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USA Gymnastics files for bankruptcy, citing sex abuse lawsuits

dw.com logo dw.com 2018-12-06 dv/sms (AP, Reuters)
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USA Gymnastics, the sport's governing body in the United States, on Wednesday filed for Chapter 11 bankruptcy in Indianapolis, where it is based.

The organization is facing 100 lawsuits representing 350 athletes in various US courts who blame it for failing to supervise Larry Nassar, a former national team doctor accused of sexually abusing them. Nassar was sentenced to up to 300 years in prison in two different trials in Michigan last February.

The Chapter 11 bankruptcy would allow for USA Gymnastics to reorganize while protecting it from creditors. Kathryn Carson, the recently elected chairwoman of the board of directors, cited the lawsuits as the "primary reason" for the filing and that is based on legal expediency rather than fiscal distress.

"This is not a liquidation. This is a reorganization," she said, who described the financial condition of the organization as "stable."

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Also 'morally bankrupt'

John Manly, an attorney whose firm represents around 150 of Nassar's victims, condemned the organization for continuing to "inflict unimaginable pain on survivors."

"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."

Typically, a bankruptcy petition will temporarily halt any litigation, meaning the filing from USA Gymnastics could complicate efforts by Nassar's victims to recover damages.

"This bankruptcy filing will suspend all lawsuits by Nassar survivors and their ongoing efforts to discover the truth about who at USA Gymnastics and the US Olympic Committee knew about Nassar's criminal conduct and failed to stop it," Manly said.

Carson said the filing does not affect the amount of money available to victims, insisting the victims' claims will be paid by the organization's insurers.

However, Scott Shollenbarger, the chief financial officer of USA Gymnastics, said the previously purchased insurance coverage "may be insufficient" to cover all the claims."

Holding off the USOC

USA Gymnastics reported assets in the range of $50 million to $100 million (€44 million to €88 million) and a similar range of liabilities, with 1,000 to 5,000 creditors.

Its largest unsecured creditor is disgraced former president Steve Penny, resigned in March 2017 and was arrested in October for tampering with evidence in Nassar's case. Perry is owned around $400,000, though the organization is disputing his claim.

Carson also said the legal maneuvering will delay the US Olympic Committee's efforts to decertify USA Gymnastics as a national governing body. The USOC said it is reviewing the effect the bankruptcy filing will have on decertification.

"Financial stability and viability are essential for a national governing body to operate in the best interests of its athletes," USOC spokesman Patrick Sandusky.

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