Facing 100 lawsuits from more than 350 sexual-assault victims of team physician Larry Nassar, USA Gymnastics filed for bankruptcy protection Wednesday.
The voluntary filing does not represent USA Gymnastics' surrender of its role as the sport's national governing body. Its recently appointed board chairman said the step was taken to expedite payment of claims to the many victims and to allow the organization to continue day-to-day operations while continuing its search for its fourth president and CEO in the past two years.
"This is not a liquidation; this is a reorganization," said Kathryn Carson, who last week was elected chair of USA Gymnastics' Board of Directors. In addition, Carson said the Chapter 11 filing would halt the U.S. Olympic Committee's effort to dismantle the sport's governing body and provide critical "breathing room" for the organization to continue running the sport at a grassroots and national level.
"We owe it to the survivors to resolve, fully and finally, claims based on the horrific acts of the past and, through this process, seek to expedite resolution and help them move forward," Carson said in a conference call Wednesday afternoon, as the filing was entered in an Indianapolis court.
The USOC pushed back immediately on the assertion that the move would stop the process that may lead to the de-certification, an administrative response to what's known as a "Section 8" complaint.
"We are aware of USA Gymnastics bankruptcy filing and are evaluating how that filing may impact the USOC and our current relationship with USAG," USOC spokesman Patrick Sandusky said. "While we fully understand that USAG believes this restructuring will begin to solve deficiencies we've identified, the filing does not impact our Section 8 complaint, and it's our intention that the process will move forward."
A lawyer representing more than 100 victims, including Olympic medalists Aly Raisman, McKayla Maroney and Jordyn Wieber, dismissed Carson's claim that the goal of the bankruptcy filing was to expedite payments as "a transparent falsehood" and "laughable."
"At every turn in this case, [USA Gymnastics has] done everything possible to delay, obstruct and dismiss the survivors' claims," said John Manly, the California-based victims' advocate. Manly characterized the leadership of USA Gymnastics as "both morally and financially bankrupt" and called on Congress, as well as relevant state and local law enforcement, to redouble its investigation into the governing body's failure to protect athletes.
The bankruptcy filing comes one month after the USOC announced it was taking initial steps of disband the governing body after a series of poor decisions in the dealing with the Nassar scandal, saying that the sport "deserved better."
It also comes 20 months before the 2020 Tokyo Olympics, where the U.S. women's gymnastics squad will seek its third consecutive Olympic gold medal in the prestigious team competition, and reigning individual all-around champion Simone Biles will attempt to defend her Rio 2016 title. Both the U.S. women and Biles are favorites to do so, with the U.S. women dominating the world championships in Qatar in October, claiming the team title and Biles earning a record fourth gold in the individual all-around.
As the USOC and USA Gymnastics trade procedural moves, hundreds of young women await redress for emotional and psychological damage inflicted by the former team doctor who has been sentenced to jail for the rest of his life.
Carson, former chief legal counsel for the U.S. Golf Association, joined USA Gymnastics' reconstituted governing board in June and was named the panel's chair Nov. 29.
She declined to provide an estimate of the payouts the governing body expects to make to the gymnasts victimized by Nassar. Earlier this week, Michigan State paid $500 million into a settlement fund to compensate Nassar victims under its watch. Nassar was employed by Michigan State and served as the volunteer team physician for USA Gymnastics. In both cases, leaders at Michigan State and USA Gymnastics ignored allegations of abuse for years and failed to refer athletes' claims to law enforcement in a timely manner.
Carson said that the board had discussed the step of filing for bankruptcy protection long before the USOC's Nov. 5 announcement that it was taking the initial step toward dismantling USA Gymnastics. The step was taken, she said, because the mediation process was "not moving at any pace." A Chapter 11 bankruptcy process will consolidate the claims before one judge in one court who would likely appoint a mediator to broker a resolution.
She characterized it as "a critical first step" toward rebuilding the organization's trust with gymnasts and their families, the public and corporate sponsors, many of whom fled the sport in the wake of the Nassar scandal.
Any settlements with victims will be funded by insurance bought by USA Gymnastics prior to the Nassar scandal. Carson said the amount paid to victims would not be affected by the Chapter 11 filing. Apart from those insurance proceeds, she added, the organization has “no other significant assets” to pay claims.