Bankruptcy risk for BSA

Sex abuse cases looming after states change laws

“It appears highly probable that the Scouts of America will commence a Chapter 11 mass-tort bankruptcy case in the not too distant future to resolve its legacy liabilities stemming from sexual assaults perpetrated by many of its adult volunteers on Boy Scouts of tender years,” said Jeffrey Schwartz, a bankruptcy expert with the firm McKool Smith based in New York.

This statement follows the rumblings of what could be, according to The Associated Press (AP), the most fateful chapter in the history of the Boy Scouts of America (BSA), based in Irving, Texas.

In the past few months, according to AP, states have begun to change their statute-of-limitations laws. That means victims of long-passed sexual abuse will now be able sue the offender. New York passed a law that will allow such lawsuits beginning in August. Similar bills are pending in California and Pennsylvania. One such bill has arrived at the New Jersey governor’s desk.

Because of these statutory changes, according to AP, lawyers are recruiting clients via internet ads to bring sexual abuse cases against the BSA and sue.

Scouts recite the Pledge of Allegiance at the World Jamboree in Virginia in 2005.

Scouts recite the Pledge of Allegiance at the World Jamboree in Virginia in 2005.

According to Karen Bitar, a partner with Seyfirth Shaw, a law firm based in New York and national co-chair of the firm’s white collar, internal investigations and false claims team, these changes give victims a limited window to assert their claim to restitution.

“This presents a new and lucrative opportunity for those lawyers. Lastly, the #metoo movement has given many victims who would normally have suffered in silence the courage to come forward. I believe this confluence of events is what is leading to the uptick in litigation,” said Bitar

Meanwhile, the BSA is exploring all possible options to contain the damage, including Chapter 11 bankruptcy. They are also defending their current policies.

“We care deeply about all victims of child abuse and sincerely apologize to anyone who was harmed during their time in Scouting,” the BSA said a prepared statement released to the Chronicle. “We believe victims. We support them, and we have paid for unlimited counseling by a provider of their choice. Nothing is more important than the safety and protection of children in Scouting and we are outraged that there have been times when individuals took advantage of our programs to abuse innocent children.”

According to the statement, the BSA has enacted “strong youth protection policies” to prevent abuse, such as mandatory youth protection trainings and a “formal leader-selection process” which includes criminal background checks. The BSA has also maintained a volunteer screening database since the 1920s. This database prevents individual accused of “abuse of inappropriate conduct” from rejoining BSA programs.

“At no time have we ever knowingly allowed a perpetrator to work with youth, and we mandate that all leaders, volunteers and staff members nationwide immediately report any abuse allegation to law enforcement,” the BSA said.

Schwartz said that the BSA does not have a large cash flow. In the event of bankruptcy, the 109-year-old organization could be forced to sell property.

Another point of contention is the BSA’s so-called “ineligible files;” a list of adult volunteers believed to pose a threat of sexual abuse.

Boy Scout spokeswoman Effie Delimarkos told AP that as soon as a volunteer is added to this list, “They are reported to law enforcement, removed entirely from any scouting program and prohibited from re-joining anywhere.”

According to AP, lawyers and litigants hope that court action will cause classified names in the “ineligible files” to be released to the public, or at least put pressure on the BSA to release them.

The BSA has policies and measures in place meant to check for sexual abuse and pedophilia. These measures include criminal background checks for all adult volunteers, according to AP, and the so-called “two-deep leadership,” a policy which requires two adults to accompany a single scout or two scouts to be with a single adult.