The Associated Press reports that the official committee representing sexual abuse survivors in the Boy Scouts of America bankruptcy is asking a judge to void real estate transfers by a local Boy Scouts council in Tennessee, saying they violated court restrictions on sales or transfers of BSA assets.
The BSA filed bankruptcy in February. It was a move that followed years of decline that left the once strong youth organization in a precarious financial situation. The bankruptcy also positioned the BSA to weather lawsuits over sexual abuse claims that could end up costing the BSA hundreds of millions of dollars.
The committee’s court filing late last week came almost a month after it sent a cease-and-desist letter to the Middle Tennessee Council, but got no direct response.
“Instead, the BSA, acting on behalf of the Middle Tennessee Council, asserted that the transfer was proper — while simultaneously admitting that the BSA has an interest in the property,” attorneys for the abuse survivors wrote. “The BSA has refused to take any action in response to the Middle Tennessee Council’s actions despite numerous conversations with BSA’s counsel about transfers like these.”
According to the court filing, the council transferred its Boxwell Reservation, Latimer Reservation, Grimes Canoe Base and Parish Reservation camp properties, as well as its Nashville office building, to an irrevocable asset protection trust on July 1. Such trusts are typically established to shield assets from creditors. The committee believes the council took similar steps to shield its cash and deposit account assets.
The trustee for the properties is the council’s vice president of properties, Clay Bright, who also is Tennessee’s state transportation commissioner.
According to the victims committee, the Middle Tennessee Council is the subject of at least 35 sexual abuse claims that have been or will be filed. The existence of the claims, according to committee attorneys, “shows what motivated the council to irrevocably transfer the assets for no consideration.”
The committee argues that under BSA charters and bylaws, the national organization has a “reversionary interest” in local council properties. Under the organization’s rules, if a local council’s charter is revoked or lapses, its property and cash will be turned over to the BSA after any claims against the council are satisfied. The committee thus contends that the transfers violated the automatic stay included in Chapter 11 bankruptcy proceedings to halt collection activities and otherwise protect the assets of a debtor.
“Despite having a self-admitted interest in the transferred properties, BSA has not taken any action to enforce the automatic stay and restore the estate’s property rights notwithstanding the tort claimants’ committee demands,” the court filing states.
The BSA contends that the transfer of the properties does not affect its reversionary interests.
James Stang, an attorney for the abuse survivors committee, declined to comment on the filing, as did Larry Brown, Scout Executive for the Middle Tennessee Council.
The BSA national organization said the victims committee was focusing on “a single transaction by a single local council,” and that all local councils have agreed to share information with the committee regarding past and future transactions involving their assets.
“This clearly demonstrates that the BSA and the local councils are committed to working through a productive, mediated process that provides equitable compensation for survivors of past abuse in Scouting and ensures that the mission of Scouting can continue for America’s youth,” the organization said in a statement.
The Boy Scouts of America, based in Irving, Texas, sought bankruptcy protection in Delaware in February in an effort to halt hundreds of individual lawsuits and create a huge compensation fund for thousands of men who were molested as youngsters by scoutmasters or other leaders.
As part of the bankruptcy, the Boy Scouts obtained a consent order for a preliminary injunction halting lawsuits against the organization’s 261 local councils as “related parties.” The local councils, which run day-to-day operations for local troops, are not listed as debtors in the bankruptcy and are considered by the Boy Scouts to be legally separate entities. Attorneys for abuse victims have nevertheless made clear that they will try to go after campsites and other properties owned by the local councils to contribute to the victims fund.
In return for protection against litigation under the injunction, participating local councils must adhere to certain conditions of the consent order. Those conditions include providing 30 days notice to BSA of any action regarding the marketing, sale or transfer or real estate, and of any sale or transfer of personal property valued at more than $25,000 outside the ordinary course of business.
Attorneys for the victims committee say that on June 12, three days after the injunction was extended to Nov. 16, Brown and Middle Tennessee Council president John Bright Cage executed an agreement establishing the trust. On June 30, Brown signed quitclaim deeds for each of the five properties, which the council is now leasing from the trust. The council did not disclose the transfers until July 6, the deadline for opting into the consent order. Under the consent order, the council was required to disclose any sales, transfers or encumbrances of real property since July 2014. A hearing on the motion is scheduled for Sept. 9.
In November of last year, MinistryWatch reported that the BSA had quietly mortgaged its most valuable asset, Philmont Scout Ranch, encumbering a property that had been virtually debt-free with nearly $450-million in debt.
Though the BSA has been in a slow decline for decades, the problems accelerated in 2013 when what was once the world’s largest youth organization decided to accept openly gay Scouts, and – in 2015 – extended that privilege to gay Scout leaders. Long-time Scouts fled the organization by the tens of thousands. Many churches that had previously hosted Scout troops and Cub packs left Scouting, or transferred their troops to other organizations, including TrailLife USA, a boys program that is explicitly Christian in its principles and statement of faith.