Daily Progress, Jacksonville, TX

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February 1, 2013

SHOWDOWN: Lon Morris College bankruptcy hearings seemingly devolve into series of disputes; Texas AG asks for answers

Confirmation hearing on LMC liquidation plan takes place in Tyler's federal bankruptcy court Monday and Tuesday

(Continued)

TYLER —

Next week's hearings are expected to last awhile. There are literally 33 items — many of them objections to the confirmation — that must be addressed before any decision by the judge can be reached.

AG officials have literally argued their point back and forth with the LMC estate via filings submitted through the legal system.

The LMC bankruptcy estate has drafted and submitted a fourth version of the liquidation request after reading filed complaints by the Texas AG. At least six other parties are involved with the bankruptcy proceedings in one capacity or another.

However, Abbott and his staff contend LMC's plan changes are is too little, too late. They say the bankruptcy estate ultimately did not raise enough money to stave off debts with the recent $2.2 million auction.

"The (new) plan fails to resolve the majority of the attorney general's objections and concerns about the prior version," Abbott states.

One of the priorities emphasized by the LMC estate in their new plan is the monetary reimbursement of former LMC employees, who last received some compensation around Christmas time. But the language of the plan is confusing and seems to not be specific as to how that will be approached.

According to the liquidation plan, Ragan is expected to be appointed "Plan Agent," a $300 an hour position that will not be scrutinized by bankruptcy court, after the bankruptcy conclusion. In this capacity she is expected to act as the sole manager and responsible officer of LMC concerns from that point forward.

In the background of all this drama is former LMC President Dr. Miles McCall, who apparently believes the LMC bankruptcy estate owes him over $150,000 and has filed paperwork to claim that amount from the bankruptcy estate. LMC CRO Ragan heartily disagrees.

As a matter of fact, Ragan lays the blame for the $1.04 million in missing endowment money that attracted the Texas AG's attention to begin with squarely at McCall's feet. The Attorney General launched investigation into a missing $1.04 million from an endowment which should have reverted to Sam Houston State University after the college declared bankruptcy.

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