Former college president facing new accusations
Former Lon Morris College President Dr. Miles McCall is facing various accusations from the Texas Attorney General Greg Abbott, claiming that his actions factored into the school's downfall.
In a lawsuit filed Feb. 13 in Travis County, the attorney general alleges "breach of fiduciary duty" and "negligent management."
The lawsuit states that in 2006, the school increased borrowing so it could "refinance its debt, fund school operations, construct or purchase additional facilities and maintain its existing facilities," according to the lawsuit, and notes payable by Lon Morris went from about $5 million in 2005 to more than $18 million in 2011.
That same year, Lon Morris participated in a loan agreement with Amegy Bank for debt totaling $8.5 million, which was funded by a "swap agreement" that, "on information and belief," led to the college losing "significant funds," the lawsuit states.
According to the lawsuit, it was amended various times before Lon Morris' bankruptcy filing last July.
The lawsuit asserts that McCall "failed to oversee the management of Lon Morris College in a prudent and reasonable manner" and "jeopardized the institution and its charitable educational purpose, and knowingly and repeatedly placed its charitable assets at extreme risk."
"In managing the college, McCall took unreasonable risks in accumulating debt without an adequate plan to service that debt, which eventually led to the closing of the 158-year-old charitable institution," Abbott wrote.
They added, "McCall oversaw the liquidation and pledging of endowment funds as collateral for debt, at times in a manner that conflicted with the college's governing instrument and the intent of donors and trust agreements."
McCall has been served with the lawsuit, but no court date has been set, Tom Kelley, spokesman with the Attorney General's Office said via email.
When reached by phone Wednesday, McCall repeatedly said he "can't make any comments" in regard to the legal matters.
The attorney general's lawsuit is not the only one pending against McCall.
Sam Houston State University also filed a lawsuit in December through the Texas Attorney General's Office in reference to the James Long Endowment.
The will and testament of James Long, who died in 2009, states that Lon Morris could invest the donation how they choose, but for the first 50 years, half of the income should be used exclusively to purchase books and journals for the Lon Morris library, and "to modernize library services and improve student access to library resources."
The endowment specifies that if Lon Morris College does not exist anymore, the main library at Sam Houston State University in Huntsville becomes the beneficiary.
The lawsuit claims that McCall "breached his fiduciary duties and failed to ensure that the Long Endowment was protected and used only for the purposes established."
"McCall, without obtaining authority from the Board of Directors, authorized the inappropriate transfer of the corpus of the trust," the lawsuit states. "Additionally, McCall failed to provide any documentation or security to preserve the corpus. McCall was aware of the financial difficulties of Lon Morris at the time he authorized the transfer of the funds."
As McCall faces lawsuits, he also is in a new job. Rusty Rust, president and chief operating officer of Commercial Bank of Texas, N.A. recently announced that McCall will serve as executive vice president. His duties include leading the Communications and Marketing divisions in state markets as well as managing "the coordination and growth of business development efforts, the extension of the (bank's) Banking Texas-Style brand and all aspects of human resources and employee development," according to a news release.
"When we began thinking about who we might ask to fill this position, we immediately thought of Dr. McCall. He's well-educated with tremendous expertise in the communication field. I'm confident he'll bring a high-energy, laser-focused style of management that will benefit not only the bank, but the community," Tommy Ellison, CEO and chairman of the board, said in the news release.
According to a news release, McCall served as a professor and vice president at Stephen F. Austin State University for more than two decades. He resigned as president of Lon Morris in May.
Dawn Ragan, chief restructuring officer with the Lon Morris bankruptcy estate, said given McCall's past experience, his new job seems consistent with his skill set. McCall said by phone Wednesday that he looked forward to the opportunity to help.
The announcement of McCall's new job is one of the latest developments since the school went bankrupt.
Lon Morris, the state's oldest junior college, 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 said the school embarked on a costly plan to grow enrollment.
In August, the college learned it would lose federal student aid and subsequently decided to suspend the fall semester. Hugh Ray III, who represents the bankruptcy estate, has said that changed the nature of the case, which went from selling an operating facility to instead auctioning its assets as real estate.
The bankruptcy estate worked with the company AmeriBid on last month's auction, which resulted in purchases by Jacksonville ISD, according to a news release.
The district announced earlier this month that trustees approved the $1.53 million purchase of the gymnasium, administration building and more than 50 acres of land. That includes 10 acres around the gymnasium as well as about 40 acres in the area of the baseball and softball fields.
Jacksonville ISD was a high bidder in the auction as was local office supply company 11 x 17 Inc., which bid on most of the school's academic buildings, the chapel and dormitories, according to a news release.
Jack Webb, with 11 x 17, said Wednesday via email that the company would like to sell the campus to an established college to use as an extension.
"It would be great for Jacksonville," he wrote. "I have not found any of our Jacksonville citizens that does not care about Lon Morris College. All are supportive and willing to assist. We are assembling packets to market the campus and hope to work with those that have already contacted some prospects."
In the meantime, the bankruptcy estate still is working through issues with the surveyor and city of Jacksonville to accommodate the different buyers, Ms. Ragan said.
Ray has said the bankruptcy estate also will wrap things up by collecting assets to distribute to creditors, but the college will no longer need to administer its assets in Jacksonville.
"We've been authorized to sell substantially all of the Jacksonville real property. On the horizon is attempting to get money from others for the benefit (of) remaining creditors," he said this month. "All the creditors now know how we will be pursuing assets and that we will hopefully make a distribution to give them some of what they are owed to the best of our ability."
According to a news release, financial recoveries were expected to be several million dollars with liquidated claims, asset sales and insurance policy collection.
Ms. Ragan said settlement discussions with the Attorney General are still ongoing in regard to a $3.5 million Lon Morris directors and officers liability policy between charities and creditors.
Ray has said the Attorney General's Office and the bankruptcy estate are both seeking the money, and only the bankruptcy estate's money would go to creditors.
Ms. Ragan said the Attorney General's Office would like those proceeds to be redirected for public interest in charity.
She hopes to have multiple issues resolved in the next few weeks.