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December 6, 2012

Lon Morris: $150,000 loan in, $144,001 paycheck out?

Dawn Ragan, chief financial officer for the Lon Morris bankruptcy estate, is making nearly $300 an hour, court records show

(Continued)

Tyler —

In some related documents it is stated that the LMC bankruptcy estate had to pledge $4 million of approximately $10 million it had in cash and endowments held by non-profit foundations to Amegy Bank to secure a $750,00 loan.

The bank subsequently foreclosed on those funds, the court filings state.

The Texas Attorney General's office has made it clear it intends to protect vulnerable endowments. The AG is still investigating funds missing from a $1.3 million endowment that should have reverted to Sam Houston State University after LMC declared Chapter 11 bankruptcy in July.

Additionally, the Texas Methodist Foundation is suing the Lon Morris College bankruptcy estate and the AG to prevent Ragan from liquidating five separate charitable endowments totaling $265,000 to pay Chapter 11 bankruptcy costs.

In her financial paperwork, Ragan said she has been charging the university $298.91 per hour since July. She contends she worked 490.50 hours during the period from July 2 through September 2.

The $144,001 includes $137,800 in actual pay. This breaks down to $9,580 in advisory fees; $119,340 in chief restructuring officer fees (she is alleged to have worked 397.80 hours doing this); and $8,880 for 59.2 hours of travel time, court records show. The time consisted of travel from Dallas to Jacksonville and Tyler, according to documents.

The remaining $6,201.12 is for expense compensation, Ragan said in court records.

In the petition's historical background, Ragan provides her account of why the bankruptcy took place in the first place. In this account, she contends the college experienced financial difficulties for several years prior to the bankruptcy.

This, she said, was compounded by a plan to grow student enrollment with unfunded scholarship aid, insufficient housing space, inadequate tuition controls, and "assumption of debt to facilitate capital improvements and provide working capital."

Bridgepoint LLC, Ragan's employer, was formally appointed the college's financial advisor and Ragan its chief restructuring officer on July 5.

In the background, Ragan said the college has an outstanding debt of about $14 million “without trade” and $16 million “with trade.”

 

 

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