Daily Progress, Jacksonville, TX

February 5, 2013

Lon Morris College liquidations hearing: The art of the deal

Ben Tinsley
Jacksonville Daily Progress

TYLER — Cutting deals with one another in the hallway outside the courtroom was the order of the day Monday, as parties involved in the Lon Morris planned liquidation slowly inched closer to a conclusion.

Hugh Ray, the attorney representing the interest of the LMC estate, darted in and out of the courtroom of the United States Bankruptcy Court – Eastern District of Texas, quietly whispering to each involved party as he tried to reach an agreement on each of the many objections against the final liquidation plan draft.

Federal Judge Bill Parker went as far as to describe the process as “more blood-letting,” although he acknowledged it was necessary.

The hearing took at least three and a half hours, but seemed to be much longer due to the many bankruptcy parties who would go out into the hallway with Ray to negotiate their part of the deal.

These parties included bank officials and a smattering of others who, for one reason or another, have become part of this process.

During the hearing, Hal Morris with the Texas Attorney General's Office informed the judge that former LMC president Dr. Miles McCall had been, or was in the process of being sued in state court by the AG's office for the way in which McCall handled a $1.04 million endowment fund.

The AG's office reached the same conclusion as the LMC estate: That McCall didn't make a loan as claimed, but simply drained the Long Endowment of the $1.04 million, transferred the bulk of it to CDs, then had subordinates covertly cash many of the CDs and transfer them into a restricted fund.

During the hearing, Ray informed the judge that a $500,000 fund was going to be set up in the final liquidation agreement to provide former LMC employees with back pay.

The LMC attorney even bargained with the AG's office. Toward the end of the day, Morris agreed to relinquish the attorney general's objections against the proceeding.