Daily Progress, Jacksonville, TX

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January 16, 2013

Texas Methodist Foundation: Spare our endowments or stop the Lon Morris auction

Both TMF and United States Department of Justice file motions in bankruptcy court requesting more time before auction results are accepted by court

(Continued)

TYLER —

The first came from a representative of the Texas Attorney General's Office, who initiated an investigation into a missing $1.3 million from an endowment which should have reverted to Sam Houston State University after the college declared bankruptcy. Dr. Miles McCall, college president from July 2005 until he resigned May 24, was questioned regarding management of that endowment.

The five endowments TMF officials believe will be liquidated total $265,000 and have been an object of concern by the foundation for some time. In November, the foundation formally sued both the Lon Morris College bankruptcy estate and Texas Attorney General Greg Abbott to prevent the liquidation. Tuesday's motion is an extension of that.

The same day the TMF suit was filed late last year, officials with the Texas Attorney General's Office attempted to halt or reschedule this week's auction because AG officials believed the college was improperly attempting to sell restricted assets that are not part of the bankruptcy estate.

In Tuesday's motion, officials with Texas Methodist Foundation — a domestic non-profit organization — are again seeking the declaration they did not get before — that none of the endowments is legally considered property of the bankruptcy estate of Lon Morris college.

Legal action on behalf of the Texas Methodist Foundation was prompted when LMC Chief Restructuring Officer Dawn Ragan alarmed them by requesting TMF wire her $100,635.36, the principal balance of one of the endowment funds.

Ragan could not immediately be reached to comment Wednesday, but in an earlier email said that the college has been the recipient of many gifts over time, and some of those gifts have been restricted, and some have not.

"Monetary gifts are generally held at various foundations that manage the investment of those funds, which then remit earnings or other distributions to the college periodically," she said in the previous email. "The debtor has been seeking to obtain unrestricted funds to be used to help pay its debts, in particular the unpaid employee wages as well as unsecured creditors such as local vendors and suppliers."

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