One of Pierce County’s oldest charities has petitioned to reorganize itself under Chapter 11 of the nation’s bankruptcy code, citing finances decimated by the voluntary closure of its bingo hall and the ongoing threat of sex-abuse litigation.
Gateways for Youth and Families filed its petition April 2 in U.S. Bankruptcy Court in Tacoma. The move came after the charity shuttered its Lakewood bingo hall in October, suspended its social service programs and laid off 14 employees.
“There were not a lot of choices,” said Chuck Larsen, a member of the Gateways board of directors.
Chapter 11 protects a company or charity from the threat of lawsuits from its creditors while it reorganizes its finances. A majority of creditors must approve any reorganization plan. During the process, Gateways would be able to retain control of its mission and assets, including real estate holdings, unless a federal bankruptcy judge says otherwise.
Gateways’ board envisions a newly named charity — Mentor House — emerging from bankruptcy protection that is more tightly focused on its core mission, mainly providing housing opportunities to at-risk youths, according to the bankruptcy petition.
“The plan is designed to enable Gateways to continue serving the needy youth and families of Pierce County while providing a recovery for creditors of at least as much as they would get in a liquidation of Gateways,” the petition states.
Founded in 1890 as the Women’s Lend-A-Hand League, the organization has provided housing for troubled youths, including people leaving the state’s foster-care system, and offered other social services.
Until October, Gateways taught job skills to people ages 16 to 24, provided a domestic-violence impact panel for offenders, and offered a program that allowed noncustodial parents required to have only supervised visits with their children a safe and neutral place to do so.
Only the Humane Society for Tacoma and Pierce County, founded in 1888, has a longer history of charitable enterprise in Pierce County.
The decline of bingo hall revenues and recent lawsuits brought against Gateways by former clients seriously eroded the organization’s fiscal viability, its bankruptcy petition shows.
For years, money from the bingo hall on Bridgeport Way Southwest provided a significant portion of Gateways’ revenue, as much as 60 percent some years. But attendance waned in recent years, “and the bingo hall became a cash drain rather than a profit center,” the petition states.
By the third quarter of last year, it was clear something had to be done, Gateways executive director Charity Woolbright said in an interview this week.
“It wasn’t making the revenue to support programs any longer,” Woolbright said. “We had to make a fiscally responsible decision.”
So the bingo hall was closed. It was a devastating blow.
Gateways recorded more than $2.8 million in revenue in 2012 and nearly $2 million in 2013, despite receiving no bingo revenue in the last three months of the year, bankruptcy records state. So far this year, the organization has taken in $11,000.
Former Gateways board member Audrey Chase, who left the board in early 2013, called closing the bingo hall foolish.
“It was the bedrock of the entire organization and kept it going,” said Chase, who joined the board in 2005 and said she was forced out last year. “It was always up and down with the bingo hall. I told them to give bingo a chance, that it’ll come back.”
In addition, fundraising efforts were made more difficult after three men sued Gateways over the past three years, the petition states.
Two alleged they were sexually abused as boys in the 1980s while in the organization’s care. One voluntarily dismissed his suit. The organization settled out of court with the second man.
“The third lawsuit, which is ongoing, alleges abuse by a counselor at the Jessie Dyslin Boys’ Ranch,” the petition says. “Although Jessie Dyslin Boys’ Ranch was operated by a separate legal entity, the property is now part of (Gateways’ real estate holdings), and Gateways was unsuccessful in attempts to obtain dismissal of the lawsuit.”
The lawsuits have had a chilling effect on potential donors and also raise the specter of future litigation and the expense necessary to fight it, Gateways contends.
“Donors are reluctant to contribute to Gateways unless they know their gifts will be used for the charitable mission, as opposed to payment of legal fees and judgments based on problems from long ago,” the petition states.
The petition also mentions possible irregularities involving Gateways Foundation, the organization’s former fund-raising arm.
“The foundation had significant assets, including real property and endowment funds, but those assets appear to have been dissipated over time,” the petition shows. “It is possible that Gateways has claims that could be asserted against the former managers of the foundation, who were also the former officers and directors of Gateways.”
Woolbright and Gateways’ attorney, Brian Jennings, declined to answer further questions about the foundation.
The News Tribune investigated Gateways and in 2007 and 2008 published a series of articles about apparent improprieties there, including alleged conflicts of interest and misappropriation of funds. The newspaper’s coverage prompted an audit by the Washington Gambling Commission, which determined no laws had been broken.
Former board member Chase said this week that “mismanagement and personal squabbles” on the board of directors and among staff over the past five years helped lead to Gateways’ demise.
“It makes me cry,” she said.