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Boy Scouts get conditional OK for $850M compensation fund

But judge also rejects 2 key provisions

DOVER, Del. — A bankruptcy judge on Thursday approved a proposal by the Boy Scouts of America to enter into an agreement that includes an $850 million fund to compensate tens of thousands of men who say they were sexually abused as youngsters by Scout leaders and others.

But the judge also rejected two key provisions of the deal, potentially jeopardizing the agreement that the organization had been hoping to use as a springboard to emerge from bankruptcy later this year.

Following three days of testimony and arguments, Judge Laura Selber Silverstein granted the BSA's request to enter into an agreement involving the national Boy Scouts organization, roughly 250 local Boy Scout councils, and attorneys representing some 70,000 men who say they were sexually abused as youngsters decades ago while engaged in Boy Scout-related activities.

The agreement was opposed by insurers who issued policies to the Boy Scouts and local councils, attorneys representing thousands of other abuse victims, and various church denominations that have sponsored local Boy Scout troops.

It was not immediately clear how Thursday's ruling will affect the future of the bankruptcy case, given that the judge rejected two significant provisions in the restructuring support agreement.

“Basically, everybody's going to have to go back to the drawing board,” said Paul Mones, an attorney representing hundreds of abuse claimants. “I think this is going to cause a reset.”

While ruling that BSA officials exercised proper business judgment as required under the law in entering into the agreement, the judge refused to grant a request that the Boy Scouts be allowed to pay millions in legal fees and expenses of attorneys hired by law firms that represent tens of thousands of abuse claimants.

Silverstein said she had several concerns about the fee request, including whether the ad hoc group called the Coalition of Abused Scouts for Justice is duplicating efforts by the official victims committee appointed by the U.S. bankruptcy trustee, and whether the coalition is making a substantial contribution to the case.

The judge also noted that coalition attorneys had emphasized last year that their legal fees would be paid by individual law firms they were representing, and that abuse claimants would not be responsible for those costs.

Silverstein said any payment of legal fees by the Boys Scouts, or by the victims fund, which was also contemplated in the agreement, “comes directly or indirectly out of their clients' pockets, and indeed the pockets of all abuse victims.”

“Any funds diverted from abuse victims, especially to pay an obligation of their lawyers, needs to be closely examined,” she said.

Silverstein also denied the BSA's request under the agreement for permission to withdraw from an April agreement in which insurance company The Hartford would pay $650 million into the fund for abuse claimants in exchange for being released from any further liability.

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