Daily Progress, Jacksonville, TX


February 26, 2013

Dr. Miles McCall sued by Texas Attorney General for 'grossly negligent management' and other financial mismanagement alleged to have led to the demise of Lon Morris College



The lawsuit calls into question Dr. McCall's aforementioned practice of borrowing money from Amegy Bank, N.A., illegally using secured endowments as collateral.

“Had these gifts been retained as permanent endowments, they would now be available to support the charitable educational and religious purposes of the college — or, if the gift so indicated to a specific charity upon the dissolution of the college,” Abbott wrote.

A message sent to an Amegy representative seeking comment about the role company officials are alleged to have played in this “swap” loan process was not immediately returned.

One of the more publicized endowment examples was McCall's alleged liquidation of an endowment fund earmarked for Sam Houston State University. Sam Houston also is suing McCall in court in an attempt to recover this money.

Additionally, the Lon Morris College bankruptcy estate has attempted to claim insurance money based on Dr. McCall's actions as an administrator.

The Attorney General — in his capacity as the protector of the public's interest in charity — decided to sue after scrutinizing Dr. McCall's actions between June 2005 and May 2012.

The lawsuit contends the agreement between Amegy and McCall was amended five times prior to the bankruptcy to extend the college additional credit. McCall offered additional collateral. The assets-to-debt ratio the college was required to maintain was altered in the process, the suit alleges.

Notes payable by the college grew from $5 million in 2005 to $18 million in July 2011.

Texas Attorney General Spokesman Thomas Kelley declined further comment. CRO Ragan did not return a request for comment.




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