Daily Progress, Jacksonville, TX

Homepage

December 3, 2012

BREAKING NEWS: Texas Attorney General tries to block $500,000 loan to Lon Morris to ensure fairness in bankruptcy dealings

"The OAG contends that that proposed auction is actually being conducted for the true benefit of the secured creditors." — petition from the Texas Attorney General

(Continued)

JACKSONVILLE —

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.

 

Text Only

LOCAL NEWS
LOCAL SPORTS
LIVING