USA Gymnastics files for bankruptcy as part of 'reorganization'

USA Gymnastics filed for Chapter 11 bankruptcy on Wednesday as it searches for ways to remain afloat in the wake of the Larry Nassar sexual abuse scandal.

The national governing body for gymnastics said it hopes this latest move will allow for an expedited process in handling dozens of civil lawsuits related to the sexual abuse perpetrated by Nassar, the former national medical coordinator who was convicted of assaulting patients under the guise of medical treatment.

Kathryn Carson, chair of the USA Gymnastics board of directors, said the move is a reorganization and not a liquidation.

"We owe it to the survivors to resolve, fully and finally, claims based on the horrific acts of the past," Carson said.

Defense attorneys involved in the case expect the bankruptcy declaration will stop all legal proceedings in civil court, including an ongoing discovery process and depositions of USA Gymnastics officials. The dozens of lawsuits say that the organization and its leaders failed to live up to their obligation to report claims of Nassar's abuse and stop him from abusing others. Multiple attempts at mediation in those suits have not produced a settlement.

Carson's statement said USA Gymnastics has no assets significant enough to help settle those lawsuits. The bankruptcy filing claims between $50 million and $100 million in assets and the same monetary range of liabilities. Carson's statement said insurance policies, which are not affected by the bankruptcy claim, would be used to cover the cost of those lawsuits.

Attorney John Manly, who represents many of the women suing USA Gymnastics, called the filing an "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," Manly said. "They have inflicted and continue to inflict unimaginable pain on survivors and their families. They are incapable of meeting their obligations as an Olympic governing body."

Wednesday's filing is the latest in what has been a tumultuous path forward for USA Gymnastics since Nassar was arrested on sexual conduct charges more than two years ago.

A grand jury indicted former USA Gymnastics president Steve Penny in October on charges of evidence tampering. He denied any wrongdoing through his attorney. Among the creditors listed in Wednesday's bankruptcy filing, Penny is listed as someone who is still owed $340,000 in severance pay, which USA Gymnastics disputes.

Two replacement presidents have come and gone since Penny stepped away from the organization in March 2017. Both Mary Bono and Kerry Perry resigned from interim president positions under pressure from some of the sport's most high-profile athletes, including world champion Simone Biles.

Those missteps, among other things, led the U.S. Olympic Committee to take the first steps toward revoking USA Gymnastics' certification in early November. USOC CEO Sarah Hirshland told gymnasts in an open letter that they "deserve better." Hirshland said in the same letter she did not know how long the decertification process would take.

"While we fully understand that USAG believes this restructuring will begin to solve deficiencies we've identified, the filing does not impact our Section 8 complaint and that process will move forward," USOC spokesman Patrick Sandusky said.

The Associated Press contributed to this report.