Daily Progress, Jacksonville, TX

Local News

December 4, 2012

AG tries to block $500,000 loan to Lon Morris

JACKSONVILLE — Texas Attorney General Greg Abbott is intervening in the bankruptcy proceedings of Lon Morris College to protect charitable endowments and ensure a level playing field for unsecured creditors trying to recover their money, court documents show.

Abbott's latest foray: Attempting to block a $500,000 loan that the LMC bankruptcy estate is seeking, allegedly to pay staff and maintain the college through the conclusion of an upcoming auction and sale.

But there's no guarantee the auction will take place on Dec. 13.

Late last week,  AG representatives filed paperwork attempting to stall the upcoming Dec. 13 auction at least until after the New Year.

At roughly the same time Texas Attorney General officials were maintaining their strong presence in Tyler federal bankruptcy court last week, representatives of auction company Ameribid LLC  were calling area reporters en masse, offering tours of the now-vacant Lon Morris College campus, chatting up the auction and making no mention of any possible postponement.

As to his office's opposition to LMC's requested loan, Abbott contends if the college bankruptcy estate is allowed to borrow money without incoming revenue – basically, with no way to pay it back – it would amount to a de facto sale, which would be to the detriment of LMC's unsecured creditors. A $500,000 loan would provide problems for the unsecured creditors because it could eat into the $585,000 the bankruptcy estate has set for them in its plan, the petition states.

"The OAG contends that that proposed auction is actually being conducted for the true benefit of the secured creditors," reads the petition filed last week in Tyler.

One AG criticism of the loan request is that "there is no specificity for what cost and expense the loan proceeds will be used."

Ultimately, the loan illustrates vast disparities in the way the auction itself will benefit the college's secured and unsecured creditors, according to the paperwork, which was provided to the Daily Progress by Tom Kelley, Texas AG spokesman.

The AG contends college maintenance expenses should be limited to minimal staff, and security and maintenance personnel.  

Additionally, instead of taking a loan, LMC and secured creditors would be best served if the secured creditors themselves paid for the expenses the loan is being sought to cover, the AG said.

"Given that the debtor no longer conducts any business and is not generating any revenue, the proposed transaction essentially provides for the debtor to 'sell' its unencumbered property to the DIP lenders in order to fund administrative expenses for the true benefit of the case professionals," the petition reads. "… The debtor should not have to incur additional financing to the detriment of unsecured creditors."

 As part of their opposition to a Dec. 13 auction, the AG is currently investigating whether the Lon Morris bankruptcy estate is trying to auction off restricted property it does not legally own and expects to file a declaratory judgment preventing that from happening.

The auction should not be held since their active investigation is still being conducted, the AG asserts. As part of this investigation, the AG has already located four parcels believed to be restricted properties that cannot legally be auctioned away, reports show.

Yet another aspect of the AG investigation is a missing $1.3 million from an endowment that should have reverted to Sam Houston State University after LMC declared bankruptcy.

Finally, in a separate but related legal matter, the Texas Methodist Foundation has filed its own lawsuit against LMC and the AG's office last month to prevent the college's chief restructuring officer, Dawn Ragan, from liquidating five separate charitable endowments totaling $265,000 to pay Chapter 11 bankruptcy costs.

1
Text Only
Local News
  • Christian Rapper 0419.tif Local rap artist spreads the 411 on Jesus

    "I have seen things in my life that would make Dr. Phil crazy," Jacksonville native, ordained minister and aspiring rap artist Stephen I. Crow Jr. said with a laugh. "That's why I don't label my music specifically as "Christian rap" -- yes, Christians who love rap can listen and hopefully be uplifted, but I truly want and am trying to bring the word and Jesus' message to people who may never have heard it or don't believe it's for them.

    April 19, 2014 1 Photo

  • Tomato Bowl flushed to bottom of priorities

    The historic Tomato Bowl, built in 1940, stands strong on the outside, but according to some people the inside needs a lot of work in order to not be an eyesore.

    April 19, 2014

  • Cherokee County arrest: April 8-14

    The Daily Progress will publish a list of arrests from the Cherokee County Sheriff's Office on a weekly basis.

    April 19, 2014

  • Jacksonville College, high schools team up to offer dual credit program

    Jacksonville College is currently offering qualifying high school juniors and seniors attending Jacksonville and New Summerfield ISDs and The Brookhill School in Bullard the opportunity to get head start on their higher education.

    April 18, 2014

  • JISD board members to consider district strategic plan

    The Jacksonville ISD Board of Trustees will meet at 6:30 p.m. Monday, April 21, to discuss a district strategic plan and consider buying new band uniforms.

    April 18, 2014

  • 2 men arrested after standoff in grocery store

    Two men were arrested early Wednesday morning after a standoff at the B&B Foods in Alto.
    According to Alto Police Chief Jeremy Jackson, a person reported seeing two black males at the store just before 3 a.m. Wednesday.

    April 17, 2014

  • Some area entities closed for holiday

    Many area offices and businesses will be closed Friday in observance of Good Friday and Easter.

    April 17, 2014

  • Dispatcher Enge 0416.tif JPD dispatcher killed in wreck

    A dispatcher for the Jacksonville Police Department was killed Monday on her way to work, according to officials.
    Amber Enge, 35, of Whitehouse was pronounced dead at the scene of a one-vehicle wreck Monday afternoon on CR 2177 in Whitehouse.

    April 16, 2014 1 Photo

  • CR speed limit changes, E-filling fee top agenda

    On Monday, Cherokee County commissioners set April 28 to hold public hearings concerning the changing speed limits on two county roads.

    April 16, 2014

  • Catherine look.tif Religious lines drawn: Protesters met by members of Church of Wells

    Other than a few community members' voices that rose above the crowd, the protest Saturday against the Church of Wells remained peaceful.

    April 15, 2014 3 Photos