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Lawsuits played key role in CEDU closure Posted: Wednesday, Apr 06, 2005 - 08:36:43 am PDT By ELIZABETH CIEPIELA Hagadone News Network
BONNERS FERRY -- Lawsuits against CEDU schools played a large part in the schools' closure and Brown Schools Chapter 7 bankruptcy filings, CEDU officials said Monday. "The legal settlement and fees did play a role in the Chapter 7," said Sam Singer, a spokesperson for McCown, De Leeuw, & Co. (MDC), which owns CEDU. "There were a number of lawsuits left over from the Brown Schools ownership of therapeutic in-patient psychiatric hospitals, which continued to be on the books for a long while and were one of the reasons that the schools had financial issues."Pete Talbott, chief executive officer of CEDU, agreed legal troubles played a role in the schools' closure. "It certainly was one of the factors ... involved," he said. "I don't know what the percentage would be in terms of its impact, but it was a relatively large factor."
CEDU bankruptcy papers cite nearly $1 million in legal fees among the largest 40 creditors. Another reason for the closure and bankruptcy, Singer said, was stiff competition from other schools. Enrollment at CEDU and Brown Schools had been steadily declining, he added. Five lawsuits filed late last year by former CEDU students and parents against CEDU-owned Rocky Mountain Academy, Boulder Creek Academy and ASCENT -- all located in North Idaho -- are still pending for unspecified amounts. Prior to becoming CEDU president on March 17, Talbott worked for MDC. Talbott said he was brought in to help save the schools by attempting to file a reorganization Chapter 11 bankruptcy. Under that option, the schools would continue to function while finances were reorganized. His petition to obtain a bridge loan to sustain the schools was denied by TIAA-CREF, he said. So just eight days after being made CEDU chief executive officer, the schools filed Chapter 7 liquidation bankruptcy and abruptly told faculty and students to go home mid-semester. He's frustrated and frank. And he blames TIAA-CREF. "They had full access to the financial data and they knew if they didn't help the company in the very near term that we were totally insolvent and that we did not have any choice other than to file Chapter 7," Talbott said. Talbott said officials thought they had a plan worked out but "at the 11th hour, the 11th-and-a-half hour, we could not pull it together." He blames the failure on TIAA-CREF and MDC. But TIAA-CREF spokesman Glen Weiner said, "TIAA-CREF was a passive lender and under the law a lender is not allowed to manage or control someone else's business. It is the responsibility of the owners and operators of a business to provide adequate funds and pay the bills." He would not go into any more detail. "It is our policy not to discuss active legal matters but what I can say is TIAA-CREF was a passive lender, and we are working with the bankruptcy trustee to bring the situation to as smooth a landing as possible," he added. In the meantime, bankruptcy trustee George Miller said he's not prepared to analyze the factors that led to the bankruptcy filing. Right now, he said, he's more concerned with trying to keep the schools open. Brown will be visiting CEDU schools in Bonners Ferry today. POST YOUR OPINION
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Bonner County Daily Bee
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