[Moo] Details on The Lawsuit, and some comments

[Maven]

Copied from SCA-Bridge-Chat (Barony of the Bridge, East Kingdom):



The SCA has announced they have settled the lawsuit. The original news 
release can be found: http://sca.org/BOD/announcements/settlement.html 
<http://sca.org/BOD/announcements/settlement.html>

The questions below cover the article.

*SCA Settlement FAQ*

*What was the lawsuit about?*

Actually, there are two lawsuits, one filed against the SCA and one 
filed by the SCA to protect its interests and enforce its insurance 
policies.

Several years ago, a former SCA member named Ben Schragger was convicted 
of the sexual abuse of multiple children that he allegedly met through 
the SCA from 1999-2001. He was sentenced and is currently serving a 
62-year prison sentence. The Board, of course, permanently revoked his 
SCA membership.

After an initial civil lawsuit was filed and dismissed in 2007 against 
the Society for Creative Anachronism, Inc. ("SCA"), a second civil 
lawsuit was filed in 2009 claiming that the SCA should be held liable 
for Mr. Schragger's wrongdoing. The lawsuit also asked that the SCA be 
held liable for allegedly not having effective policies in place at that 
time to protect these children. Three SCA participants who were local 
officers during this time were also named as defendants in the lawsuit, 
and as officers of the corporation, had the right to be indemnified 
against any ensuing legal costs. The Plaintiffs in the lawsuit demanded 
Seven Million Dollars ($7,000,000.00) in damages from the SCA.

The SCA immediately tendered the lawsuit to its insurance companies and 
one insurer agreed to cover the SCA's attorney's fees incurred in 
defending the lawsuit. All other insurers refused to cover defense fees 
or indemnify the SCA in the event of a settlement or judgment.

In 2010, both insurance carriers threatened to file suit in Federal 
Court. They wanted a Federal Court judge to rule that the insurance 
policies did not cover the 2009 lawsuit and did not cover the defense or 
indemnification of the SCA or its officers in the 2009 lawsuit. As a 
protective measure, it was necessary for the SCA to file a pre-emptive 
lawsuit against both insurance carriers, demanding payment under the 
policies. In this lawsuit the SCA demanded coverage in California, where 
the SCA is headquartered. The SCA has been required to pay the attorney 
representing the SCA in this lawsuit against the insurance carriers. It 
stands to reason that payment of these fees has left the SCA in a 
precarious financial position.
*
Why is our insurance company not accepting responsibility for covering 
our loss?*

The insurance carriers have offered a number of different reasons for 
their position that the 2009 lawsuit should be excluded from coverage 
under the policies. The SCA does not believe that any of these reasons 
have any merit and is continuing its suit against the non-paying 
insurance carrier. A trial date has been set in May, 2012.

*Which lawsuit is being settled by this settlement payment?*

The 2009 lawsuit against the SCA, in which plaintiffs asked for 
$7,000,000, will be fully and finally settled and dismissed with the 
settlement payment of $1,300,000.

*How was the settlement arrived at?*

After many years of legal process, in October of 2011, the victims 
agreed to settle for $1,300,000.00. This settlement was promptly 
presented for approval to both of the SCA's insurance carriers. The 
acceptance of this offer provides the SCA with the assurance that there 
will be no further lawsuits brought by the victims of Ben Schragger and 
thus brings to a close the financial and legal risk to the Kingdoms, 
officers, and the SCA as a result of the lawsuit. One insurance carrier 
agreed to pay $450,000 of the settlement amount. The other insurance 
carrier has refused to contribute to the settlement. Therefore, the SCA 
has been forced to pay the remainder of this settlement, $850,000. This 
brings the total cost to the SCA for both the settlement and the related 
legal fees to over $1,000,000.

*Are we sure there will be no future lawsuits related to the subject 
matter of the 2009 lawsuit?*

We cannot be 100% positive, but we know that the plaintiffs in the 2009 
lawsuit are all of the victims that were named in the police reports.

*If the SCA is not guilty of any wrong-doing, why are we settling the 
2009 lawsuit instead of continuing to fight the charges?*

The simple answer is that we cannot afford it. Like any other 
corporation, the SCA must make decisions about the most effective use of 
the money it has, and the financial impact of the lawsuit is effectively 
diverting a large amount of funds that could be much better used to 
serve the SCA by fostering our mission of researching, teaching and 
experiencing aspects of the Middle Ages and Renaissance. The SCA is not 
admitting to any wrong-doing by settling the 2009 lawsuit, and the 
settlement and release agreement clearly state that fact. Settling the 
lawsuit now, for a fraction of the original demand, will allow the SCA 
to move forward and to concentrate on rebuilding our finances and 
developing initiatives that can make the SCA a healthier organization 
with which to support our mutual dreams.

*How much has the SCA paid in legal fees, and how much will it have to 
pay before the lawsuit against the insurance carrier is decided?*

Costs arising from the 2009 lawsuit, the settlement and the associated 
legal fees have surpassed $l,000,000. The SCA must also anticipate 
additional legal fees as it pursues the non-paying insurance carrier and 
seeks judgment in May 2012 that the insurance carrier must pay the SCA's 
expenses and those of the three local officers for the 2009 lawsuit. 
There is no way to know with certainty how much the SCA will still need 
to pay, but those costs will probably be in the tens of thousands of 
dollars.

*Why is the SCA asking the Kingdoms for money?*

The SCA corporate office simply does not have this much in cash, assets 
or cashable dollars. While the corporate office of the SCA has managed 
the burden of our shared liability to date, it has been the entirety of 
Society for Creative Anachronism, Inc. that has been liable for damages 
under this lawsuit. In order to the meet the terms of the settlement 
without financially crippling the SCA, its subsidiaries or any single 
branch, it has thus become absolutely necessary that each Kingdom 
located in whole or in part in North America, both Pennsic and Gulf 
Wars, and the subordinate Corporate level checking accounts contribute 
an equal percentage of their separate total cash assets to the 
settlement and associated legal fees. The other wars will contribute as 
part of the Kingdom through which they report.

*Why are all the Kingdoms liable?*

The 2009 lawsuit was brought against the Society for Creative 
Anachronism, Inc. and thus included all of the SCA. In order to meet the 
terms of the settlement without crippling the SCA or any single Kingdom, 
all Kingdoms will be required to contribute.

*Are branches outside North America expected to contribute?*

No, Kingdoms and affiliates outside of North America are not being 
required to contribute to the settlement (although voluntary donations 
would be gratefully accepted!). First, the affiliates were not named in 
the lawsuit. Second, these branches were incorporated under different 
tax IDs and non-U.S. jurisdictions, with their own Boards of Directors 
and responsibility for their own financial matters and insurance 
policies. With regard to Canadian Provinces, the SCA is incorporated as 
a foreign non-profit corporation so that Canadian branches are part of 
the overall Society for Creative Anachronism, Inc.
*
Are the subsidiaries exempt from having to contribute?*

No. At the time of the filing of the lawsuit, the subsidiaries did not 
exist. All kingdoms were branches directly under the umbrella of the 
Society for Creative Anachronism, Inc. Regardless, all subsidiaries are 
wholly-owned by the SCA, and as the sole owner, the SCA has the 
authority to use or direct the use of the subsidiaries' assets for the 
benefit or objectives of the SCA as a whole.

*Why are Pennsic and Gulf War singled out among the inter-Kingdom wars?*

Pennsic and Gulf War both report independently to the Society 
Exchequer's office and have separate bank accounts that do not fall 
under a Kingdom's authority. All other inter-Kingdom wars will 
contribute as part of the Kingdom through which they report.

*Will the SCA branches that are contributing to the settlement get their 
money back if the SCA wins the lawsuit against the insurance company?*

Absolutely! If the SCA prevails in its lawsuit against the non-paying 
insurance carrier, any funds recovered will be distributed to the 
kingdoms, on a pro rata basis, after payment of any remaining legal fees.

*Will the funds collected be kept separately from the general SCA funds?*

The settlement funds will not be kept separate because a check will be 
cut almost immediately in order to meet the deadline for payment of the 
settlement. The funds that will go toward any future legal fees will be 
kept in a separate checking account, earmarked for use only in paying 
the SCA's legal fees.

*Are there penalties if Kingdoms or the named inter-Kingdom events don't 
produce their share of the funds to SCA?*

Yes. The bank accounts owned by the various U.S. branches are, directly 
or indirectly, legal assets of the Society for Creative Anachronism, 
Inc., and the SCA would have the right to freeze all funds in such 
accounts, although it would take any such step very reluctantly.

*What has the SCA done to prevent this type of problem from happening in 
the future?*

The SCA has worked to improve its policies and institute new policies 
where needed. Some of the new policies include the two-deep rule and 
criminal background checks on anyone wishing to administer youth 
activities. The Board will be addressing long-range plans for improving 
its governance structure during 2012, after consultation with internal 
and outside counsel, as well as the SCA's financial advisors.

*How was the amount each branch would contribute determined? Who 
determined it?*

The SCA's financial advisors conducted extensive financial evaluations, 
taking into account financial reports from all SCA branches. Data was 
collected from the 2010 Consolidated Doomsday reports and the most 
recent Kingdom level quarterly reports to determine the estimated 
available cash assets held in the SCA and its subsidiaries. Using that 
total, a calculation was performed to determine what percentage of funds 
each Kingdom had in relationship to the total amount of cash needed. The 
percentage per Kingdom was used to calculate the amount each Kingdom 
would have to contribute to the settlement. To be fair, each Kingdom 
will be paying the same percentage of its assets. That percentage is 18% 
of the cash assets each branch had as of the last relevant financial 
report filed by the branches and Kingdoms. The analysis was presented to 
the Board of Directors, who approved this method of calculating the 
contributions from each Kingdom.

*In general, how will the contribution of funds work? *

Each Kingdom will send to the Corporate Office an amount equal to 18% of 
all monies in the checking accounts of all branches within that Kingdom 
as of the last relevant financial report filed by the branches and 
Kingdoms. Each Kingdom will have discretion in determining how it will 
collect the funds internally, from each of its branches.

*Does each branch have to contribute the same amount? What if another 
branch holds a branch's money such as a Barony holding funds for a Canton?*

Each Kingdom will be required to contribute the same percentage of the 
combined total cash assets of each of its branches as of the last 
relevant financial report filed by the branches and Kingdoms. Each 
Kingdom will be given great flexibility in how it raises this amount 
from the branches under its authority. Your Monarchs, Seneschal and 
Exchequer will make the determination of how the gathering of funds will 
be handled within your Kingdom, and the Corporate Treasurer and Society 
Exchequer will work with each Kingdom to facilitate the gathering of the 
funds.

*Is each branch going to have to send their money to the corporate office?*

No. Each branch will need to send its contribution to its Kingdom Exchequer.

*How is the money going to be collected from each branch?*

Each Kingdom will receive an invoice from the corporate office stating 
the amount of money it is required to contribute. It is the 
responsibility of the leadership in each Kingdom to determine how to 
collect the money from each of its branches. The Corporate Treasurer and 
the Society Exchequer will work with the Kingdom Exchequers to discuss 
the best options for each Kingdom.

*How soon does the money have to be sent to the corporate office?*

The due date for each invoice that will be sent to the Kingdoms will be 
10 business days from receipt of the invoice. We do realize that some 
Kingdoms may not have the full amount immediately available within the 
Kingdom account, so the corporate office will work with these particular 
Kingdoms to discuss different methods of collecting the funds and/or 
making the required payment.

*What happened to the $600K the corporate office had in reserve from 
previous years?*

Between rising costs in operating expenses, the loss from investments 
due to the general global economic downturn, and the expenses of the 
2009 lawsuit, this money has been depleted.

*What if I want to hold a fundraiser or make a personal donation?*

You are free to do so, and the SCA deeply appreciates your efforts and 
your support of our shared organization. We would suggest that you make 
any such donations directly to your Kingdom to help it pay the amount it 
will be required to contribute as its part of the SCA's obligations in 
the settlement.

*Will the Board be holding any meetings or town halls where we can talk 
face-to-face to ask questions and discuss this?*

Yes. Meetings have already been held for Kingdom Royalty, Seneschals, 
and Exchequers. We will also be holding town halls at Gulf War, Estrella 
and Pennsic. Check the war schedules for dates and times. Your Crown, 
Coronet and Kingdom Seneschal and Exchequer have all been briefed, 
understand the obligations involved and can answer many of your 
questions. We recognize you will naturally have many questions, and we 
ask that these be addressed to the appropriate Kingdom Ombudsman, who 
will endeavor to respond as soon as possible. While we are committed to 
getting get back to you as quickly as possible, we do ask for some 
patience and understanding as this process is extremely difficult.

The Board of Directors, Corporate officers, and Society officers are 
doing everything possible to resolve this issue to the best outcome 
possible. Your understanding and support of our mutual responsibilities 
are deeply and fervently appreciated as we move forward.

-------------------------------------------------
Comments (Medhbhin):
This is good news and bad news. It's good news that the Looming Doom of 
the Lawsuit has been settled at a discount rate. It's *bad* news that 
the monies must be raised so broadly in such a short time, and will 
seriously impact groups and people that had absolutely nothing to do 
with the original crime.

It is also bad news that we are finding out that insurance carriers 
cannot be trusted to live up to their ends of their contracts with us. 
(Or is this really *news?*)

It is bad news that the Board now has all the excuse it ever needed to 
continue to increase the financial burden on individual members.

It is bad news that they are apparently not considering that it is WAY 
WAY WAY past time to think about radical reorganization of the SCA - at 
the very least, separation into individual Kingdoms under an overall 
nominal umbrella organization. Better still would be reversing the 
current structure - from top-down to bottom-up. In neither of those 
cases would there have been the perception of one single huge pot of 
money to be accessed via lawsuit - which is what has caused so much of 
the trouble. (Tip of the turban to Duke Cariadoc, who said such things 
for years before his worst forebodings came true, and who has had the 
graciousness not to shout, "I TOLD YOU SO, YOU MORONS!" all over every 
available  communications source.)


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