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December 13, 2012

EDITORIAL: Christmas cash disbursement not the ribbon-adorned gift LMC's disguised it to be

JACKSONVILLE — When is a heartwarming Christmas story not what it appears to be?

When it comes from an expertly-disguised press release, of course. When it masks the Lon Morris College bankruptcy estate's efforts to squeeze settlement money out of the United Methodist Higher Education Foundation.

If you scanned LMC's Wednesday press release, you would have seen the headline, "Lon Morris College Estate Asks Court to OK Pay for Employees Before Holidays," and read a  saccharine sweet account of the bankruptcy estate's planned gift to former LMC employees in the form of recovered wages.

Except, that's not what really happened.  

The press release stems from a proposed resolution to the bankruptcy estate's attempts to gain access to $1 million in the UMHEF's endowment money, which is designated for and restricted to scholarships.

The estate is asking Judge Bill Parker of the U.S. Bankruptcy Court to authorize a settlement allowing them to receive $7,000 in return for leaving the $1 million endowment alone from here on out. That was the true arrangement.

But UMHEF's attorneys had two basic conditions before anyone agreed to this: One, pay LMC employees back $130,000 using our money and, Two, do it on Christmas Day.

This was intended as a "Thank You" from UMHEF to the employees for their hard work in the wake of this very troubling bankruptcy.

(The LMC press release lists the number of employees as 138. The legal paperwork says 130.)

This wasn't a gift or a gesture of goodwill from the Lon Morris College bankruptcy estate. It was a settlement between two parties, pure and simple.  

The LMC estate, you see,  has for some time been under fire for trying to use restricted endowment money to pay for escalating bankruptcy costs.

Dawn Ragan has both admitted and denied — giving different accounts in news interviews and on court documents — that the LMC bankruptcy estate accessed $ 1.3 million from an endowment that should have reverted to Sam Houston State University after LMC declared bankruptcy. The Texas Attorney General's Office is investigating that particular case.

Additionally, the Texas Methodist Foundation has filed a lawsuit against LMC seeking to protect several endowments.

The endowment angle wasn't immediately evident in the feel-good tale that PR writer par excellence Bruce Vincent crafted and several news agencies plopped down on their websites.

The Devil is always in the details, and LMC's cheerfully-promoted story was designed to give readers the impression that LMC was pushing for permission to pay former Lon Morris employees "with deep ties to the community" THEMSELVES so the employees wouldn't experience hardships during the holidays.

Not what happened.

Houston attorney Hugh Ray III of McKool Smith and LMC chief restructuring officer Dawn Ragan are quoted early and often in their press release, which states for the central reason for the hearing that they “are requesting a hearing to present evidence for why the group of 138 former Lon Morris employees should be allowed to receive the cash disbursements."

Uh, uh. The primary reason for the hearing is to ask Parker can approve the endowment settlement between LMC and UMHEF.

Plus, there's a much darker reason for Lon Morris wanting everything completed by Christmas: If the settlement becomes effective by the end of the year, the LMC bankruptcy estate can "reduce obligations of the estate in a manner that may assist in (Liquidation) plan confirmation." Their words.

If and when Judge  Parker grants the settlement request during the courtroom hearing scheduled for 9:30 a.m. Dec. 20, and if and when the employees receive their Christmas money, they will have UHMEF, not the Lon Morris College bankruptcy estate, to thank.

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