USA Gymnastics filed for bankruptcy protection Wednesday afternoon, a move it says will help resolve lawsuits stemming from Larry Nassar’s sexual abuse but one it’s also counting on to hold off the U.S. Olympic Committee.
The filing, in the U.S. Bankruptcy Court for the Southern District of Indiana, stays all “pending actions” against the governing body. That includes the 100 lawsuits filed by more than 350 Nassar survivors as well as the USOC’s Section 8 complaint to strip USA Gymnastics of its status as the national governing body.
“Our board has been talking about this bankruptcy strategy for a while now — well before the Section 8 complaint was filed,” said Kathryn Carson, chair of the USA Gymnastics board. “Our primary reason to do this is to expedite those survivor claims.”
But John Manly, an attorney who represents many of the survivors, was far more cynical.
“Today’s bankruptcy filing by USA Gymnastics was the inevitable result of the inability of this organization to meet its core responsibility of protecting its athlete members from abuse," Manly said in a statement.
"The leadership of USA Gymnastics has proven itself to be both morally and financially bankrupt. They have inflicted and continue to inflict unimaginable pain on survivors and their families.”
The bankruptcy filing comes more than two years after revelations that Nassar, the longtime team physician for USA Gymnastics and Michigan State, had molested more than 350 girls and young women under the guise of medical treatment. Olympic gold medalists Simone Biles, Aly Raisman, McKayla Maroney, Gabby Douglas, Jordyn Wieber, Kyla Ross and Madison Kocian are among the women who said they were abused.
Earlier this year, Michigan State agreed to pay $500 million to settle lawsuits with hundreds of Nassar’s victims. In financial statements released last month, USA Gymnastics estimated it would cost between $75 million and $100 million to settle the lawsuits. Months of mediation have failed to produce a settlement, and Carson said the board decided it was best to let a bankruptcy court decide the claims.
“It is true we have participated in mediation. Those discussions were not moving at any pace at the current time,” Carson said.
The claims will be paid by USA Gymnastics’ insurers because the federation does not have those kind of assets, Carson said. While USA Gymnastics is still negotiating with the insurance companies on the limits of coverage, Carson said they have been “cooperative.”
“Our expectation is that they will come to the table and pay on our coverage,” she said.
Carson also said she hopes for similar cooperation with the USOC.
Fed up with USA Gymnastics’ repeated missteps as it tries to recover from the Nassar scandal, the USOC last month began the rare process of revoking its NGB status. That would effectively lead to the demise of USA Gymnastics, because its members would likely migrate to whatever new group becomes the NGB.
USA Gymnastics is fighting the complaint, and Carson acknowledged that that played a role in the decision to file for bankruptcy. In addition to staying legal and administrative claims, Chapter 11 protection prevents assets from being taken away from a debtor.
“Our ability to be the NGB is a very big part of how we raise our revenue and how we inspire athletes,” Carson said. “I think it’s pretty critical to our continued existence.”
The USOC had already selected the three-person panel to hear the complaint before USA Gymnastics filed for bankruptcy, but had not set a hearing date. Spokesman Patrick Sandusky said the USOC is reviewing the filing to see what impact it has on the Section 8 proceedings.
"The USOC is committed to fulfilling its responsibility and obligation to ensure that each organization accepted for membership as a national governing body has the capacity and capability to provide the support, protection, and services that we expect for all Olympic athletes in the United States,” Sandusky said.
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