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 —

Dr. McCall, college president from July 2005 until he resigned May 24, was questioned regarding management of that endowment. This led to concerns about the college's treatment of endowments by others such as the Texas Methodist Foundation. TMF believes a total of $265,000 spread throughout five additional endowments are in danger of being used to offset bankruptcy costs.

Ragan is adamant that McCall deserves no payoff.

"No funds are owed Dr. McCall," Ragan states in her paperwork. "According to the board minutes, it appears Dr. McCall made untrue statements to the board about about the Long endowment and he failed to act with the diligence his contact required. … There is no evidence of board approval of a loan by Dr. McCall to the college."

McCall specifically filed a claim for $154,289.26, claiming he is due $24,289.26 in wages, $50,000 in deferred compensation, and $80,000 for an alleged loan made to the college.

But Dr. McCall made no such loan, Ragan contends. He simply drained the Long Endowment of the $1.04 million, transferred the bulk of it to CDs, then had subordinates covertly cash many of the CDs and transfer them into a restricted fund, records show.

The disposition of these funds have been a major hot button issue with the Texas attorney General's Office. Ragan alleges Dr. McCall told the board all CDs were still funded and accounted for when he knew it was not true.

"In a matter of months, the Long Endowment was reduced from $1 million in cash to a mere book entry," Ragan stated. " … This was not a loan as he contended. …. Through these actions Dr. McCall breached his contract with the college and violated his duties of loyalty, fidelity and good faith."

On a "to do" list following the confirmation hearing, Ragan says suing Lynn Acker and Acker and Co for accounting malpractice is a high priority.

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