In February 2020, the Boys Scouts of America (BSA) filed for Chapter 11 bankruptcy. Bankruptcy was necessary to handle the 300 sex abuse lawsuits against the Boy Scouts.
However, the bankruptcy proceedings are not without controversy. The Boy Scouts did not include property owned by local councils in the bankruptcy filing. The national organization claims these local councils are separate entities. This distinction protects valuable assets from the bankruptcy filing.
The distinction also allowed local councils to apply for Paycheck Protection Program (PPP) loans. If the bankruptcy named the local councils, they would not have been eligible for PPP loans.
These strategies benefit the national organization and local councils. But, they may hurt child sex abuse victims seeking justice and compensation. Furthermore, these strategies may protect the Boy Scouts from the legal consequences of systemic sexual abuse in the organization.
Update: In January 2021, a committee representing sexual abuse survivors called out the Boy Scouts for withholding $667 million from survivors. Read more about this legal challenge below.
National BSA Bankruptcy Protects Local Councils
According to the Boy Scouts, local councils are legally separate and financially independent. As such, assets owned by local councils have not been reported to the bankruptcy court. Thus, fewer assets are available to pay off the organization’s debt to sex abuse victims.
In total, local councils own more than $3 billion in land, buildings, art and investments. The national organization only claims $1.4 billion worth of assets.
The bankruptcy protection also shields local councils from pending litigation. The bankruptcy suspended all lawsuits against the Boy Scouts. This includes lawsuits that name local councils.
Lawyers And Victim Advocates Question Separation
Lawyers and abuse victims have criticized the Boy Scouts’ protection of local councils. Many critics note the existence of local councils depends on the national organization.
The national organization has the right to grant and withdraw council charters. Critics claim this power demonstrates clear authority over local groups and a lack of separation.
In January 2021, a committee representing sex abuse survivors legally challenged the Boy Scouts for withholding $667 million in assets from abuse victims. The $667 million is made up of cash, investments and property, including the well-known adventure camp Philmont Scout Ranch.
The Boy Scouts claims Philmont Scout Ranch, similar adventure camps and other assets “are critical to delivering the mission of Scouting.” Thus, the scouting organization argues the assets should not be used to pay sex abuse victims.
Local Councils Benefit From COVID-19 Aid
Amidst the bankruptcy proceedings, 101 local councils received loans from the PPP. Out of 101, 26 of these local councils are named in current, ongoing sexual abuse lawsuits. Some of these lawsuits refer to incidents that took place as recently as 2018.
If the bankruptcy included local councils, they could not receive PPP loans. Organizations in bankruptcy proceedings are not eligible for PPP funds. For example, many Catholic dioceses facing sex abuse lawsuits could not apply for PPP loans due to bankruptcy filings.
In total, local Boy Scouts councils reportedly received between $28.7 and $71.6 million in PPP funds. Yet, this number is most likely an underestimation of the full amount.
The Small Business Administration (SBA) handles the PPP. It does not release the names of organizations that received less than $150,000 in PPP funds. It is possible some local councils received loans but were not officially recognized due to the smaller size of the loans. This protected information further shields the organization from public scrutiny and accountability.
How The Separation Affects Victims
The separation strategy specifically benefits the Boy Scouts and its local councils. Money set aside for American small business owners is going to organizations facing child sex abuse lawsuits. A technicality is protecting assets from victim compensation settlements.
Bomey, N. (2020, February 18). Boy Scouts bankruptcy: What we know about victims, assets and the future of scouting. USA Today.
Brickley, P. (2020, July 9). Boy Scouts Bankruptcy Roiled by Suspicions About Asset Transfers. The Wall Street Journal.
Brickley, P. (2021, January 8). Boy Scouts Challenged for Declaring $667 Million Off-Limits to Victims. The Wall Street Journal.
Crary, D. (2019, April 24). Boy Scouts: Handful of sex-abuse cases emerged in 2018. The Associated Press.
Sherman, C. (2020, July 29). Boy Scout Groups Accused of Harboring Sexual Predators Received Coronavirus PPP Loans. VICE.
Wamsley, L., Goodwyn, W. (2020, February 18). Boy Scouts Of America Files For Bankruptcy As It Faces Hundreds Of Sex-Abuse Claims. NPR.