[Moo] Details on The Lawsuit, and some comments

[Flaithri O'Cearnaigh]

Please read the notes from me and Her Excellency. In them you will find that
we are not being asked to contribute a large sum. 

 

Baron Flaithri

  _____  

Date: Sun, 5 Feb 2012 15:41:22 -0500
From: hourumiyamoto at gmail.com
To: moo at lists.stierbach.org
Subject: Re: [Moo] Details on The Lawsuit, and some comments

And so because of the actions of one oshirinoana (asshole in Japanese),
everyone in the sca gets (censored). Lovely, so what's the plan, I know we
as a barony aren't going to sit idly by, I personally want to get this
monies owed business out of the way. Game plan?

On Feb 5, 2012 10:41 AM, "Maven" <sk8maven at yahoo.com> wrote:

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

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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