by Irvin Muchnick and Tim Joyce
Those of you who remember the contretemps last year in London over U.S. Olympic team athletes’ uniforms that were made in China need to ask yourselves this:
What about the fact that USA Swimming, seat of the biggest documented scale of institutional sexual abuse outside the Catholic Church, owns a captive “reinsurance” subsidiary … in Barbados?
With this post, Concussion Inc. launches a series of articles on the Byzantine manipulations behind how organized swimming’s top executives self-insured their feathered nests against a generation of claims of widespread coach abuse and cover-up. It is an extremely complicated story, involving international law and money-laundering, tax-dodging, tropical junkets, and incestuous business relationships.
And all in the name of “safe sport.” Not.
Congressman George Miller and his staff at the House Committee on Education and the Workforce are investigating USA Swimming. In that endeavor, the thick file of victims’ abuse stories, and how the swimming powers denied them into oblivion, is obviously important. But so are the logic and the borderline (at best) business principles and practices that have been hijacking good, clean American sports in the name of “branding” and profits.
We start, in the next post, with background on what must be the creepiest entity ever formed in the name of youth athletics: USA Swimming’s $20 million-plus wholly owned subsidiary, United States Sports Insurance Company.
USSIC Stands for “ka-ching!” in Barbados
The United States Sports Insurance Company (USSIC) was incorporated in 1988 as a wholly owned subsidiary of the entity now known popularly as USA Swimming. The decision to start USSIC makes for an appropriate prologue for the work today of Congressman George Miller and his staff at the House Committee on Education and the Workforce, who are investigating USA Swimming’s failed “safe sport” program — even as the organization’s PR flacks and lobbyists work furiously to shore up “perceptions.”
In ‘88, swimming faced the prospect of skyrocketing insurance costs. The organization’s main carrier, AIG, complained that premiums were too low in multiple areas of liability, including sex abuse. Given the exposures, AIG would only discuss premiums in the range of $1 million, up from about $200,000, for the same coverage.
During that period, large corporations, profit and non-profit alike, faced steep premium hikes. What emerged from the creativity of that generation’s lawyers and MBA’s was a new wrinkle called “captive reinsurance.” In a nutshell, parent entities, with smart leveraging of tax breaks and regulatory gimmicks, could save money by insuring themselves, managing the claims themselves, or underwriting the risks of their third-party commercial carriers.
Today many corporations have some type of captive. (Yep, the Catholic Church has one: it’s called the National Catholic Risk Retention Group, Inc.) In 1988, the U.S. Olympic Committee already had its own captive covering several sports, called PANOL. But USOC wanted no more part of underwriting swimming’s risks than AIG did at the established premiums. While other national governing bodies, or NGB’s, saw their premiums reduced or coverage stable, USA Swimming was not allowed to join due to its risks and failure to manage them. So swimming researched forming its own captive.
In the late 1980s, Caribbean countries competed furiously to be the preferred home of captive reinsurers from the States. For USSIC, USA Swimming chose Barbados, which offered many years of tax abatement, as well as a structure so loose that all the operation really required was a dummy bank account and a set of books domiciled on the island, plus the periodic on-site board of directors meeting. (These seaside soirees could easily be justified as perk-laden bacchanals — as we will explain in a future installment.)
A lot of companies preferred to locate their captives in other Caribbean countries — the Cayman Islands was a popular destination. But for USA Swimming, the clincher was that Barbados had a tax treaty with Canada — but not the U.S. The less exposure to U.S. laws and their pesky inspectors and enforcers, the better.
Recently, offshore captives have fallen somewhat out of favor as internal American states — notably Vermont, North Carolina, and Hawaii — rejiggered state laws and regulations to emerge as equally friendly havens. “USA” Swimming, however, never seems to have considered returning its insurance operations to the U S of A. The main reason, experts believe, is that swimming’s lords of the rings do not want records of their reinsurance machinations open to public inspection here. As a subsidiary of the non-profit USA Swimming, USSIC is included in Internal Revenue Service filings. But let’s not get carried away and let every Tom, Dick, and Harry read all the details of how our NGB works so assiduously to protect its own institutional derriere — while not lifting a finger to reach out and offer support to the victims of sexual abuse in their ranks.
Stay with us for more on the ice-cold tactics of swimming’s insurers in warm and sunny Barbados. Our next stories will deal with such topics as:
* USOC’s 1999 warning to swimming that it couldn’t use the parent organization’s Colorado Springs training facility, because USA Swimming was the only NGB whose insurance didn’t cover the exposure of their clubs.
* The consultant’s actuarial study that concluded that sexual abuse claims were a ticking time bomb for swimming — a view shared by, among others, Jack Swarbrick, now the athletic director at football player rape-rife Notre Dame.
* The imperial ambitions for USSIC of Dale Neuburger, USA Swimming’s board president from 1996 to 2004.
* How the case of Simon Chocron — a pedophile coach at the famous Bowles Club in Jacksonville, Florida, who is now an international fugitive from justice — helped blow apart swimming’s multilayered defenses in abuse civil lawsuits.
1999: Olympic Committee Forces USA Swimming’s Offshore Tax-Dodging Subsidiary to Change Coverage
As Congressman George Miller and his staff proceed with their investigation of USA Swimming, there will be natural pauses — such as the wait for a report Miller has requested from the Government Accountability Office on how existing statutes impact sex abuse reporting requirements in sports programs.
In the meantime, let’s not allow swimming’s $200,000-a-year public relations and lobbying campaign to bore us to death in anticipation of an “independent review” of its “safe sport” program that won’t be released until early 2014. Instead, let’s continue to educate ourselves in what the lords of the pools have been pulling off with their Barbados-based subsidiary, the “United States” Sports Insurance Company.
As explained in the last installment, USSIC was started by USA Swimming in 1988 in response to surging policy premiums from its regular insurance carriers, and burgeoned to assets of well over $20 million.
The next important date in the evolution of the national governing body’s (NGB) defenses against abuse and other claims is 1999. That was the year the U.S. Olympic Committee told swimming, in writing, that it could no longer use the Colorado Springs Olympic Training Center facilities. The reason was that USA Swimming was the only NGB without appropriate insurance coverage.
The risk manager for the USOC explained all this bluntly to USA Swimming’s consultant, Risk Management Services. On May 3, 1999, RMS senior vice president Sandy Blumit forwarded these notes to the USSIC board:
“[USOC] mandates innocents should be protected by their NGB. Therefore, can’t delete abuse and molestation [coverage].”
As a consequence, USOC “would not allow any local members clubs, volunteers or members on premises (training center).”
Two days later, USOC was advised that swimming was deleting the exclusion for abuse/molest coverage, and they were allowed back at the training center.
In future installments of this series we’ll have more on:
– The calculated distinctions between USA Swimming’s coverage and that provided to member clubs.
– The so-called “wasting” provision in the coverage, designed to frustrate victims from collecting anything close to adequate compensation.
– Warnings by experts (including Jack Swarbrick, current athletic director at Notre Dame) that swimming’s accumulation of sex abuse claims was a ticking time bomb.
USA Swimming’s Moguls Realize They’re Sitting on a Time Bomb With Sex Abuse Cases
In previous installments we’ve set up the 1988 founding of USA Swimming’s dummy insurance subsidiary — the United States Sports Insurance Company, headquartered in sunny Barbados. And we’ve shown how in 1999 the parent U.S. Olympic Committee scolded swimming for its inadequate coverage for sexual abuse and molestation claims.
All this was taking place in the context of decades of cover-ups of rapes of mid-teen swimmers by some of the most prominent coaches in the sport. This year Rick Curl was sentenced to seven years in Maryland prison for his abuse of his Olympic hopeful, now named Kelley Davies Currin, in the 1980s. After Currin exhorted Congress to get involved following her statement at Curl’s sentencing hearing, Congressman George Miller of California and his minority-party staff of the House Committee on Education and the Workforce have begun to investigate this historical and ongoing national disgrace.
Back in 1999, it was apparent to the lords of swimming that they had a serious problem on their hands. Not a moral problem — they didn’t pay a stroke to that — but a business problem. Experts were beginning to warn the USA Swimming board that the number of potential abuse claims was large and growing, and that they could bankrupt the organization.
One of the first to say so was an Indiana lawyer named Jack Swarbrick, an adviser to USA Swimming. He has since become the athletic director at the University of Notre Dame — an institution that has had its own problems with rape allegations against football players (including one by a woman who subsequently committed suicide). Swarbrick said swimming should get a grip on its abuse liability issue before it was too late.
The existence of Swarbrick’s advice emerged in the deposition of John Leonard, the executive director of USA Swimming’s coach-credential gatekeeper, the American Swimming Coaches Association. Leonard is the guy who last year told Concussion Inc. that ASCA is not “an organization that deals directly with children, nor is that part of our purpose in any way, shape or form.”
Most of USA Swimming’s response to doomsday warnings was legalistic. The national group itself did not have specific abuse liability coverage — only a general liability policy that excluded abuse coverage to its 2,000 member clubs. The clubs were given USSIC-underwritten coverage for coach abuse and molest claims. And even that coverage was capped at $100,000.
Further, the team’s coverage was saddled with what is known as a “wasting” provision. This meant that every dollar spent on defending a claim would be correspondingly reduced from the coverage. So if investigators and lawyers for USA Swimming ran up a tab of $100,000 in a particular case, a victim stood to collect a maximum of $100,000 minus $100,000: zero dollars.
The club, too, had zero dollars to defend itself and its innocent coaches and club boards. This happened more often than not. In addition, the coverage was limited to two claims a year for all member clubs.
The idea was that a club could easily be sacrificed — its coaches tossed to bankruptcy and any parent board left holding the bag. The two larger goals were:
First, protect USA Swimming from claims made against member clubs.
Second, frustrate victims in trying to isolate deep enough pockets to provide settlements to cover their injuries and needed treatment.
Dale Neuburger — USA Swimming’s Empire-Building Board President, 1998-2002 — And the Golden Age of USSIC
As we’ve been chronicling, USA Swimming has had a subsidiary since 1988, the United States Sports Insurance Company — a “captive reinsurance” operation designed to leverage the risks for its widespread problem of coach sexual abuse and other liabilities. And the beauty part is that USSIC is in Barbados, free of American taxes and regulations and record-keeping.
From here, we’re going to document three cases that helped “pierce the veil” of swimming’s strategy to frustrate plaintiffs by lowballing insurance claims limits, adding a “wasting” provision that made those limits negligible, and foisting the whole risk onto member clubs rather than USA Swimming. The wasting provision, in particular, made it impossible for victims to get recoveries substantial enough to pay for their treatment. And the entire system intentionally drove individual clubs into bankruptcy.
The first of those cases involved Venezuelan national Simon “Danny” Chocron, a coach at the famed Bowles club in Jacksonville, Florida, who raped both girls and boys. He is now a fugitive from justice back in his native country. See https://concussioninc.net/?p=5993. We’ll get to Chocron in the next installment.
But first let’s pause to observe that the generation-long story of swimming corruption and cover-up of sexual abuse is also about a coterie of profit-making potentates. One such figure is Dale Neuburger, whose term as USA Swimming board president, 1998-2002, coincided with the heyday of USSIC.
According to USA Swimming’s public accountings, it was on Neuburger’s watch that USSIC attained its peak of an annual $750,000 in “safety rebates” to USA Swimming. In recent years, as victims aggressively pursued civil action to recover from their abuse, the safety rebate has been slashed by two-thirds. We’ll explain safety rebates in a future post.
Dale Neuburger, one of those extraordinarily exploitive figures in the “Lords of the Rings” world, was the right man for presiding over all this legalistic misdirection. For one thing, he is endowed with immense chutzpah — like USA Swimming chief executive Chuck Wielgus, Neuburger has brazenly lied in sworn statements to courts.
In one deposition, Neuburger claimed to know little about predator coach Mitch Ivey and the allegations against him. Neuburger was a contemporary of this legendary figure, and Ivey was the subject of an investigation by ESPN’s Outside the Lines, which got Ivey fired as the women’s coach at the University of Florida. Yet under oath, Neuburger feigned complete unfamiliarity with all of this. He even played dumb about the sacking of his own son’s coach. See https://concussioninc.net/?p=6008 andhttps://concussioninc.net/?p=7525.
Most recently, through Neuburger’s affiliation with the TSE Consulting group, he helped Bob Bowman, Michael Phelps’ coach, consummate lucrative consulting deals with the British and Turkish national teams.
As the American representative to the FINA Bureau, the global swim governing body, Neuburger has had access to unique money-making ventures. His specialty is high-paid consulting for a city or country bidding to host an event. With his presence on the board, he had the capacity to make that role pay off for his clients by helping to get their bids approved.
The quintessential example of Neuburger’s handiwork was the 2010 FINA Open Water World Cup in Fujairah, south of Dubai. Neuburger consulted for the Dubai sheiks who landed that event, where the overly warm ocean waters would lead to the wholly preventable death of American open water swimmer Fran Crippen.
As USA Swimming board president, Neuburger had one important achievement for USSIC, besides maxing out on the safety rebate. He was also astute enough to realize that 100 percent overlap of the boards of USA Swimming and USSIC was a bad idea. The parent, USA Swimming, would need more of an arm’s-length relationship with its subsidiary should anyone start attacking USSIC’s assets (which during Neuburger’s term peaked at $27 million). On the advice of President Neuburger, USSIC began recruiting outsiders for the USSIC board. Of course, with the promise of little work and lavish Caribbean junkets for board meetings, this wasn’t hard.
There was one area where plaintiffs would locate deeper pockets and higher damage awards to get just recompense to pay for life-repairing treatment. That was by getting past the member clubs’ coverage for abuse-molest claims and all the way to USA Swimming’s general liability coverage.
As this series proceeds, we’ll discuss the new cases that will, indeed, continue to expose USA Swimming. They also highlight why this whole scandal is a subject that Congressman George Miller and the House Committee on Education and the Workforce will want to investigate wherever it leads — straight to the top of the executive leadership and board management of our national sport governing body.