USA TODAY International Edition
Does filing bankruptcy go against Scout code?
Sides disagree whether it is an honorable move
It’s the third word in the Boy Scout oath: “Honor.”
The Boy Scouts of America, an organization that built its reputation on perpetuating a well- defined moral code, has sought refuge in bankruptcy court, where promises are broken.
Critics of the Boy Scouts’ Chapter 11 bankruptcy filing on Tuesday say it’s a dishonorable route for the nonprofit, which has proposed paying victims of sexual abuse less than they would have received outside of bankruptcy. Exactly how much less is up in the air.
Defenders say it’s actually an honorable step for the Boy Scouts to face up to its failures, find a path to help compensate victims and stabilize the organization’s finances.
What’s widely agreed upon is that bankruptcy poses a moral conundrum that’s particularly thorny for a group that expects to face about 1,700 claims of sexual abuse dating back several decades.
Any victim whose claim is vetted through the judicial process would be entitled to a share of the settlement funds.
From an ethical perspective, one of the biggest questions of the case is whether the Boy Scouts should be allowed to continue or whether it should be forced to liquidate to pay its creditors the maximum amount possible.
The Boy Scouts of America’s decision to file Chapter 11 bankruptcy amid a sexual abuse crisis is a complicated one for an organization with a well- defined moral code.
Like in other bankruptcy cases involving abuse victims, such as USA Gymnastics and Catholic Church dioceses, bankruptcy law provides a way for the debtor to potentially escape paying its full debts.
The amount paid to victims of abuse by organizations that file for bankruptcy varies widely based on the amount of assets held by and debts owed by each individual entity. For example, in the bankruptcy of USA Gymnastics, which was sued by more than 500 women who said they were abused by longtime physician Larry Nassar, the organization has proposed paying $ 215 million to the victims.
John Manly, an attorney who represents many of the victims in that case, criticized the USA Gymnastics offer, estimating that it would equal about $ 250,000 to $ 300,000 for each woman.
Manly told USA TODAY in January that the proposal was “one more punch to the gut,” saying it “won’t even cover the therapy that these women need, probably for the rest of their lives, and the excruciating emotional toll and pain.”
In the Boy Scouts case, is it ethically acceptable for the Scouts, who pledge “to do my duty ... help other people at all times” and “keep myself ... morally straight,” to escape paying their debts in full?
“Bankruptcy can be a place of reckoning for everyone,” said Pamela Foohey, associate professor at the Indiana University Maurer School of Law, who has studied bankruptcies involving abuse cases. “If there’s not enough money, people aren’t going to get paid.”
Boy Scouts propose victims compensation trust
What bankruptcy does is force the debtor to evaluate its assets and use them to try to pay off its liabilities in the best interests of its creditors while attempting to stay afloat. In that respect, bankruptcy is designed to give organizations like the Boy Scouts a chance to start over.
But at what expense for a group that bases its existence on treating others with dignity?
“They have this internal code that dictates you behave in particular ways – included among those is keeping your promises,” said Peter Jaworski, who teaches ethics at Georgetown University’s McDonough School of Business. “For the reasons they’ve publicly said they’re filing for bankruptcy, it looks on its face like it’s a violation of the Boy Scouts code.”
The Boy Scouts, which said it paid $ 150 million in settlements and legal costs from 2017 to 2019, plans to create a Victims Compensation Trust through the bankruptcy process to pay victims who file claims by an unspecified date to be set soon.
New York state Sen. Brad Hoylman – a former Eagle Scout and a Democrat who co- authored a law for sexual abuse survivors – blasted the bankruptcy filing.
“As a Scout and an Eagle Scout, I learned that civic responsibility should be foremost in our minds as citizens, and it’s extremely disappointing to see the Boy Scouts take this approach, which will shield themselves from that very responsibility,” said Hoylman, whose law gives adult survivors of sexual abuse a one- year window in which to file lawsuits that were previously outside the statute of limitations.
The Boy Scouts said in a statement in response to USA TODAY questions:
“Our decision to file for Chapter 11 is rooted in the values within our Scout Oath and Law. The Boy Scouts of America believes our organization has a social and moral responsibility to equitably compensate all victims who were harmed during their time in Scouting. We also have a duty to carry out our mission for years to come.”
Without bankruptcy, the Boy Scouts’ finances could have deteriorated rapidly as the cost of defending the organization against myriad lawsuits stacked up, potentially leading it to collapse.
Indiana’s Foohey said the bankruptcy process could help sexual abuse victims get paid and provide them a voice in the process, rather than wait indefinitely for a resolution to their cases as the organization disintegrated.
In that sense, she said, it could be a positive development for the victims.
“It’s not dishonorable to file bankruptcy,” she said. “I would argue that it’s actually honorable in some circumstances for a business to say we need to all come together and discuss the extent to which insurance can cover this, the extent ( of) these suits, how widespread they are, and let’s be honest about what our assets are and how much we can truly pay.”
Abused in Scouting, a group of attorneys representing some of the victims, said in a statement that it believes the case “presents an opportunity for exploring a resolution that can” deliver payments to victims and enable the organization to survive.
The law firm Pfau Cochran Vertetis Amala, which represents more than 300 people alleging sexual abuse by Scout leaders, said “the bankruptcy process is generally a positive development for abuse survivors” because “the focus is on identifying the Boy Scouts’ assets and then deciding on a fair way to divide their assets across the people who have filed claims.”
National Boy Scouts seeks to protect local councils
Still, the extent to which the Boy Scouts is willing to pay up is already becoming a sticking point in the case.
With more than $ 1 billion in assets – which include the Philmont Scout Ranch in the New Mexico – the Boy Scouts could be forced to sell some of its biggest treasures to pay victims. But the organization has proposed a restructuring plan that would shield the assets of its local councils from being sold to pay creditors. The precise collective value of the local councils’ assets is unknown, but it’s believed to be larger than the value of the national organization’s assets.
Victims’ attorneys are expected to argue the national organization should not be allowed to protect the local councils.
“I find it extremely objectionable that the Boy Scouts ... after all of the harm that the organization perpetuated on these innocent young souls, are now doubling down and limiting potential awards to survivors,” Hoylman said.
From an ethical perspective, one of the biggest questions of the case is whether the Boy Scouts should be allowed to continue or should the organization be forced to liquidate to pay its creditors the maximum amount possible.
Jaworski, the business ethicist, said it would be a “genuine loss to lose” an organization that “many people have benefited from.”
But legal experts said local councils could form a new entity to oversee them if the national organization went away.
Because of the decades of abuse, the organization has failed the basic expectations of every parent who signed their kids up for Scouts, Jaworski said. “It’s sufficiently egregious that it might be the right thing for the Boy Scouts to disappear.”