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U.S. Bankruptcy judge: Nassar settlement ‘enormous’ benefit to USOPC

A U.S. Bankruptcy Court judge said the U.S. Olympic and Paralympic Committee would receive an “enormous” benefit from a settlement agreement proposal to survivors that would release the organization from legal liability even though there was a “distinct possibility of liability on the part of USOPC” should civil lawsuits related to the sexual abuse of young gymnasts by Larry Nassar and others proceed.

Robyn L. Moberly, the chief judge for U.S. Bankruptcy Court Southern District, in a telephonic hearing Monday also accused the USOPC of not “playing ball” in lawsuits filed by more than 500 women who allege they were sexually abused by Nassar, the former U.S. Olympic and women’s national team physician, and other Olympic and national team coaches, according to a previously undisclosed hearing transcript obtained by the Southern California News Group.

Mitchell A. Kamin, an attorney for the USOPC, suggested in the hearing that the organization did not have a legal responsibility to alert authorities at Michigan State after top USOPC officials were made aware of sexual abuse allegations against Nassar in 2015, a year before the allegations became public. Nassar continued to treat young athletes at Michigan State’s sport medicine clinic until September 2016.

The remarks were made during a hearing conducted by Moberly related to a USA Gymnastics $217 million settlement proposal that would release the USOPC from liability without paying anything to survivors in hundreds of lawsuits related to the sexual abuse by Nassar, former U.S. Olympic coach Don Peters and others.

A disclosure statement filed with the U.S. Bankruptcy Court Feb. 21 outlines a settlement agreement in which USA Gymnastics asked survivors to accept a deal releasing the USOPC, former USA Gymnastics CEO Steve Penny, Peters, former national team directors Bela and Martha Karolyi, 2012 Olympic coach John Geddert and others from “any and all claims arising from or related to Abuse Claims or Future Claims.”

The settlement agreement, however, does not address the extent USA Gymnastics, USOPC and FBI officials were aware of the predatory behavior of Nassar and others and to what steps, if any, they took to conceal that sexual abuse from unknowing potential victims.

USA Gymnastics filed for Chapter 11 bankruptcy protection in December 2018.

“The only way the USOPC will agree to” the settlement “is if it is protected by the release and injunctions described” according to the settlement proposal.

Alex Cunny, an Orange County-based attorney representing more than 140 survivors, last month served notice for subpoenas for former USOPC CEO Scott Blackmun, current USOPC board chairman Susanne Lyons, former chairman Larry Probst, current CEO Sarah Hirshland and four other current or former USOPC top officials. All legal proceedings involving USA Gymnastics, including discovery, have been frozen by the bankruptcy proceedings.

Cunny told the court Monday he was willing to withdraw the subpoena request for Hirshland, who hired by the USOPC in July 2018.

Attorneys for the USOPC initiated the hearing Monday to oppose the subpoenas and other requests for discovery.

Moberly, however, admonished Kamin and the USOPC and questioned the settlement proposal.

“As I’ve stated before, I have some attention to the fact that the USOPC is reaping the full benefits of gathering all of these tort suits in this forum, in the bankruptcy of USAG and not having to go through it themselves, not having to pay for it and what little did I know which is not everything is that there certainly is a distinct possibility of liability on the part of USOPC themselves so they are getting an enormous benefit,” Moberly said according to the transcript.

“And my observation thus far from the limited view of any judge is that USOPC hasn’t really played  ball. I mean I wasn’t the judge presiding over the (civil) case in California. I don’t know what those orders were, how many depositions there were, I haven’t seen the questions, the answers, the limitations, et cetera. So I think it would certainly behoove USOPC to play ball a little bit more. That’s my opinion.”

Moberly was further irritated by Kamin’s response.

“I’d like to correct any perception to the contrary that we’re not participating or playing ball because we are,” he said.

“I’m sorry,” Moberly responded, “I thought the only thing you’re offering is you’re not going to bankruptcy, you’re not paying all these bankruptcy counsel, you’re not throwing a dime into the settlement pot, you’re just throwing in insurance and obviously, at least from your arguments, financial statement, you have hundreds of millions of dollars versus USAG which doesn’t.

“So if you interpret that as fully playing ball with an association that’s going through bankruptcy, you and I don’t see matters eye to eye on that one particular topic. I don’t think — I mean coming to a mediation is a lot different than forking over settlement dollars, especially when you represent a very well-financed organization that is not filing bankruptcy, at least not at this point. And if you’re getting the benefit, as I’ve said multiple times before, you’re not getting the message. You’re not getting the message from me. Okay.”

The USOPC is a tax exempt, non-profit organization based in Colorado Springs. It reported $322.8 million in revenue for the fiscal year 2018, according to a filing with the Internal Revenue Service. The USOPC also reported $265.8 million in assets in the same filing and listed four employees receiving compensation over $500,000 with nine employees paid more than $400,000 and 14 receiving at least $300,000.

Blackmun received a $2.4 million buy-out from the USOPC after he was forced to resign in 2018 amid allegations he was involved in the cover-up of sexual abuse by Nassar, according to financial documents. Blackmun was referred to the Department of Justice and FBI in December 2018 for criminal investigation by two U.S. Senators who accused him of making false statements and misleading Congress.

The USOPC has been named in suits in both California and Michigan. Kamin argued in the hearing that attorneys for survivors have already conducted depositions of USOPC officials for the suits.

But Cunny complained to Moberly Monday that USOPC employees were uncooperative during those depositions, often at the instruction of their attorneys.

“I can tell you they were littered with instructions not to answer,” Cunny said.

Further depositions are needed, attorneys for the survivors maintain, to provide the women with an accurate account of the USOPC’s finances before signing off an agreement that releases the organization from financial and legal liability.

The depositions would also shine new light on why Michigan State was not contacted by USOPC officials, along with USA Gymnastics and FBI officials, after they were presented with allegations of sexual abuse against Nassar by multiple gymnasts in the summer of 2015.

An investigation commissioned by the USOPC found that that Blackmun and Alan Ashley, then USOC chief of sport performance, were first notified by Penny of allegations against Nassar in July 2015. Yet neither Blackmun nor Ashley took action or reported it to Michigan State or USOC board members, according to the report and court documents.

Nassar, according to court documents, sexually abused at least 40 young athletes between Penny’s first informing the USOPC and the FBI agent in charge of the bureau’s Indianapolis office about Nassar in July 2015 and September 2016, when Nassar’s abuse became public. The number of victims in that window could actually surpass 100, according to persons familiar with dozens of Nassar-related lawsuits.

“The theory is that once USOPC had notice of Larry Nassar’s abuses which happened at the time he was suspended from USAG in 2015, it did not act to prevent abuse of others at Michigan State,” Kamin said during the hearing Monday. “There’s no allegation that the USOPC had direct relationships with those plaintiffs. They were at Michigan State and the abuse occurred there. So I believe that all of the liability-related facts are known and contained in the prior disclosures.”

Under the settlement agreement proposed by USA Gymnastics, $215 million of the payout to survivors would come from the organization’s insurance carriers.

“But we do not feel that we have gotten accurate information yet even as to the total amount of money that is available insurance wise,” Stephen Drew, a Michigan based survivors’ attorney told Moberly. “We feel that there is more than ($) 215 million.”

“I’m quite sure there is,” the judge responded. “Nobody offers 100 percent (indiscernible). I think you can certainly assume there’s more than ($) 215 million.”

Source: Orange County Register

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