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Michigan State University said Tuesday it has transferred $500 million into a settlement fund to compensate the victims of sexual abuser Larry Nassar — but also announced the end of a separate fund created to cover counseling, sparking anger from victims and their allies.

The university said the $10 millionHealing Assistance Fund, created to provide counseling for victims and their families, is being folded into the settlement fund, reducing the amount MSU has to borrow to pay for Nassar's crimes by $8.5 million.

The Healing Assistance Fund was set up a year ago as the Nassar scandal was ramping up and the MSU trustees and former President Lou Anna Simon were under pressure to help the victims who were coming forward with complaints and filing lawsuits, claiming that MSU failed to protect them from Nassar's sexual abuse over more than two decades.

MSU suspended the Healing Assistance Fund in July following fraud allegations after paying out more than $1 million. Many victims have been clamoring for the university to reinstate it so they could get help as they try to heal.

The fund was established to help victims until the settlementwith 332 women who sued MSU for failing to protect them against Nassarcould be negotiated and paid, university spokeswoman Emily Guerrant said Tuesday.

“We felt the Healing Assistance Fund was a way to support the survivors during an incredibly difficult time,” trustees Chairman Brian Breslin said in a statement. “The fund was intended to be a bridge from the point of creation to when the survivors would receive payments from a settlement with the university.

"Now that the university has fulfilled its commitment and deposited the settlement funds, we support redirecting the remaining Healing Assistance Fund toward the $500 million lawsuit settlement. We hope survivors who need counseling support continue to seek out appropriate services, including the several options available on campus.”

Interim President John Engler said the university will redirect approximately $8.5 million remaining in the Healing Assistance Fund to the settlement payment, which will reduce the university’s borrowing to $491.5 million.

The decision drew swift criticism from Nassar victims and others, including the chair of the MSU Relationship Violence and Sexual Misconduct Workgroup appointed by Engler.

Rebecca Campbell, a professor of psychology, said she and other workgroup members strongly recommended that the fund be reopened.

"MSU should continue to provide financial assistance through the Healing Assistance Fund to Nassar survivors and their families," Campbell said via email. "The Fund should be available to all survivors — those in the primary settlement and those who are not part of the settlement."

Nassar victims took to social media to express their anger.

"Every time I think MSU leadership can’t get any worse, they somehow never cease to amaze me with their callus & heartless decisions,"tweeted Larissa Boyce, the woman who said she told former MSU head gymnastics coach Kathie Klages about Nassar in 1997.

Added Grace French, another Nassar victim, on Twitter: "This betrayal will likely cause significant distress that will compound trauma symptoms they are already experiencing.”

Natalie Rogers, an MSU student and spokeswoman for the activist group Reclaim MSU, said it's "terrible" and "frustrating" that the Healing Assistance Fund is no longer available for Nassar's victims. 

"It feels like the money wasn’t ever was going to be paid out to them in the first place," Rogers said. "Based on what Engler has said, the fund was established for show."

John Manly, the California-based lawyer who represented most of the victims in the civil lawsuits, called Engler a "morally bankrupt bully."

He said even though 500 victims are part of the settlement, many others came forward after the September cutoff and won't get a dime.

Nassar, Manly noted, abused young women under the guide of medical treatment for nearly three decades before he was caught and imprisoned for life.

"You are ignoring all these other victims who are getting nothing," he said. "They are in pain. They are hurting. Their families are hurting. They suffered terribly."

Manly said Engler's decisions involving the victims were "stupid" and prevented the university from settling the lawsuits for less than $500 million.

Those actions, the attorney said, included suggesting that Rachael Denhollander, the first gymnast to publicly accuse Nassar of sexual abuse, might get a "kickback" from her attorney for "manipulating" other victims to file lawsuits.

Manly also noted that Nassar victim Kaylee Lorincz accused Engler of secretly trying to settle her civil suit against MSU for $250,000 without her attorney present. 

"If it were not for his boorish manner, conduct and incompetency in the way he handled the cases, these cases would  have settled for hundreds of millions less," Manly said. "Taking away the settlement fund is what he has been doing from the beginning ... Clearly, he was hired to come and push these women around and grind them up into submission, and it blew up in his face."

"Every step Engler made made these cases more valuable and made it more likely we would be successful," Manly said.

Guerrant said MSU is working hard to change its campus culture.

"The settlement is part of the many steps that the university is taking to be accountable to the survivors of Larry Nassar and to everyone in the community,"she said. "We're very focused on how we can work together to create a better environment and move forward."

The university borrowed money to make a $425 million payment to the Qualified Survivor Fund that will go to the 332 victims who sued MSU, alleging the university failed to protect them against Nassar, who sexually abused girls and women over more than two decades. 

William L. Bettinelli, a retired Superior Court judge in California, will work with the survivors to determine individual payments.

Meanwhile, the remaining $75 million is set aside in a litigation fund, which will be used to settle claims against 168 plaintiffs who sued the university up until a deadline in September. Guerrant said those claims are still being evaluated.

“Making the payment on this settlement is an important step for the university," Engler said.

"But it is not the only way MSU is accountable to those harmed,” the interim president said. “The entire campus is focused on implementing the improvements we’ve made in health care practices, reporting policies, campus-wide sexual assault education and prevention efforts and trauma-informed responses and treatment for survivors.”

kkozlowski@detroitnews.com

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