U.S. Gymnastics files for bankruptcy amid scandal

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U.S. Gymnastics is turning to bankruptcy in an attempt to ensure its survival.

The embattled organization filed a Chapter 11 bankruptcy petition on Wednesday in an effort to reach settlements in the dozens of sex-abuse lawsuits it faces and to avoid its potential demise at the hands of the U.S. Olympic Committee.

U.S. Gymnastics filed the petition in Indianapolis, where it is based. It faces 100 lawsuits representing over 350 athletes in various courts across the country who blame the group for failing to supervise Larry Nassar, a team doctor accused of molesting them.

Nassar, 55, worked at U.S. Gymnastics and Michigan State University for decades. He is serving effective life sentences for child porn possession and molesting young women and girls under the guise of medical treatment.

Kathryn Carson, the recently elected chairwoman of U.S. Gymnastics' board of directors, said the organization's goal is to speed things up after mediation attempts failed to gain traction.

“Those discussions were not moving at any pace,” Carson said. “We as a board felt this was a critical imperative and decided to take this action.”

Victims and others look on as Rachael Denhollander, the first woman to publicly accuse Larry Nassar, speaks at the sentencing hearing for Larry Nassar in the U.S. on January 24, 2018. /VCG Photo

The filing does not affect the amount of money available to victims, which would come from previously purchased insurance coverage, she said. Carson said the insurance companies “are aware we're taking this action and our expectation is they will come to the table and pay on our coverage.”

Carson added: “This is not a liquidation. This is a reorganization.”

John Manly, an attorney representing dozens of women who have pending lawsuits against U.S. Gymnastics, chastised the organization for continuing to “inflict unimaginable pain on survivors” and encouraged law enforcement officials to “redouble” their investigative efforts.

“Today's bankruptcy filing by U.S. 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 U.S. Gymnastics has proven itself to be both morally and financially bankrupt.”

On March 2017, the former president and CEO Steve Penny resigned under pressure from the USOC. Two other presidents — Kerry Perry and former U.S. Rep. Mary Bono — have followed in what has become a revolving door amid the organization's hierarchy.

Larry Nassar (R), who pleaded guilty in November 2017 to sexual assault charges, is in the courtroom during victim statements of his sentencing in the Eaton County Circuit Court in Charlotte, Michigan, the U.S. on February 2, 2018. /VCG Photo

USOC CEO Carson said the legal maneuvering Wednesday delays the USOC's efforts to strip its designation as a national governing body.

“We always have a dialogue going with them and intend to make it clear with them we have a lot to talk about and we want to keep that going,” she said.

U.S. Gymnastics believes bankruptcy protects it from having opportunities or assets taken away by a debtor. Carson acknowledged that being a national governing body “is a big part of how we raise our revenue.”

Carson, who replaced Karen Golz as chairwoman last week, said she accepted the position because she believes in the direction of U.S. Gymnastics, which she said doesn't need money but rather time.

“We think we're changing the dynamic and we certainly believe that we will try to remain the NGB,” Carson said. “To be clear, it is our lawyers' firm belief that the bankruptcy will automatically stay (decertification) ... and we will work with the USOC to regain credibility.”

Source(s): AP