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Boy Scouts File Chapter 11 Bankruptcy

The Boy Scouts of America filed for bankruptcy protection early today.

The long-anticipated move is the latest in a long series of legal and financial troubles for the youth organization.  The Chapter 11 filing took place in Delaware Bankruptcy Court overnight.

In 2010, the Boy Scouts lost a $20-million child sexual abuse case, and that case revealed the existence of a so-called “perversion file,” a list of who were barred from being Scout leaders.  However, critics of the Boy Scouts say that list was not made available to local councils.  That failure resulted in the sexual abuse of yet more boys.  Today, the BSA faces dozens of lawsuits, with many more likely on the way.  These cases could result in hundreds of millions of dollars in damages against the BSA.

Tim Kosnoff, an attorney who has tried thousands of child abuse cases, including many against the Boy Scouts and the Catholic Church, told USA Today: “They’re going into bankruptcy not because they don’t have the money.  They’re going into bankruptcy to hide … a Mount Everest in dirty secrets.”

However, it is not clear that the Scouts do, in fact, have money to weather the onslaught.  The Boy Scouts have about $1.5-billion in assets, much of it real estate, including Philmont Scout Ranch in New Mexico.  Local Scout councils also have dozens of camps scattered around the country.  NPR estimated that the value of these camps could exceed $3-billion.  However, many of these assets – including Philmont, as has been previously reported by MinistryWatch — are already encumbered with mortgages.

To add to Scouting’s woes, the organization has lost more than $150-million over the past five years, and on January 1, more than 400,000 Mormon boys and leaders left the organization en masse.  A dues increase took place in October, from $33 to $60.  The massive jump was interpreted by many as a sign of desperation by the BSA.

Further tightening the financial stranglehold on Scouting is the response of its insurance company, which has so far refused to pay the BSA for settlements it has already made.  The insurance company claims the BSA did not fully disclose to it the full extent of the “perversion files” and the risk those files represented.

The Boy Scouts released a statement, reading in part:

“The BSA cares deeply about all victims of abuse and sincerely apologizes to anyone who was harmed during their time in Scouting.”

“The BSA intends to use the Chapter 11 process to create a Victims Compensation Trust that would provide equitable compensation to victims.

“Scouting programs will continue throughout this process and for many years to come. Local Councils are not filing for bankruptcy as they are legally separate and distinct organizations.”


A Once Great Institution

For a century, Scouting was one of the great institutions of American civil society.  It was one of those “mediating institutions” that Alexis de Tocqueville spoke of that teach service, volunteerism, duty, leadership, and citizenship.

Alvin Townley has written two books on Scouting.  He said Scouting was second only to the military in its ability “to bring together so many from so many different backgrounds over such a long period of time.  Scouting has played a unique role in American culture.  It is part of the fabric of American life.”

It’s also had a close relationship to the churches of America.

All Scout units – more than 100,000 of them — have chartered organizations.  Part of the genius of the Scouting movement is that these chartered organizations are the “owners and operators” of these units, not just by providing meeting space, but by approving the units’ leaders.  More than 70 percent of these chartered organizations are churches.  The Mormons have used the Boy Scouts as their primary youth program for most of the BSA’s history, and – until recently — they had more than 37,000 units and 430,000 youth in the program.  But as recently as 2013, United Methodist, Roman Catholic, Presbyterian, Lutheran, and Southern Baptist churches combine for nearly 30,000 units and nearly 1-million Scouts.

Scouting flourished throughout most of the 20th century.  In the 1960s, membership topped 5-million – at a time when the population of the country was barely half what it is today.  Scouting’s highest rank, the Eagle, has become a widely recognized mark of achievement for young men. More than 2 million have earned the badge in the 100-year history of Scouting. Famous Eagle Scouts include President Gerald Ford, Sen. Mike Lee, former Attorney General Jeff Sessions, Mike Rowe (host of TV’s Dirty Jobs), and department store magnate Sam Walton.

That so many political, business, and civic leaders are former Scouts is no accident, Townley said.  “Producing leaders and developing character are explicit goals of the Scouting program,” he said.  “The Boy Scouts provided millions of boys and men their first experiences with leadership.” The also learn about democracy and cooperation:  Scouts elect their own leaders, and patrols and troops plan cookouts and hikes and camping trips as a group. Every Scout must perform service projects, and Eagle Scouts must plan and lead a major project that is “helpful to any religious institution, any school, or your community.” Eagle projects total more than 9 million hours year. That’s the equivalent of 4,500 people working full-time, every year.


The Slide Begins

Scouting has been a victim of the culture wars, but other factors played a role.

America is much more urban and technological than in Scouting’s heyday.  By the 1980s, learning how to tie knots and build fires had become less attractive to boys than video games and year-round sports programs.  Den Mothers who hosted after-school meetings in the 1950s and 60s were mostly in the workplace by the 70s and 80s.

It didn’t help that the Scouting movement responded tentatively to these changes.  Instead of promoting outdoor adventure as an alternative to urban life, the Scout Handbooks of the 70s and 80s taught boys to read a bus schedule.  The Scout Motto “Be Prepared” stopped meaning always having your multi-purpose Scout knife with you, but instead meant having a dime in your pocket for the payphones then ubiquitous in urban areas.

Membership in Scouting fell even as the population grew.  Then, in the late 90s, Boy Scouts found themselves on the front lines of the cultural battles, when they became the target of atheist and homosexual groups.

In the 1990s, an openly homosexual man, James Dale, sued the Boy Scouts to be an adult leader.  The case went to the U.S. Supreme Court, and the Boy Scouts won in 2000.  But this case and others, even though the Scouts were victorious, cost millions in legal fees.

While homosexual groups fought the Boy Scouts from one direction, atheist groups came at them from another.  Beginning in 1981, the quadrennial National Scout Jamboree had been held at Ft. A.P. Hill in Virginia.  The American Civil Liberties Union (ACLU) argued that the Scouts’ use of the military facility was a subsidy to the Scouts.  Because the Scouts require “duty to God,” the ACLU said government support amounted to an establishment of religion, a violation of the First Amendment.

The ACLU made a similar argument in 2004, forcing more than 400 Scout units off military posts.  Most of these units easily found other sponsoring organizations – often churches – but whether the Scouts won or lost – and, as in the Supreme Case, they often won — the legal bills mounted and slowly the Scouts lost their appetite for defending themselves.  Back in 2004, Scout spokesman Bob Bork told WORLD, “[The ACLU is] like a dog with a bone.  They’ve been gnawing on us for 30 years now.  It isn’t cheap.  Our lawyers aren’t working pro bono.”

So in part to keep from fighting the ACLU every four years, in 2009 the Scouts bought a 10,600-acre tract in West Virginia, with the help of a $50-million gift from Stephen Bechtel, an Eagle Scout whose grandfather founded the Bechtel Corporation, the world’s largest engineering firm. Despite Bechtel’s gift – and others that totaled at least $85-million – the development of Summit Bechtel Reserve was soon over-budget.  A project originally estimated to cost $150-million ballooned to more than $500-million, forcing the Scouts to take on debt to keep construction on schedule.

Taking on so much debt may have seemed reasonable as recently as 2007, when the assets of the Boy Scouts approached $1-billion and Scouts, though a not-for-profit organization, had financial surpluses that in some years topped $40-million.  But in the recent stock market crash, the Scouts’ investment portfolio lost more than $173-million in 2008 alone. By 2011, the financial situation of the Scouts had deteriorated dramatically.  With the losses of the past six years, the situation has become even more dire.

But the Scouts can’t blame James Dale, atheist groups, or the ACLU for its most recent troubles.  Most of its recent wounds have been self-inflicted.  A 2013 decision to allow homosexual boys to participate in the program accelerated the membership drop.  The Mormon Church, which had for generations used the BSA as its youth program, left Scouting after its leadership took the next step and began allowing gay adult leaders, in 2015.  The BSA began accepting transgender youth in 2017.

This drop in membership contributed to a flood of red ink in the organization’s finances, amounting to – as mentioned above – to $177-million in the last six years alone.  At the end of 2018, the BSA said it was considering bankruptcy.  The Boy Scouts mortgaged its Philmont property in March of this year, but the BSA hoped no one would notice, and the transaction did not become well-known until MinistryWatch broke the story in November.  The mortgage, held by JP Morgan Chase, is “not to exceed” $450-million, but that line of credit was almost immediately “tapped out” to pay off previous debts incurred by the BSA.

It’s not hard to think of the Philmont mortgage as an act of desperation by an organization rapidly running out of options.  In October the BSA made another such move.  The Scouts announced a dramatic increase in membership fees, from $33 to $60, a price hike of 80 percent.  The Scouts said the dramatically rising cost of insurance was a key reason the increase is necessary.

This rise in the cost of insurance brings us to the most recent cause of Scouting’s decline:  sexual abuse cases that have started piling up against the Scouts.

In August, a group called Abused in Scouting filed a lawsuit in Philadelphia on behalf of a former Scout who claims he was abused by a Scout leader.   The BSA has long kept a list of “ineligible volunteer files” which could include as many as 7,800 names.  Various lawsuits have pressured the Scouts to release the list, but the BSA has resisted, saying that to release a list of suspected abusers would violate their civil liberties and their rights to due process.  But victims’ advocates say the BSA is reluctant for the public to know the extent of abuse within the organization.

The Philadelphia lawsuit says, “It is apparent that the Boy Scouts defendants continue to hide the true nature of their cover-up and the extent of the pedophilia epidemic within their organization.”


Warren Cole Smith

Warren previously served as Vice President of WORLD News Group, publisher of WORLD Magazine, and Vice President of The Colson Center for Christian Worldview. He has more than 30 years of experience as a writer, editor, marketing professional, and entrepreneur. Before launching a career in Christian journalism 25 years ago, Smith spent more than seven years as the Marketing Director at PricewaterhouseCoopers.