Larry Nassar's reign of terror amounts to $500 million in payouts from Michigan State

For Michigan State, there was an apology and a settlement, two moves that delivered a needed and necessary admission of culpability to the victims of Larry Nassar. It also represented a step through the scandal that has enveloped the school in the past year.

For the victims, it was a day a long time coming – not just acknowledgement of what they went through, but a financial agreement to help aid past bills and future challenges as they put their lives back together.

Michigan State announced Wednesday it agreed to a half a billion-dollar settlement with the hundreds of victims of Nassar, a longtime doctor in the school’s College of Osteopathy, who sexually abused patients for decades.

The massive settlement probably could have been even bigger, but brings a close to one chapter of Nassar’s reign of terror that extended beyond just his office in East Lansing but to the highest reaches of USA Gymnastics, where he worked as the team doctor.

MSU will pay out $425 million to 332 current claimants against the school and set aside another $75 million for future victims who may come forward. The deal does not stop victims from further filing suits against USA Gymnastics, its national team directors, Bella and Marta Karolyi, the United States Olympic Committee, the local Twistars Gym and its owner John Geddert, or any other party that could be culpable.

This is Michigan State and Michigan State only.

“We are truly sorry to all the survivors and their families for what they have been through, and we admire the courage it has taken to tell their stories,” the Michigan State Board of Directors, which approved the settlement, said in a statement.

The payout averages $1.28 million per victim (actual payouts will vary, according to attorneys). More money will likely come from settlements with other parties.

At Nassar’s sentencing hearings in January, victims repeatedly detailed stories of years and years of significant counseling and even hospital or inpatient treatment to deal with depression, substance abuse or suicidal behavior that followed being abused by Nassar. Parents talked about having to quit jobs and dedicate their lives to trying to help their daughters recover from a trauma they didn’t always understand had occurred.

This should help make up for some of the tangible bills. Never meeting Nassar would have remained preferable, though.

This is below the average payout in the similar — but by no means identical — Jerry Sandusky/Penn State scandal. In that, Penn State has paid out about $109 million to 35 victims (average $3.1 million) of the former assistant football coach who is currently serving up to 60 years in prison for molesting children.

Using the Penn State settlements as a guideline, there was a belief that Michigan State might eventually dole out about $1 billion.

Even a settlement of half of that remains a huge blow to the school, which will need to find ways to allocate the funds. While the school has insurance for some of this, it is expected, like in the Penn State case, that the insurers will sue to get out of paying their share by arguing Michigan State should have stopped Nassar as far back as 1997, when the first complaint about him was lodged by a 16-year-old to then-Spartan gymnastics coach Kathie Klages.

“This historic settlement came about through the bravery of more than 300 women and girls who had the courage to stand up and refuse to be silenced,” said John Manly, a California-based attorney who represents scores of victims.

As big as Michigan State is, a state-backed institution with $2.4 billion in operating expenses, according to its 2016-17 financial report, and an endowment of some $3 billion, the financial hit is considerable and challenging. Endowment rules prohibit the payouts from coming exclusively from that fund.

John Engler, the former three-term Michigan governor serving as interim MSU president, has said that settlements will be paid using tuition and state aid. He’s directly predicted that tuition could rise and taxpayers funds will be used. The current Michigan legislator has balked at the use of state aid to pay off Nassar’s actions. That fight is still to come.

MSU has also seen its reputation battered, which could result in lower donations or even enrollment. That, too, is to be seen.

If nothing else, the settlement allows Michigan State to take a significant step forward and away from the cloud of a most ugly scandal. It also avoids emotionally charged civil trials that would have been ruinous in terms of public relations.

Nassar, 54, is currently serving a 60-year federal sentence in Arizona for child pornography and faces hundreds of years in state prison if it ever gets to that.

As for the victims, this is step one. Most were just local youth athletes who suffered some kind of injury and thought they were fortunate to have been referred to a doctor that had worked with Olympic champions. Nassar lined his office walls with pictures of him with famous gymnasts, helping add credibility to his claim that unorthodox treatments were legitimate and not just a tactic for abuse.

Just as Michigan State agreed to culpability with everyone because it hadn’t stopped Nassar in the past, USA Gymnastics will be forced to defend itself under similar terms. Whether a victim ever competed at the national level is likely to be immaterial. Some of the 332 victims who settled Wednesday never set foot in mid-Michigan.

Unlike MSU, USA Gymnastics is unlikely to have the resources to weather such a huge settlement. It’s 2016 federal tax return, the most recent available, shows the organization brought in $34.5 million in revenue against $32.4 million in expenses. It finished the fiscal year with $3 million in assets. Michigan State brought in nearly $3 billion during its 2016-17 school year, according to tax filings.

That’s for USA Gymnastics to deal with. Same with the USOC, Twistars and anyone else.

Those deals are next. Michigan State’s is over, at least financially. That’s a step forward for the school, the marathon of making sure such a thing could never again occur remains.

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