the organization last month offered to furnish cash, artwork and other assets, plus the rights to insurance policies dating back to 1935. The Boy Scouts also said they would seek $300 million for victims from hundreds of affiliated local councils spread across the country, which aren’t themselves in bankruptcy but are seeking to participate in a broad victim settlement through the chapter 11 proceeding.

This preliminary plan offers an average of $6,100 to each victim, excluding the unknown value of the insurance, according to the committee. Thursday’s court papers revealed for the first time the estimates that survivors have been using in negotiations, yielding an average claim value of $811,215.

Thousands of claims named both the Boy Scouts and the corresponding local council where the victim participated, as well as churches and civic groups that sponsored Scout troops. Some of the largest and wealthiest local councils are facing enough claims to threaten their solvency if they can’t buy peace with victims through the bankruptcy case.

In all, decades of sexual abuse did an estimated $103 billion of damage, according to the committee’s filing, enough to financially wipe out the Boy Scouts and the 253 local councils.

“Virtually all these councils in New York, New Jersey and California would be bankrupt,” said Jason Amala, a lawyer representing victims.

Richard Mason, a lawyer who has been negotiating on behalf of local councils, said the bankruptcy plan that victims want to propose wouldn’t offer fair compensation or preserve the Boy Scouts’ mission. Victims would receive little if local councils across the country were pushed into bankruptcies of their own and liquidated, he said.

Nearly 84,000 claims were filed by a November deadline, making the Boy Scouts the largest sex-abuse-driven bankruptcy, dwarfing the dozens of bankruptcy cases filed by Catholic dioceses and religious orders over the past two decades.

“That the number of claims for some casual and uninformed observers is surprising should not and cannot diminish the sad but undeniable truth that thousands upon thousands of children entrusted to Boy Scout’s care were molested, abused, fondled and raped, stealing their precious youth and causing enormous damages in their lives and the lives of their families,” lawyers for the committee wrote.

The Boy Scouts have apologized for failing to protect children, and say the abuse is in the past, quelled by safety training and protocols. Victims, however, note that more than 11,000 of the abuse claims arose in the mid-1990s, after the safeguards were in place.

The victims want a chapter 11 plan that won’t grant legal immunity to the local councils, which the victims committee says control $4 billion in property, cash and investments. Mr. Mason said the local councils’ unrestricted assets—those available to creditors under state law—are “nowhere near $4 billion.”

Local councils have been instructed that they would need to contribute, and some have already put camp properties on the block to raise funds.

“We are in survival mode as a council,” said Jon Ball, a member and former president of the Silicon Valley Monterey Bay Council in California.

“We hope that the bankruptcy court will honor the scouting movement by orchestrating a financial settlement that is acceptable to the plaintiffs and allows us to continue the scouting movement and doesn’t wipe us out,” Mr. Ball said.