USA Today
12/10/2021
Cara Kelly
Like many survivors of sexual abuse, Jeffrey Chelmo didn’t get involved in the Boy Scouts of America bankruptcy case for the money. He wanted someone to be held accountable. Yet, the settlement Chelmo’s looking at under Boy Scouts’ latest proposal is hard to stomach: $3,500.
That’s less than some attorneys in the case have been charging for two hours of work, according to court records. For the month of August, one attorney with White & Case, lead counsel for Boy Scouts, billed $1,725 an hour – more than $200,000.
The case is unprecedented for bankruptcy litigation related to sexual abuse in the number of survivors filing claims (82,000), the overall amount of proposed settlement funds ($1.8 billion) and now in the proportion going to fees for everyone from attorneys to financial advisers – even lobbyists tapped by the Scouts to ward off bankruptcy reforms.
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Boy Scouts of America estimates the bill for their professionals, plus those hired by the official creditors’ committees, could be more than $205 million by the end of the year. That’s approaching the amount Boy Scouts said it would contribute to a trust for survivors: $219 million.
The 82,000 who have filed sexual abuse claims in the case are scheduled to vote on the plan by Dec. 28. Approval requires a two-thirds majority. Under that plan, a majority of survivors are likely to receive $10,000 or less. Many payouts will be restricted by state laws that preclude older claims, making the flat rate option of $3,500 an attractive choice.
All told, the lawyers, financial advisors and consultants working the case could share $1 billion, according to a USA TODAY analysis.
Among the top recipients based on billing so far and elements of the proposed plan:
- The two law firms that have led Boy Scouts’ legal team, White & Case LLP and Sidley Austen LLP, together have billed the nonprofit more than $26 million.
- Screening claims and coordinating payouts requires other specialized teams, with costs expected to reach about $180 million.
- Attorneys who represent victims typically work on contingency of one-third of a potential settlement, and as high as 40%, which would amount to at least $400 million.
- The Coalition for Abused Scouts for Justice, which says it represents 63,000 survivors, stands to receive $950,000 a month in fees and a lump sum payment of $10.5 million.
Lynn LoPucki, a professor at the UCLA School of Law who studies large bankruptcies, called the entire system corrupt. Professional fees have continued to climb, he said, thanks to loopholes few are incentivized to close.
LoPucki analyzed fees in more than 100 large corporate bankruptcies filed before 2007 through a database he helped create, the UCLA-LoPucki Bankruptcy Research Database. He calculates fees as a percentage of the total assets of a bankrupt company.
He found the norm is roughly 3%, only occasionally entering double digits. Enron, which employed 64 professionals after filing for bankruptcy in 2001, had a rate of 2%. Boy Scouts’ fees are 42% of its self-reported assets.
“These are very rough benchmarks,” LoPucki said, “but I’ve never seen a case that had fees this high by that measure.”
More: Boy Scouts files Chapter 11 bankruptcy in the face of thousands of child abuse allegations
More: Boy Scouts of America sex abuse survivors claim censorship, object to bankruptcy exit plans
Earlier this year, Judge Laurie Selber Silverstein called the mounting fees in the Boy Scout case staggering and agreed to withhold 20% of them until the end of the case.
The court brought in a fee examiner, who got firms working for Scouts and the official creditors’ committees to cut $242,399 from one two-month billing cycle, according to a USA TODAY analysis of court records.
The examiner charged Boy Scouts $216,716 for his time.
Silverstein also approved Boy Scouts’ retention of several dozen “ordinary course” professionals – people the nonprofit would employ in their normal business operations outside of bankruptcy.
In October, Boy Scouts updated that list to include the 535 Group, which it said provides “government relations consulting services” and would bill the nonprofit no more than $10,000 a month. No one, including the judge or U.S. trustee in the case, objected to the addition.
The group filed paperwork with the U.S. House of Representatives last month disclosing work by a lobbyist with 535 Group – a former House member – on behalf of Boy Scouts against bankruptcy reform legislation pending in Congress.
In a statement, Boy Scouts said it “engaged 535 Group to help consult government officials related to pending legislation.”
“As a Congressionally chartered organization, it is appropriate that the BSA has a means to communication with elected officials, particularly at this pivotal time in our financial restructuring,” the statement continued, “and this requires the retention of registered lobbyists.”
https://www.usatoday.com/story/news/investigations/2021/12/10/boy-scout-bankruptcy-sexual-abuse-settlement-attorney-fees/8887578002/?gnt-cfr=1