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Boy Scouts Of America Files For Bankruptcy As It Faces Hundreds Of Sex-Abuse Claims

The Boy Scouts of America has $1.4 billion in assets. The organization says it will use the Chapter 11 process to create a trust to provide compensation for victims.

Faced with hundreds of sexual abuse lawsuits, the Boy Scouts of America filed for bankruptcy. // AP, Tony Gutierrez

Updated at 10:30 a.m. ET

The Boy Scouts of America has filed for bankruptcy, a sign of the century-old organization's financial instability as it faces some 300 lawsuits from men who say they were sexually abused as Scouts.

The organization says it will use the Chapter 11 process to create a trust to provide compensation to victims. Scouting programs will continue throughout.

The Boy Scouts had been exploring the possibility of bankruptcy since at least December 2018, when the group hired a law firm for a possible Chapter 11 filing. Chapter 11 usually involves the debtor making a reorganization plan to keep its business alive and pay its creditors over time.

The filing was made in Delaware and is expected to set a new deadline for victims' claims to be made.

The Boy Scouts also published a carefully worded open letter to victims of abuse. The letter, signed by BSA National Chair Jim Turley, reads in part:

"I am outraged that individuals took advantage of our programs to commit these heinous acts.

"I am also outraged that there were times when volunteers and employees ignored our procedures or forgave transgressions that are unforgivable. In some cases, this led to tragic acts of abuse. While those instances were limited, they mean we didn't do enough to protect the children in our care — to protect you.

"On behalf of myself and the entire Scouting community: I am sorry. I am devastated that there were times in the past when we failed the very children we were supposed to protect."

The letter encourages people who were abused to come forward and file claims so they can receive compensation from the trust that will be created.

Amid high-profile sexual abuse scandals in organizations from the Catholic Church to USA Gymnastics, some states have changed their laws to allow more time for victims of sexual abuse to sue their perpetrators. That has brought a wave of new lawsuits from victims whose cases were prevented previously by statutes of limitations.

"For years, organizations like the Boy Scouts counted on these laws protecting them," says Paul Mones, an attorney in Los Angeles who is representing many men who are suing the Boy Scouts. "Now those laws are not there, and the Boy Scouts have fallen under their own weight of these abuse allegations and the potential cases that will be filed."

The Boy Scouts' potential liability is large. Mones points to just one case he won in Portland, Ore., in 2010, where the judgment against the organization was nearly $20 million.

For many years, the Boy Scouts had insurance that would cover sexual abuse claims. But in recent years these carriers have been withdrawing coverage, arguing that the Boy Scouts knew about the abuse and didn't tell the insurance companies. That has left the organization with the prospect of having to fund any litigation and settlements itself.

The Boy Scouts' most recent tax filing shows total revenue of more than $285 million. With significant land holdings across the U.S., the organization's assets in 2018 totaled $1.4 billion.

The national organization might hope that its bankruptcy filing will shield the assets of its local councils, similar to how Catholic dioceses were able to protect their properties and parishes from claims.

BSA was clear on this point in its statement on Tuesday: "Local councils, which provide programming, financial, facility and administrative support to Scouting units in their communities, have not filed for bankruptcy. They are legally separate, distinct and financially independent from the national organization."

Local Boy Scout councils and other affiliated nonprofits separately hold $3.3 billion in assets, The Wall Street Journal reported last month.

At least 20 Catholic dioceses in the U.S. have filed for bankruptcy amid the wave of sex abuse lawsuits against the church. Some victims' attorneys have complained that bankruptcy filings shift the emphasis to the diocese's finances, rather than uncovering documents and information about what church leaders knew.

Mones says the Boy Scouts' case could be a warning for any organization that hasn't properly reckoned with reports of abuse.

"If the largest youth organization by far in the United States can be crippled under the weight of doing nothing about their sexual abuse allegations and covering the problem up, I think it is a warning shot across the bow to all churches and youth organizations and schools that have this problem and don't act proactively to resolve it," he says.

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