The chapter 11 filing covers the national Boy Scouts organization and automatically halts the hundreds of lawsuits it faces alleging sexual misconduct by employees or volunteers. The Boy Scouts are seeking to compensate claimants through bankruptcy proceedings while protecting 261 local scouting councils across the country and the billions of dollars in assets they hold.
The bankruptcy filing marks a watershed moment in the 110-year history of the Boy Scouts, which for years have been embroiled in lawsuits blaming the organization for failing to screen out sexual predators. It said in court papers that its “ability to deliver its mission to future generations of scouts may be in peril” unless it can reach a broad settlement of hundreds of current and future sex-abuse claims.
Laws passed in California, New York and other states have created temporary windows allowing for sex-abuse lawsuits to be filed regardless of when the alleged abuse occurred, exposing the Boys Scouts to an unprecedented level of potential liability.
These laws took effect in more than a dozen states last year, opening the courthouse doors to more potential claimants. States including Florida, Ohio and Virginia are also considering passing similar legislation.
In an open letter Tuesday to victims of sexual abuse, Boy Scouts National Chairman Jim Turley acknowledged “there were times when volunteers and employees ignored our procedures or forgave transgressions that are unforgiv He said the Boy Scouts’ youth-safety measures are now “the strongest and most effective policies found in any youth-serving organization.”
“I regret that these measures weren’t always in place or weren’t always enough,” Mr. Turley said. “The fact is that predators harmed innocent children in scouting programs, and for this I am deeply sorry.”
Other nonprofits overwhelmed by sex-abuse claims have also turned to chapter 11 to cut down on legal expenses, centralize court proceedings and set deadlines for alleged victims to file claims. Over the past 15 years, more than 20 Catholic dioceses and religious orders have sought bankruptcy to negotiate payouts to thousands of abuse victims. USA Gymnastics, the governing body for the sport, is also using chapter 11 to try to settle lawsuits from decades of sexual abuse by the national team’s former doctor, Larry Nassar.
The Boy Scouts bankruptcy dwarfs those cases—in the number of alleged victims, the size of the assets at stake and the complexity in reaching settlements.
Some sexual-abuse lawsuits also target local councils and other nonprofits, such as churches and civic groups, that sponsored troops. As part of the bankruptcy case, the Boy Scouts are seeking to shield the local councils from continued litigation as well, even though they haven’t filed for bankruptcy.
n court papers, the Boy Scouts said the cost of defending and resolving sex-abuse claims “has become unsustainable,” totaling more than $150 million in settlements and legal fees since 2017. The Boy Scouts generated roughly $394 million in total gross revenue last year, according to court papers.
There are roughly 275 pending lawsuits, and attorneys representing victims have supplied information on roughly 1,400 additional claims that haven’t been filed, roughly 90% of them alleging abuse more than 30 years ago, court papers said.
Since the organization’s founding in 1910, more than 130 million people have participated in Boy Scouts educational programs, which promote outdoors skills, character-building and leadership. It had 2.2 million members as of 2019, according to the organization, but those numbers have been falling for decades.
The Church of Jesus Christ of Latter-day Saints took away about 400,000 members when it ended a long partnership with the Boy Scouts in December and launched a separate youth-leadership program.
Negotiations between the Boy Scouts and lawyers for alleged abuse victims collapsed in November, partly over demands that local councils, which own land and operate troops in many states, make financial contributions to a compensation trust.
Filing for bankruptcy gives the Boy Scouts breathing room to negotiate the creation of a settlement trust with those who have sued and with lenders, insurers and other creditors.
The chapter 11 filing in the U.S. Bankruptcy Court in Wilmington, Del., doesn’t cover the majority of the organization’s wealth. Roughly 70% of all Boy Scouts assets are in the hands of local councils, according to a Wall Street Journal review of tax filings.
Local councils have participated in the organization’s survival strategy, operating through a committee formed to look out for their interests, and will continue to do so throughout the bankruptcy.
Of the assets held by the national council, not all are available to pay sexual-abuse claimants. The famed Philmont Scout Ranch in New Mexico, for example, was pledged as collateral for a line of credit used to meet financial needs, including rising insurance costs because of the lawsuits. Some assets were also donated with restrictions on how the funds could be used. The national council holds $1.4 billion in assets, according to the most recent tax filings.
The Boy Scouts have said they never knowingly allowed a sexual predator to work with youth members and have put rules in place to strengthen protections.
The youth group has also said it supports retroactive changes to civil statutes of limitations if an organization knowingly concealed or otherwise withheld evidence of wrongdoing. But the Boy Scouts have expressed concerns about imposing retroactive liability on organizations that didn’t have knowledge of the specific misconduct underlying an allegation of abuse.
Earlier this month, the Boy Scouts rolled out a five-year partnership with 1in6, a nonprofit group that provides support services to men who have been the victims of sexual abuse. The partnership, 1in6 said, would allow it to expand web-based chat services and double the number of online support groups for men who have been sexually abused.
The Boy Scouts also recently tapped Roger Mosby, a former human-resources executive from energy company Kinder Morgan Inc., to serve as chief executive and president. The leadership change followed the retirement of Michael Surbaugh, who held the chief executive and president post for more than four years.
The organization has undergone huge cultural shifts over the past decade. The Boy Scouts welcomed gay youths to join in 2013, and later gay leaders, the inclusion of whom some conservative members opposed. In another controversial move, the Boy Scouts in 2017 began accepting transgender youth. Then last year, it welcomed girls into the flagship Scouts BSA program after allowing girls into the Cub Scouts in 2018.