Simone Biles flipping in air
American gymnast Simone Biles competes on the balance beam at the 2018 Gymnastics World Championship. (Photo by Ulrik Pedersen/NurPhoto via Getty Images)
Business Archive

USA Gymnastics' bankruptcy filing could have long-lasting impact

Simone Biles flipping in air
American gymnast Simone Biles competes on the balance beam at the 2018 Gymnastics World Championship. (Photo by Ulrik Pedersen/NurPhoto via Getty Images)

The embattled USA Gymnastics filed for bankruptcy protection on Wednesday in an effort to reach settlements in the multiple sexual-abuse lawsuits it faces.

The organization faces 100 lawsuits from more than 350 athletes across the country who allege the governing body failed to supervise Larry Nassar, the former team doctor convicted of assaulting them.

With the next Olympics less than two years away, USA Gymnastics' bankruptcy filing halts lawsuits and could impact USOC's decertification of the NGB

According to the Associated Press, Kathryn Carson, the recently elected chairwoman of USA Gymnastics’ board of directors, the organization’s goal is to accelerate the settlement process after mediation attempts failed.

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

John Manly, an attorney representing many of the women suing USA Gymnastics said in a statement: “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. The leadership of USA Gymnastics has proven itself to be both morally and financially bankrupt.”

According to the AP, USA Gymnastics reported assets of $50 million to $100 million with a similar list of liabilities to between 1,000-5,000 creditors.

Carson, who described USA Gymnastics’ finances as “stable,” called the decision to file one based on legal expediency, not fiscal distress. She disputed the ability of the organization to pay claims resulting from the lawsuit, saying those payments will come from insurance coverage.

In November, the U.S. Olympic Committee began the process to decertify USA Gymnastics as the sport’s national governing body. According to Patrick Sandusky, a USOC spokesman who spoke to the New York Times, the USOC is reviewing the filing to see how it might impact the decertification process. He told the Times it is the USOC’s job to make sure sport governing bodies have “the capacity and capability to prove the support, protection and services that we expect for all Olympic athletes in the United States.”

The Wall Street Journal reported that the filing puts an automatic stop on lawsuits pending against Nassar and could have long-lasting implications. The Journal said because of bankruptcy protection, the USOC also may not be able to remove USAG as the sport’s governing body.

And that, apart from playing for time, may be the biggest factor in the filing. Carson, who has admitted sponsorship has decreased since the scandal broke, acknowledged that being a national governing body “is a big part of how we raise our revenue.”

The Journal also reported: “Filing for chapter 11 protection gives an organization that faces many lawsuits a legal timeout and the chance to put together a pool of money to pay victims in an orderly manner.

A similar process has been used by more than 20 Catholic dioceses and religious orders that have turned to chapter 11 bankruptcy to negotiate payouts to alleged victims. In those cases, more than 4,000 victims have come forward.

It isn’t clear how far the organization’s bankruptcy will go to stop lawsuits against the organization’s former officers and other related entities. It will be up to a judge to decide whether to make the pause in legal actions that partially involve USA Gymnastics permanent.

In addition to the lawsuits, USA Gymnastics faces scrutiny from Congress and investigations by law-enforcement authorities in Texas, where its former training center was located, and the attorney general’s office of Indiana, site of the organization’s corporate headquarters.”

There is a deadline to resolve this the 2020 Tokyo Olympic Games. The US gymnastics team has been one of the most dominant teams in the sport the past few Olympics and gymnastics has become a marquee event for U.S. broadcasters and sponsors.