Bankruptcy Law News

USA Gymnastics Employees Shouldn’t Get Bonuses, Victims Say

Jan. 10, 2019, 9:57 PM

Survivors of sexual abuse perpetrated by individuals acting under the aegis of USA Gymnastics are objecting to the bankrupt organization’s motion for permission to pay bonuses totaling $88,000 to 39 employees, calling it “beyond belief.”

The objection filed Jan. 9 by the Sexual Abuse Survivors Committee appointed in the case acknowledges that the $88,000 is a small amount “compared to amounts otherwise at issue in the case” but says that the case involves issues that are “not reducible simply to dollars and cents.”

The proposed bonuses are for either $1,000 or $5,000 per employee.

USAG filed Chapter 11 bankruptcy Dec. 5, after the well-publicized scandal of team physician Dr. Larry Nassar’s abuse of hundreds of girls or young women over many years. There are also numerous allegations of abuse by others working for or on behalf of USAG.

USAG was allowed by the court to pay its employees on an interim basis shortly after the bankruptcy filing, when there was no committee of abuse survivors. The committee filed its objection after USAG filed a supplement describing the requested bonuses.

It’s not uncommon for companies in Chapter 11 to get court approval to pay certain key employees bonuses to keep necessary employees from leaving while the company strives to reorganize.

The committee complained in its filing that USAG intends to pay bonuses to “employees who had participated and had knowledge of the cover-up of sexual abuse.”

The committee identified Amy White as an example. White refused to testify in a number of sexual abuse cases under her Fifth Amendment right against self-incrimination, it said.

Another witness testified that White told her that Steve Penny, USAG’s former chief executive officer who has been indicted in Texas for tampering with evidence, instructed White to remove and conceal records from a Texas training facility and transport them to USAG’s Indianapolis headquarters, the committee said.

“Why is USAG rewarding an employee who apparently participated in tampering with evidence of the abuse of gymnasts around the country?” it asked.

Another employee on the bonus list is Leslie King, who the committee said instructed members of the gymnastics team not to speak to the public regarding sexual abuse allegations, thus contributing to a cover-up.

The committee complained generally of a lack of information about the bonus recipients provided by USAG. There isn’t evidence showing that the employees deserve the bonuses or that they’re necessary for the company’s reorganization, the committee said.

“Bonusing employees who plead the Fifth Amendment, and directed communications during an era of cover-up and may otherwise actively or passively be involved in facilitating sexual abuse” shouldn’t be authorized, it said.

The case is pending before Judge Robyn L. Moberly of the U.S. Bankruptcy Court for the Southern District of Indiana.

USAG is represented by Jenner & Block LLP. The committee is represented by Pachulski Stang Ziehl & Jonews LLP.

The case is In re: USA Gymnastics, Bankr. S.D. Ind., 18-09108, Objection 1/9/19.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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