Daily Progress, Jacksonville, TX


December 5, 2012

Lon Morris media machine gets heavy handed

"The attorney general has been playing poker your honor. They've been communicating with the press." -- Hugh Ray

TYLER — The Lon Morris bankruptcy estate's media machine kicked off in full gear Wednesday.

During a federal bankruptcy hearing , Dawn Ragan, chief restructuring officer for LMC, and Stephen Karbelk, founder of AmeriBid, testified that area newspapers are guilty of endangering the upcoming sale of the estate by publishing negative stories.

Hugh Ray III, attorney for Lon Morris College, asserted that the Texas Attorney General's Office is guilty of manipulating the media to create these "negative stories."  However, U.S. Bankruptcy Judge Bill Parker, Eastern District, shifted the focus away from the criticism of the media coverage.

Meanwhile, during a brief hearing recess, Ragan told a Jacksonville Daily Progress reporter she wanted him to email her his story before it went to press. (The reporter refused.)

And before the hearing was even completed, a PR writer had already emailed out en masse a press release announcing that Lon Morris College bankruptcy estate's upcoming auction had been postponed until January -- and that LMC had received approval for a loan to offset the costs of the coming auction.

The odd thing is, the press release appears to have been written before the hearing even began Wednesday. It lists the loan amount as $500,000, which is the amount LMC had requested. But LMC's motion to borrow $500,000 was amended by the judge so the college can only borrow $150,000 now.

"Two weeks from now the judge allowed us to retain the right to object to their borrowing the balance, $350,000," AG Spokesman Thomas Kelley explained after the hearing.

Also, the aforementioned press release seemed to have been written before the hearing, as it was released at 2:30 p.m. while the hearing was still underway.

The rescheduling of the auction until Jan. 14 with a subsequent confirmation of the sale planned for Feb. 4 was only part of several LMC bankruptcy issues addressed Wednesday.

The hearing did provide a brief glimpse into the current inner workings of the bankruptcy estate now that is appears these days to mostly be a ghost town.

Ragan testified that among the skeleton staff is one employee managing the LMC facilities, one taking care of security there, one comptroller and one academic dean.

Hugh Ray was almost antagonistic of the attorney general during the hearing. AG representative Hal Morris stayed mostly quiet, but Ray asserted Attorney General Greg Abbott was "simply wrong in his math" when it came to his complaints filed trying to block the aforementioned loan and his scrutiny of LMC's handling of endowment money.

In her comments criticizing the press, Ragan alleged newspaper stories have misinterpreted court files or misrepresented crucial information, spreading doubt and mistrust.

Ray said this is the AG's fault.

"The attorney general has been playing poker your honor," he said to the judge. "They've been communicating with the press."

Also, Ragan attempted to characterize the change in auction date as LMC's idea rather than the attorney general's, who filed the motion to change the date. But that seemed to contradict with testimony that  auction company AmeriBid incurred $30,000 in costs exclusively promoting the Dec. 14 auction date.

 Kelley said Wednesday's hearing was mostly a victory for his office.

"The judge agreed with our attorneys that the debtor's auction should NOT be held before Christmas," Kelley said. "The auction date is set for Jan. 14 in Dallas — McKool Smith law firm for debtor's counsel."

 There will be more on the hearing in tomorrow's Jacksonville Daily Progress.


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