Daily Progress, Jacksonville, TX

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December 7, 2012

BREAKING NEWS: Attorney General to Lon Morris College auction bidders: We're not the enemy

"The OAG is simply doing its duty on behalf of the public's interest in nonprofit institutions and preserving such assets." -- Thomas Kelley, spokesman, Texas Attorney General

(Continued)

JACKSONVILLE —

As part of the scrutiny, the AG has opposed the efforts of the LMC bankruptcy estate to use charitable endowment money to pay for Chapter 11 bankruptcy costs.

AG officials also have tried to create a level playing field for unsecured creditors. To this effect they unsuccessfully attempted to block the $500,000 loan the LMC was seeking, contending it would amount to a "de facto" sale, as there was no further collateral available to secure such a loan.

The AG's investigation also includes the attempt to determine if the Lon Morris bankruptcy estate is trying to auction off restricted property it does not legally own.

But it's not only party investigating the dealings of the LMC bankruptcy estate. Officials with the Texas Methodist Foundation also are are suing to protect certain endowments from the sale, as evidenced by a recently-filed lawsuit.

The Friday letter with the AG's assurances, meanwhile, was formally addressed to Ragan, although it addresses all parties involved in the upcoming estate sale.

In direct response to the statements made in court by LMC public officials, AG representative Hal Morris said the ongoing investigation should not impact the auction or any bidder's ability to acquire real estate free and clear of any existing liens and claims.

"Potential bidders should be assured that any claims the Attorney General brings would be against certain proceeds of the action and/or against the debtor and/or third parties and NOT against the real property itself or any arm's-length bidders who acquire those assets in a sale approved by his honor U.S. Bankruptcy Judge Bill Parker," Morris wrote. "The Attorney General will not seek to recover any real properties sold at auction as approved by the bankruptcy court."

Ragan, Ray and Karbelk, incidentally, could not be reached by email for comment. A Lon Morris College representative contacted a Jacksonville Daily Progress reporter after Wednesday's hearing and said he, not Ragan, would be the newspaper's point of contact for questions from that point forward.

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