Bulletin
Investor Alert

March 1, 2021, 10:30 p.m. EST

Bankrupt Boy Scouts offer sex-abuse settlement

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

By Peg Brickley

The Boy Scouts of America are offering cash, artwork and other assets to sex-abuse victims under a bankruptcy plan filed Monday, an opening gambit by the youth group to move past the failures to protect children that have threatened its standing in American society.

Sexual abuse by Boy Scout volunteers has put the organization's survival at risk unless it can build support for its chapter 11 exit proposal, which offers recompense to abuse victims for the damage done to them as children. The Boy Scouts have apologized and said they want to make peace with the 85,000 people who stepped forward after the organization filed for bankruptcy to claim they were sexually abused.

For the Boy Scouts to succeed, a judge in the U.S. Bankruptcy Court in Wilmington, Del., will have to decide that the settlement offer the institution sketched out Monday is fair. Victims will have the chance to vote, as will other stakeholders in the 111-year-old organization.

The chapter 11 plan would set up a settlement trust to evaluate abuse claims and administer payments, drawing on assets contributed by the Boy Scouts. The organization is proposing to contribute a collection of Norman Rockwell paintings, certain oil and gas interests, and the organization's excess cash above a $75 million minimum.

Insurance companies that wrote policies covering the Boy Scouts have big financial interests on the line. Those policies, which victims are counting on for a big portion of the collective compensation, also would be signed over to the trust.

The Boy Scouts turned to bankruptcy more than a year ago as they faced about 275 sex-abuse lawsuits and the potential for many more as states including California and New York suspended statutes of limitations on such claims.

They were following a strategy pioneered decades ago by corporations facing crippling liabilities due to asbestos, a cancer-causing material that was once in wide use. Bankruptcy offered a pathway to preservation for some businesses swamped with product-liability cases numbering into the tens of thousands.

In recent years, bankruptcy has offered a way to resolve a widening range of alleged misconduct or negligence that sparked litigation. Catholic dioceses and religious orders, the governing body for U.S. gymnastics, and Harvey Weinstein's former film studio resorted to bankruptcy to address claims of sexual abuse.

When the Boy Scouts sought bankruptcy, they expected about 12,000 sex-abuse claims to be filed. Instead, about 85,000 claims emerged, making it the largest chapter 11 filed over sexual abuse, dwarfing the combined total of claims in more than two dozen bankruptcies filed by Catholic dioceses and religious orders since 2004.

Sexual predators began infiltrating the ranks of Boy Scout volunteers almost as soon as the organization formed, internal Boy Scout files on abuse reports that date back decades show. The Boy Scouts were forced to divulge thousands of the files in an Oregon abuse case in 2010, offering a hint of the size of the scandal.

The bankruptcy is aimed at restoring the Boy Scouts' brand, compensating victims, protecting critical assets and safeguarding most of the billions of dollars in wealth held by the organization's local councils, which aren't themselves in bankruptcy.

The local councils are being asked to contribute $300 million toward the settlement, in exchange for the same protection from legal liability over sexual abuse that the national organization is seeking. The local councils haven't agreed to support the deal framework and remain in private mediation with victims' lawyers.

Insurers also haven't signed on and have been putting up a fight, suing before bankruptcy to challenge the Boy Scouts' right to tap the policies and casting doubt on the veracity of thousands of claims filed after the bankruptcy for compensation.

Much like the Boy Scouts, insurers owned by Chubb Ltd. and Hartford Financial Services Group Inc. are following a playbook established in the bankruptcies of companies that produced asbestos products. The insurers have argued that prospects of payments from a fat bankruptcy trust has drawn out fraudulent claims, fueled by greedy lawyers whose clients should have to face questioning to determine how much potential fraud may be lurking in the 85,000 claims.

The Boy Scouts have said they believe victims and want to repair the damage. The largest committee of abuse victims has said the insurers are only seeking to intimidate and retraumatize victims to leverage a better deal.

The chapter 11 plan calls for protecting the Boy Scouts' four flagship high-adventure camps -- the Philmont Scout Ranch in New Mexico, Northern Tier in Minnesota and Canada, the Summit Bechtel Reserve in West Virginia, and the Sea Base in Florida.

Andrew Scurria contributed to this article

Write to Peg Brickley at peg.brickley@wsj.com

This Story has 0 Comments
Be the first to comment
More News In
General

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.