October 29, 2012

Texas Attorney General investigates missing $1.3 million in endowment money, former Lon Morris College president questioned

JACKSONVILLE — The former president of Lon Morris College is at the center of a Texas Attorney General investigation into a missing $1.3 million. The money comes from an endowment that should have reverted to Sam Houston State University after LMC declared Chapter 11 bankruptcy in July.

Dr. Miles McCall — who was college president from July 2005 until he resigned May 24 — was questioned in Arlington this week regarding management of the endowment, according to officials and court documents. He had been ordered by a U.S. Bankruptcy Judge to comply with the questioning.

State officials do not currently suspect the money was stolen, but it is missing, confirmed Hal Morris, assistant attorney general and managing attorney for the Texas AG's bankruptcy regulatory section.

“We were hoping we would find a restricted bank account containing the $1.3 million but it doesn't exist — there is no pot of money to be transferred,” he said. “So now we are going to try and find out what happened to those funds.”

Morris and his office are conducting a dual investigation into the missing money with Hugh Ray III, attorney for Lon Morris College.

“The college is taking these issues very seriously with this parallel investigation,” Ray explained. “Once we have finished the investigation we will take appropriate action if any is required.”

McCall does not have a listed phone number and his attorney, Michael Hassett of Arlington, declined to offer any comments.

Dr. McCall was specifically ordered by the bankruptcy judge to answer attorney questions this week regarding management of the $1.3 million endowment — created by Rusk native Dr. James “Jimmie” Duncan Long, an educator, philanthropist and Lon Morris College grad.

Dr. Long (1925-2009) left the $1.3 million to LMC to be used by its Henderson Library with a percentage of the annual interest to be used to purchase library acquisition with the rest of the interest to be reinvested. But he also stipulated that the money would go to Sam Houston State University if LMC ever closed its doors.

“If Lon Morris ceases to be, then Sam Houston becomes the principal,” Morris said. “We are looking into what happened to that request.”

Morris said despite McCall's proximity to the case, the former president is not a suspect or “person of interest” in the case. (He added that particular term doesn’t really apply in a civil investigation.)

“Dr. McCall furthered our investigation,” he said. “We appreciate his cooperation. We are just at the very beginning, trying to uncover facts.”

Dr. McCall was also compelled by the federal judge to produce documents, emails, board resolutions and minutes related to the Long endowment during his questioning. He was required to produce all copies of insurance policies that might insure him, Lynn Acker, the owner of Tyler accounting firm Acker & Co., or an agent of Acker & Co. He was additionally ordered to produce, among other documents, copies of any communications since 2008 that described the actual or contemplated treatment of any assets held in trust by LMC.

Acker will be questioned in Arlington in connection with the case starting at 9 a.m. Nov. 1. Acker will be quizzed about the college's assets and liabilities, operations, potential claims, property and pre-petition acts and conduct, court records show.

Acker was also ordered by the judge to submit to a separate examination for the aforementioned matters plus various other matters that may affect administration of the bankruptcy. This will include all documents relating to LMC's financial condition including accounting and auditing work papers and notes relating to the college at any point after 2008.

Dawn Ragan, chief restructuring officer for Bridgeport Consulting, declined to comment on the questioning, as did Hassett. Gary Kellser, attorney for Lynn Acker and Acker & Co., did not immediately return a call.

Morris said his boss, Texas Attorney General Greg Abbott took special note when the $1.3 million in endowment money went missing because of Lon Morris College's history as a non-profit institution and its previous status as the oldest school in continuous operation in East Texas.

“He was concerned when the non-profit went into bankruptcy and liquidation because nonprofits don't have stockholders looking out,” he said. “To him, it's very important to protect the interests of the charity.”