2:41 p.m- The Texas Methodist Foundation is suing the Lon Morris College bankruptcy estate and Texas Attorney General Greg Abbott to prevent Dawn Ragan, the college's chief restructuring officer, from liquidating five separate charitable endowments totaling $265,000 to pay Chapter 11 bankruptcy costs.
The news comes on the same day the Texas Attorney General's Office announced it is attempting to halt the upcoming Dec. 13 college auction because AG officials believe LMC may be improperly attempting to sell restricted assets that are not part of the bankruptcy estate. Lon Morris College properties is tentatively scheduled to start that auction at 11 a.m. Dec. 13 at McKool Smith, PC, 300 Crescent Court, 12th floor, in Dallas.
Ultimately, the lawsuit from the Texas Methodist Foundation — a domestic non-profit organization — seeks a declaration that none of the endowments is legally considered property of the bankruptcy estate of Lon Morris college.
The lawsuit, filed Nov. 6, asserts that the funds were created with the intention of furthering educational, charitable and religious endeavors of the Methodist church and "Methodism" and not to be used as financial fodder to help offset the college's liquidation costs.
Legal action on behalf of the Texas Methodist Foundation was prompted after Ragan requested they wire her $100,635.36, the principal balance of "The Faubion Funds" endowment. The lawsuit contends that in the request, Ragan stated the funds were needed to "assist in managing current liquidity constraints" and further stated any additional funding provided will be used to cover payroll, utilities, insurance and general overhead costs as well as certain marking/advertising costs," reads the lawsuit.
"As a result of the termination of the educational and religious endeavors of Lon Morris College, the executive committee of TMF ... has determined that to provide any further funds from any of the endowments to Long Morris College would defeat the charitable intention of the endowments," the lawsuit states.