Lon Morris' $1.3M gift investigated by AG office
Per its responsibility to protect charitable assets, the Texas Attorney General's Office is investigating how $1.3 million in a restricted gift was spent by Lon Morris College, the agency confirmed Wednesday.
The funds in question are from the Long Endowment, which specifies that if Lon Morris College closes, then the main library at Sam Houston State University in Huntsville becomes the beneficiary.
Attorneys for the bankrupt college reviewed minutes from the college's Board of Trustees in 2010 and 2011, and there is no apparent reference to the endowment in the 2011 minutes, "except a fleeting reference in the January 2011 minutes, which indicate that the Long Endowment will make a regular distribution for the (Lon Morris) library," according to court documents.
The will and testament of James D. Long, who died in 2009, shows that half of the income was exclusively to purchase books and journals for the Lon Morris library, and "to modernize library services and improve student access to library resources."
Court documents further state that based on Lon Morris' books, the money was borrowed "as of" 2010, but a promissory note for the $1 million that was borrowed is nowhere to be found.
Attorneys have requested board minutes, emails and documents related to the endowment.
Former Lon Morris President Dr. Miles McCall, who resigned in May, also was examined earlier this week in Arlington by the Attorney General and Lon Morris Attorney Hugh Ray III.
According to court documents, the examination can pertain to, among other things, "the acts, conduct, or property or to the liabilities and financial condition of (Lon Morris), or to any matter which may affect the administration of (Lon Morris') estate."
Auditor Lynn Acker of Acker & Co. is scheduled to be examined on Nov. 1.
Attempts to reach McCall through family, friends and acquaintances were unsuccessful Wednesday. A message left for Acker at his office Wednesday afternoon was not returned.
Ray said attorneys for the college also are conducting a parallel investigation in close connection with the Attorney General's Office investigation, and once they know the facts, they will take action.
He said he does not want to comment on the ongoing investigation or any evidence or conclusions related to it until it is complete. He believes he will know something in mid-November.
The investigations are among the latest issues for Lon Morris.
The financially-strapped institution filed a voluntary chapter 11 bankruptcy petition in July after bleeding millions of dollars since at least the 2007-08 school year, when college representatives say the school embarked on a costly plan to grow enrollment.
In August, the college learned it will lose federal student aid and subsequently decided to suspend the fall semester.
About 100 students were expected to attend Lon Morris this fall, and now other East Texas community colleges have stepped in to help accommodate them.
Another hearing is scheduled for Oct. 31, at which time the judge will consider the college's request for authority to employ Tranzon Auction Resolutions, which will sell "a substantial amount of the real property" of the Jacksonville estate.
According to the application to employ Tranzon, the auctioneer would market and sell the real property and certain personal property.
Lon Morris has an estimated 112 acres of real estate with various buildings such as dorms, athletic facilities, administration buildings, a library, a chapel and admission buildings, the application states.
The college still could be purchased by an educational institution or another buyer, provided the bankruptcy court authorizes Lon Morris to go through the auctioning process as it requested.