Jacksonville Daily Progress
One day before a federal judge authorized a $150,000 debtor-in-possession loan so that the Lon Morris College bankruptcy estate can pay some of its bills, LMC's Chief Restructuring Officer Dawn Ragan filed paperwork requesting to be paid $144,001 for three month's work.
A hearing regarding the proposed payment is expected to be held at 9:30 a.m. Jan. 16 in U.S. Bankruptcy Court Eastern District of Texas — two days after an auction is conducted for the bankruptcy estate.
Ragan's paperwork was filed Tuesday in the court of U.S. Bankruptcy Judge Bill Parker, Eastern District, which also is where the debtor-in-possession loan was authorized by Parker on Wednesday.
The only currently-employed officer at the college, according to court records, Ragan was hired after being selected from a team of Bridgepoint Consulting LLC personnel. They had been working at LMC since May 14 as the college's financial advisors.
After College President Dr. Miles McCall resigned May 24, Ragan was formally hired as chief restructuring officer on July 2. She is asking to be paid for the time period between July 2 and Sept. 30 of this year.
Ragan's agreement with the college obligates LMC to defend her against any legal claims made during the course of her employment. It also restricts LMC from making any claims against her — unless they are claims of willful misconduct or fraud.
This written agreement can be terminated with two weeks written notice. Ragan is supposed to be compensated on a semi-monthly basis.
Her charge: Help the college bankruptcy estate handle the hundreds of potential creditors and over 200 unsecured creditors with known claims.
Ragan expanded on LMC history in court documents. She mentions the Lon Morris bankruptcy estate has sought to recoup costs by using the proceeds of certain endowment funds — "unrestricted funds" — being maintained by various foundations associated with the college.
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.”