For decades, the Boy Scouts of America secretly kept tabs on its “ineligible volunteers,” meaning those who were known or suspected to have sexually abused scouts. That file was finally revealed in 2018 and named more than 12,000 victims and 7,800 abusive scout leaders — numbers that the victims’ lawyers say may actually be much higher. Amid the shock of this information, the organization announced that it was exploring the possibility of filing for bankruptcy. The BSA pulled the trigger on that idea last month, filing for Chapter 11 to temporarily halt the sexual abuse investigation and lawsuits and delay the victims’ ability to hold the BSA responsible.
This decision may have been motivated by new laws passed in several states that have extended the statute of limitations for abuse victims. Since many victims are no longer barred from legal action because of their age, the BSA is now exposed to even more potential liability.
The BSA will now seek to compensate claimants through bankruptcy proceedings while protecting its local chapters and billions of dollars in assets. However, filing for bankruptcy might not be effective in avoiding responsibility forever. A similar situation happened in 2017, when the Supreme Court denied General Motors’ efforts to use bankruptcy to block lawsuits over injuries and financial losses related to its ignition switch defect. So, the BSA will still likely have to face the victims at some point, but it’s difficult to tell when that will be.
If the plaintiffs do obtain justice from the BSA, they could face an additional hurdle. Any potential settlements with the BSA may be taxable under President Trump’s tax reform law. According to Section 162(q) of the tax code:
(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. — No deduction shall be allowed under this chapter for — (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.
This new tax law means that if there is a nondisclosure agreement involved, the victims of sexual abuse will not be able to deduct their attorney fees if they receive a settlement. To them, this rule adds insult to injury.
It’s disappointing that the BSA is not owning up to its responsibility for the devastation that some of its scout leaders have caused thousands of boy scouts to suffer over the years. It is our hope that despite filing for bankruptcy, the organization will still have to own up to its failure to protect many children who looked to the BSA for guidance and learning.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).