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At Stake in Boy Scouts’ Bankruptcy: $1 Billion in Assets, or Much More

As the Boy Scouts tries to deal with a flood of sexual abuse claims in bankruptcy court, it wants to shield the local councils that own most scout camps. But plaintiffs’ lawyers say the councils must pay.

Merchandise sales are a major source of revenue for the Boy Scouts. The French Creek Council in northeastern Pennsylvania  maintains a retail store at its headquarters in Summit Township.Credit...Christopher Millette/Erie Times-News, via Associated Press

On a 2,800-acre tract of Texas woodland surrounded by the Sam Houston National Forest, a $65 million youth camp is taking shape that will include an aquatics center, a shooting range, a climbing and rappelling tower, a science center, three chapels and an air-conditioned dining hall with room for 450 people.

The sprawling facility, set to open later this year, is owned by the Boy Scouts — but not by the Boy Scouts of America, the national governing body that filed for bankruptcy protection on Tuesday. Rather, it’s held by one of the organization’s local councils, like most of the properties around the country where scouts build their skills and values amid breathtaking wilderness, pristine lakes and panoramic landscapes.

As the Boy Scouts of America tries to hammer out in bankruptcy court what it did not achieve outside it — a global settlement for a mountain of lawsuits over allegations of sexual abuse — the future of the Scouting movement may turn on that distinction of ownership.

A great deal is at stake. The Boy Scouts of America has assets exceeding $1 billion; its most recent tax filings showed much of that in the form of financial investments like stocks and bonds ($680 million), cash in the bank ($55 million), and property ($102 million), including the vast Philmont Scout Ranch in New Mexico.

But much more is held by the more than 250 local councils, which own hundreds of camps, reservations and other properties across the country. On its own, the Sam Houston Area Council, which is developing the new Texas facility, Camp Strake, has $150 million in assets, half of it in publicly traded investments.

Notable properties in the hands of local councils include places like Moab Base Camp, next to the famous red rock formations in Utah; the Curtis S. Read Reservation in the Adirondacks; and the Owasippe Scout Reservation, covering some 4,800 acres in western Michigan.

The Boy Scouts argue that the local councils are legally and financially independent, and emphasized on Tuesday that they were not part of the bankruptcy filing. But the national organization proposed a 90-page reorganization plan that it said would allow the local councils to be shielded from the abuse lawsuits.

Gilion Dumas, a lawyer who has represented about 200 clients with allegations involving the Boy Scouts, said that the local councils cannot be kept completely out of the case. If they are to be shielded from the lawsuits, she said, then they will have to contribute substantially to the victims’ compensation trust that the Boy Scouts have proposed setting up to settle current and future claims.

“They are not independent organizations,” Ms. Dumas said. “They are part of the Boy Scouts of America.” She added that the local councils have often been aware of abuse problems in their regions.

Ms. Dumas was supposed to be in an Oregon court this week for the start of jury selection in a sexual-abuse lawsuit against the Boy Scouts of America and one of its local councils. That was derailed by the bankruptcy filing this week.

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The Boy Scouts of America headquarters in Irving, Texas. The group’s assets include significant real estate holdings. Credit...Tim Sharp/Reuters

The proposed reorganization plan calls for the victims’ compensation trust to be financed mainly by the Boy Scouts of America, but would also include contributions from the local councils, although the plan doesn’t offer any details.

The Boy Scouts have said in materials about the restructuring plan that local council assets were not “directly affected” by the bankruptcy filing, but that local councils “will have an opportunity” to contribute to the victims’ fund.

Ms. Dumas said that in recent years, the Boy Scouts have tried to create the appearance of distance between the national group and local councils, referring to the councils as “franchises.” But she said they were more closely integrated than that, noting that the national group selects executives for local councils, provides retirement plans for local employees and screens and approves every volunteer.

“The idea that the councils don’t have any relationship to Scouting is like arguing that General Motors doesn’t have any relation to its factories,” said John Manly, another lawyer who represents a Boy Scout claimant and is separately leading legal efforts in the sexual abuse scandal involving U.S.A. Gymnastics, which has also filed for bankruptcy protection.

Mr. Manly likened the Boy Scouts’s efforts to those by the Roman Catholic Church, which has tried to protect its local parishes’ assets when dioceses file for bankruptcy protection over sexual abuse litigation, as the Diocese of Harrisburg in Pennsylvania did on Wednesday. Mr. Manly said those efforts have largely been unsuccessful, but in some cases have succeeded in limiting the parishes’ exposure.

The large number of the claims that have emerged against the Boy Scouts, over a wide range of dates and locations, sets up a complex legal battle that could take years to resolve. One group of lawyers has some 2,000 clients from all 50 states.

The Boy Scouts have long kept confidential files on volunteers who were credibly accused of abuse. One expert hired by the organization found that there had been nearly 8,000 complaints over a span of decades. Lawyers representing sexual abuse claimants said their clients have identified hundreds more who were not listed in those internal files.

Mr. Manly noted that if the Boy Scouts end up compensating a total of 5,000 claimants with payouts averaging $1 million each, the compensation fund would need $5 billion. He said that in similar cases, insurance has typically covered only 40 percent to 70 percent of the exposure; the rest of the money would have to come from the organization’s assets.

Mr. Manly said he was worried that the Boy Scouts of America’s turn to Chapter 11 bankruptcy would leave victims without sufficient compensation, and the organization without sufficient accountability. He said he would like to see Congress step in to prevent organizations from using bankruptcy filings to limit their liability for failing to take action to stop sexual abuse.

“It’s a perversion of the intent of Chapter 11,” Mr. Manly said.

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Some major Boy Scout camps belong directly to the group’s national governing body, the Boy Scouts of America. But many more are owned by its local councils, which the group argues are financially independent. Credit...James Quigg/Daily Press, via Associated Press

Mike Baker is the Seattle bureau chief, reporting primarily from the Northwest and Alaska. More about Mike Baker

A version of this article appears in print on  , Section A, Page 11 of the New York edition with the headline: Boy Scouts Bankruptcy Could Put Assets of Local Councils in Jeopardy. Order Reprints | Today’s Paper | Subscribe

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