Amid Ongoing Reorganization, U.S.A. Gymnastics Files for Bankruptcy

In a move meant to stabilize an organization still reeling, and barely standing, in the wake of the Larry Nassar sexual abuse scandal, U.S.A. Gymnastics filed for bankruptcy on Wednesday in Indianapolis.

Kathryn Carson, the federation’s newly elected chairwoman, characterized the bankruptcy filing as a reorganization, “not a liquidation,” of the federation, which oversees the sport of gymnastics in the United States.

More than 300 plaintiffs, including Olympic gymnasts, have sued U.S.A. Gymnastics for failing to protect them from Nassar, the former national team doctor, and the mediation process with some of Nassar’s victims was “not moving at any pace,” Carson said. She said she believed the bankruptcy, which was filed with the United States Bankruptcy Court for the southern district of Indiana, will hasten claim payments to all the plaintiffs.

“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,” she said in a statement.

In a financial report earlier this year, auditors for U.S.A. Gymnastics estimated the potential cost of the federation’s litigation to be between $75 million and $150 million, though lawyers involved in the lawsuits say those numbers are laughably low.

Carson said payouts to victims would be covered by the federation’s insurance, and those payouts won’t be affected by the bankruptcy filing. Besides the insurance money, she said the federation has “no other significant assets” to pay the victims. In Wednesday’s bankruptcy filing, the organization listed its liabilities and its assets each at between $50 million and $100 million.

The filing on Wednesday also might stop the United States Olympic Committee from decertifying U.S.A. Gymnastics, a process it began last month in order to strip the organization of its power as a governing body.

The U.S.O.C. began the decertification process because the federation had made too many missteps — including in its widely criticized choices for the chief executive position in the post-Nassar era — and had proven incapable of running itself properly.

A U.S.O.C. spokesman, Patrick Sandusky, said his organization was reviewing the bankruptcy filing to see how it would affect the decertification process. He said it’s the U.S.O.C.’s job to ensure that each sports federation “has the capacity and capability to prove the support, protection and services that we expect for all Olympic athletes in the United States.”

However the bankruptcy filing affects the organization, its lawsuits and its ability to remain in charge of gymnastics in the United States, there is a deadline for U.S.A. Gymnastics to stabilize itself: The Tokyo 2020 Summer Games are less than two years away, and gymnastics is one of the United States’ marquee sports. The gymnastics team also features one of the United States’ biggest Olympic stars, Simone Biles, who is slated to lead the Americans as they look to win their third straight Olympic gold medal in the team event.

By then, U.S.A. Gymnastics will need major sponsors. Its main supporters fled the organization after the Nassar scandal broke in 2016.

Carson said the bankruptcy filing and subsequent resolution of the claims against the federation “are the first critical steps in rebuilding the community’s trust.” That trust needs to be rebuilt with potential sponsors, too.

John Manly, the lawyer for many of Nassar’s victims, was upset that the bankruptcy filing would end all discovery and depositions in the lawsuits against U.S.A. Gymnastics. He believes that would be a devastating development in the pursuit of who knew what and when in the abuse case.

According to Manly, it’s now up to Congress and law enforcement to continue pursuing the matter, so Nassar’s enablers could eventually face punishment.

“The leadership of U.S.A. Gymnastics has proved itself to be morally and financially bankrupt,” he said, adding that the federation is “incapable of meeting their obligations as an Olympic governing body.”

But the federation’s immediate fate, and the fate of the investigative phase of the lawsuits, is now in the hands of a judge.

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