Federal Judge Bill Parker gave the go-ahead Thursday morning for the Lon Morris bankruptcy estate to distribute $130,000 to former employees who were not paid for work they did before the school’s closure earlier this year.
Direct deposits will be made to employees beginning today.
“It’s a win for us. It’s a win for the people in Jacksonville who need the money this time of year,” said Houston Attorney Hugh Ray III, who represents the Lon Morris bankruptcy estate.
Estate Chief Restructuring Officer Dawn Ragan, who negotiated the payment with representatives from the Nashville-based United Methodist Higher Education Foundation, added in a news release, “We are extremely pleased that the court is allowing this deserving group of former Lon Morris College employees to receive a paycheck before the holidays. We are working hard to increase the estate’s value and make sure that every employee receives all the wages they’re owed. This is a positive step in the right direction.”
Tom Dullard, who taught at Lon Morris and now teaches in New Summerfield ISD, also was pleased with the news.
He said the pay will be a nice Christmas present and early birthday present.
“It was a substantial loss,” he said. “Fortunately, I had an insurance license so I was able to sell insurance. … We hope that this is not the end of it.”
In a motion filed last week in the U.S. Bankruptcy Court Eastern District of Texas, estate representatives requested a hearing to present evidence for why more than 130 former Lon Morris employees should get the cash, a news release states.
Ray has said the school always worked with the other Christian charitable portions of the Methodist church, and the affiliated Methodist charities from time to time would receive money for the benefit of Lon Morris.
“They want to do what they can within the constraints of their mission, and we as debtors want to get our former employees what we can within the constraints of bankruptcy code,” he said earlier this month. “These employees sacrificed time for the college’s mission and worked without pay and are owed money. It is my job to get them paid. That is our mission as the bankruptcy team to pay the former employees.”
Ray has said the employees previously received about $200,000 after the bishop of the Texas Annual Conference of the United Methodist Church made a humanitarian appeal to churches. According to court documents, as of last week, there was still about $369,000 owed in unreimbursed priority wage claims, which does not include claims of the former Lon Morris president.
Ray has said estate representatives went to Nashville-based nonprofit United Methodist Higher Education Foundation and pleaded their case, which is that former employees dedicated time to the school’s mission, and the money would be to pay some of their wages that were incurred. The foundation, which provides scholarships for Methodist students, holds close to $1 million in a Lon Morris scholarship endowment, according to court documents. However, a news release states that Lon Morris and the foundation did not keep sufficient documentation that showed exactly how distribution of the funds should take place.
After negotiation, the foundation and estate agreed that the foundation will be able to provide $130,000 for former employees plus $7,000 for bankruptcy estate-related expenses.
Thursday’s court approval is the latest in Lon Morris’ bankruptcy proceedings.
In August, the college learned it would lose federal student aid and subsequently decided to suspend the fall semester. Ray has said that changed the nature of the case, which went from selling an operating facility to instead auctioning its assets as real estate.
On Wednesday, the bankruptcy court approved the remaining $350,000 of a $500,000 loan previously requested on behalf of the bankruptcy estate, representatives said. Earlier this month, the estate was allowed to borrow $150,000 of the loan.
The loan will be used for things such as insurance, utilities, administrative fees and fees associated with the school’s upcoming auction on Jan. 14, according to previous court testimony.
Ms. Ragan told the court earlier this month that the college must have the funds to help protect assets during this time. Additionally, she has said she would not be able to complete information for the U.S. Department of Education and different education organizations without the limited staff she has on campus, which includes a comptroller and an academic dean.
If utilities were shut off, there also likely would be mold in the campus buildings, and it likely would negatively impact the value of the assets “in a significant way,” she testified.
Per its responsibility to protect charitable assets, the Texas Attorney General’s Office also has been investigating how $1.3 million in a restricted gift was spent by Lon Morris, the agency confirmed.
The funds in question are from the James Long Endowment, which specifies that if Lon Morris College closes, the main library at Sam Houston State University in Huntsville becomes the beneficiary.
Estate representatives said via email that the estate and Attorney General continue to look into the issue and hoped to complete their review in November. However, the auction is the main priority right now, and the college and Attorney General have time before they have to take any action based on the investigation, they said.
In court documents filed earlier this month, the Attorney General’s Office states that it agrees with the Texas Methodist Foundation “that such trust assets are not assets of the bankruptcy estate.”
The Attorney General also agrees in the documents that “such assets must be distributed by a court of competent jurisdiction or as otherwise indicated in the instrument, in order to carry out the charitable purpose of the respective donor.”
Estate representatives said via email that the foundation’s declaratory action is pending, although the college is working with the Attorney General “to resolve each party’s claims to the endowment money.”
If the issues are not resolved, the court will be asked to set a trial date, they said, but no date has been set.
In the meantime, Ray said the estate is expecting a successful and profitable auction, which is scheduled for Jan. 14 in Dallas. According to a news release, the auction will include about 50,000 square feet of lecture space, dormitory buildings, a technology center, a gymnasium and fields for football, baseball and other sports. A detailed auction listing is online at www.ameribid.com.