Boy Scouts’ Bankruptcy Deals a Blow to Catholic Families

The BSA now joins Church dioceses in filing for bankruptcy over sex-abuse claims, although the legal contexts are different in some respects.

The Boy Scouts of America — its national headquarters is shown in Irving, Texas — filed for Chapter 11 bankruptcy in Delaware on Feb. 18.
The Boy Scouts of America — its national headquarters is shown in Irving, Texas — filed for Chapter 11 bankruptcy in Delaware on Feb. 18. (photo: Bruce Andersen/CC BY-SA 3.0/Wikimedia Commons)

BUFFALO, New York — For Jennie Marinaro, a Catholic and a scouting parent, the Boy Scouts of America’s announcement of bankruptcy as a result of decades of failures to protect children from sex abuse was heartbreak upon heartbreak.

“It bothers me now that two organizations I am involved with are involved in covering up sexual assault,” Marinaro told the Register. The Buffalo-area mom said she had stopped donating money to the Catholic Church as her own diocese goes through a painful reckoning of the sex-abuse scandal. And while she feels her own scouting troop cares about protecting children, the bankruptcy announcement has her feeling deeply conflicted.

The Boy Scouts of America filed for Chapter 11 bankruptcy in Delaware on Feb. 18. The 110-year-old youth organization is seeking to put an end to hundreds of sex-abuse lawsuits as well as protect from further litigation its 261 local councils and hundreds of local organizations chartering its youth units.

The BSA put up a special website that explained the national organization filed for bankruptcy in order to restructure and fulfill two mandates: first to “social and moral responsibility to equitably compensate all victims who were abused during their time in scouting” and “a duty to carry out our mission for years to come.”

“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,” Jim Turley, national chairman of the Boy Scouts of America, said in an open letter.

More than 12,000 boys are estimated to have been sexually abused in scouting, and the BSA has identified 8,000 scout leaders in its database that sexually preyed on children between 1944 and 2016.

The organization today has 2.2 million youth members, both girls and boys, in its Cub Scout, Scouts BSA, Sea Scout, Venturing and Explorer programs, as well as 800,000 adult volunteers. The BSA maintains that 90% of the abuse cases date from the 1980s and earlier and claims its youth-protection policies and procedures are among the strongest in the world.

The BSA announced the bankruptcy plan would create a compensation trust fund for anyone in its programs that had been victimized. The organization has assets exceeding $1 billion and estimated in its bankruptcy filing that it had between $500 million to $1 billion in liabilities.

“I want you to know that we believe you, we believe in compensating you, and we have programs in place to pay for counseling for you and your family by a provider of your choice,” Turley said in his letter. He explained that BSA had partnered with 1in6, a national organization for male survivors of sexual abuse and assault, so survivors could “anonymously access vital support from trained advocates when and how you need it.”

Local councils, which are separately incorporated, have not filed for bankruptcy. The BSA explained that it was working in the best interests of local councils by filing the bankruptcy. The BSA has 261 councils, which collectively have property estimated at $3.5 billion (according to a Wall Street Journal analysis), but individually may not have the financial resources or unrestricted assets to pay abuse settlements and survive. The BSA’s filing indicates that it has asked the bankruptcy court to make local councils and chartering organizations “protected parties” from sex-abuse lawsuits against the BSA under its restructuring plan.


Mixed Feelings From Scouting Families

Across the board, local councils and the National Catholic Committee on Scouting are sending assurances to members that scouting will continue at the local level and is not immediately affected by the national BSA’s bankruptcy filing.

Jim Weiskircher, the NCCS’ chairman, told Catholic News Service that all scouting councils and units at the local level will carry on “business as usual, while monitoring the situation.” The Register sought further comment from the NCCS, but did not hear back by the time of this article’s publication.

Marinaro said she received an email from her local council, the Greater Niagara Frontier Council, assuring her that the national organization’s bankruptcy would not affect local programming. It stated the local council was not filing for bankruptcy, scouting was safer than ever, and that restricted donations “can only be used for their designated purpose.”

But Marinaro took a dim view of BSA’s motives, since the Chapter 11 filing means it will avoid jury trials.

“I personally feel that they did it so they could compensate less, since a jury would not take child abuse and sexual assault lightly,” she said.

Marinaro also said that while her own local troop takes children’s safety seriously, she makes sure she is present for her children’s activities.

“I just think, on a whole, people need to stop just dropping their kids off places and hoping for the best,” she said.

Jennifer Fitz, a Catholic mother of an eighth-grade girl who is part of a new all-girls BSA troop in South Carolina, told the Register that the topic has not yet come up in casual conversation among parents.

“Having looked at the announcement on the BSA website, it looks to me like they are attempting to structure this in a way that will protect the local troops,” she said. “So if that works out, we’ll be in great shape, since locally we are very strong on the ground.”

But Fitz acknowledged that in the back of parents’ minds are the sex-abuse cases that are fueling the bankruptcy.

“Our leaders are scrupulous about following safe-conduct procedures, which is good, but as a parent you’re always going to be thinking about that,” she said.

An adult Catholic Eagle Scout heavily active in scouting in the Great Lakes region (who asked that his name be withheld) told the Register that the BSA’s bankruptcy announcement did not come as a surprise.

“While it’s a shock, it’s not a surprise to me,” he said, adding that he believed the BSA had been restructuring its assets long in advance of this announcement.

Still, he did not trust BSA’s assurances that local councils and programming would not be affected.

“I feel there will be an impact, but it will not be immediate,” he said.

The Eagle Scout said he is concerned that BSA’s claim that local councils are distinct from the national organization will have some holes. He added the BSA’s heavy-handed manner in forcing the merger of smaller local councils may come back to haunt them.

“It’s going to be an avenue that lawyers look for,” he said.

The argument is already being made. Mitchell Garabedian, an attorney whose cases contributed to revealing the sex-abuse scandal in the Catholic Church and who is also involved in the litigation against the BSA, acknowledged the argument that the BSA is a “vertically integrated corporation” and said the abuse lawsuits’ discovery process would establish how closely local councils are connected to the national BSA organization.

“After all, they’re in the same business, and they’re in constant communication with each other,” he said. “It’s too late for them to try to distance themselves from each other.”


Liability Questions

Marie Reilly, a University of Pennsylvania law professor who specializes in bankruptcy law, told the Register that creditors want to maximize the number of assets available to satisfy their claims. While attorneys may try to challenge the legal distinctions between the national BSA organization and these local councils, she said the bankruptcy court is going to “apply state law governing incorporation to determine whether those distinctions are going to stand.”

Reilly reviewed the case materials filed with the court and said the completeness of the filing and the proactive steps taken by the BSA’s lawyers indicate that a template now exists for bankruptcy filings over sex-abuse claims that did not exist 20 years ago. She said it seemed the BSA was eager to “get to a resolution as quickly as possible” that avoids expensive litigation and allows it to move forward with its mission.

“It’s a thoughtful strategy to try to control costs,” she said.

Reilly noted the BSA also asked the court to make judgments about whether some of its properties, like the Philmont Scout Ranch, can be counted as assets for creditors. She said those questions “are going to turn on whether the property was gifted to the Boy Scouts for a special purpose.” For example, Reilly said that if a BSA property is restricted to being a wilderness preserve, the land cannot simply be sold and repurposed for shopping malls.

The legal theory of BSA’s liability is different from the Catholic Church, where 24 U.S. dioceses have declared bankruptcy. While the national BSA and local councils are legally different entities, similar to dioceses and parishes, Reilly pointed out that in the Catholic Church, bishops and chanceries made the hiring decisions — not parishes — and covered up sexual abuse by their own clergy employees. But in the case of the Boy Scouts, the local organizations made the hiring decisions.

“In the case of the Boy Scouts, it will be interesting to see how liability is established against the national organization for decisions about abusive people that were made at the local level,” she said.

The liability theory for the BSA hinges on negligence: that local councils reported to the national organization their hirings and firings of scout leaders and volunteers but the national BSA organization, which was tasked with keeping a database of this information, failed to pass on that information effectively to other local scouting organizations.

“Even if the Boy Scouts as a national organization might be able to assert a defense, I’m not sure that’s what they want to do,” Reilly said. “Because it will just push litigation on to the locals, and they’ll just get destroyed any way.”

Peter Jesserer Smith is a Register staff writer.