Documents show financial impact of Nassar scandal on USA Gymnastics
Financial reports and Internal Revenue Service filings released Thursday shed new light on how the Larry Nassar scandal has hurt the day-to-day financial condition of USA Gymnastics.
The organization is estimating it will have to pay between $75 million and $150 million to the survivors of the sexual assaults by the now-imprisoned former sports doctor Nassar, according to financial statements. USAG listed the baseline $75 million under "contingent liabilities" for 2016 and 2017, after it assessed roughly $108 million in total assets for each of those years.
The range does not include what might come out of criminal inquiries or other investigations, including three Congressional inquiries and the United States Olympic Committee's Ropes & Gray report, but it would apply to the pending civil suits by 220 plaintiffs in California, Michigan and Texas.
Insurance payouts might alleviate some of the liabilities. According to the financial statements, "USAG has insurance coverage encompassing numerous policies covering approximately 30 years, which in total provides substantial amounts of coverage. USAG considers the current range of potential impact to be between $75 million and $150 million. ... USAG has recorded a receivable for insurance coverage equal to $75 million since USAG concludes such insurance coverage is probable since it is part of the mediation process. ... These [inquiries] are at an early stage and have not advanced to a level that any amount, such as the possibility of fines or settlements, can be determined."
USAG's IRS filings, also published Thursday, show former president and CEO Steve Penny received $420,000 in 2017 as part of a severance package when he resigned under pressure in March of that year. The Wall Street Journal previously reported the total value of the settlement to be $1 million. Penny earned a total of $563,000 last year before he left, including "membership dues at a social club" worth roughly $2,000. He made $671,000 in total compensation in 2016, his last full year with the organization.
Penny was arrested last month after a Texas grand jury indicted him, alleging he tampered with evidence in the sexual assault investigation into Nassar. The indictment alleges Penny ordered the removal of documents from the Karolyi Ranch -- a longtime training facility near Huntsville for the country's elite gymnasts -- relating to Nassar's activities there. It alleges Penny acted after learning that Texas Rangers and Walker County authorities were investigating the ranch, which was being managed by USA Gymnastics.
Other findings of note from the published financial filings:
- Overall revenue declined 28 percent last year from the 2016 Olympics year, and the organization posted an overall $301,000 loss in 2017. Losses and revenue declines are typical in non-Olympic years, but the decline in 2017 was larger than that in 2013, the equivalent year in the prior Olympic cycle, mainly due to loss of major sponsors, such as Kellogg's, AT&T and Procter & Gamble, in the wake of the Nassar scandal. Total revenue in 2016 was $34.5 million, while it dropped to $25 million last year.
- USAG dedicated $709,667 to its new Safe Sport Policy, which was implemented in June 2017 to provide "awareness, prevention and reporting information regarding sexual misconduct to professional members, member clubs, athlete members and their families."
- USAG lost more than $1.1 million in contributions and grants last year compared to 2016 (receiving $3.9 million compared to $5 million the previous year).
- Former CEO Kerry Perry, who succeeded Penny on Dec. 1, 2017, made $34,327 in the last month of 2017, suggesting her annual salary was roughly $412,000.
- In 2017, USAG spent $48,000 on lobbying efforts, $4.5 million on travel expenses, $1.15 million on event facility costs and $264,000 on apparel.
- Also last year, COO Davonshe Galimore made $239,611; Rhonda Faehn, the head of the women's program, made $268,611; and other key officers (including the CFO and vice presidents) made in the $110,000-$140,000 range.
The published financial reports are the latest in a string of challenges facing USA Gymnastics. On Monday, the USOC moved to revoke USAG's status as the governing body for the sport at the Olympic level. In an open letter to the gymnastics community, USOC CEO Sarah Hirshland said "you deserve better" and that the challenges facing USAG are more than it is capable of overcoming as currently constructed. Under its bylaws, the USOC has the power to review all matters related to the continued recognition of any national governing body and, in taking this first step, could force USAG to clear the decks and rebuild its organization from scratch.
According to a report from The New York Times on Thursday, the discovery of missing documents that were key to the Nassar scandal and sought by Texas law-enforcement officials led the USOC to take the step. The Times reported the documents were found by USAG officials in their main offices in Indianapolis.
The next step in the process is for the USOC to appoint a hearing panel, chaired by members of the USOC Board of Directors, with two other members from the Athletes Advisory Council and the National Governing Bodies council, respectively. USA Gymnastics will have a chance to respond before the panel holds its hearing. The panel then would make its recommendation to the full USOC board, which would vote on whether to revoke recognition. The USOC is expected to make public when the panel is chosen and when the hearing is scheduled, but USOC bylaws are silent on whether the hearing will be open or closed.
USAG would continue to function operationally and financially while the process proceeds. If and when recognition is revoked, USAG does not cease to exist; its individual members and clubs would simply be part of an independent sports organization. The high-performance program funding from the USOC and the elite men's residency program at the Olympic Training Center are not affected.
Reporting from ESPN's Bonnie D. Ford and Tisha Thompson, and information from The Associated Press, contributed to this report.