After years of struggle, Morris Brown — a 131-year-old Historically Black College — has filed for bankruptcy in an attempt to forestall foreclosure and the school’s Atlanta campus from being sold at auction. According to The Chronicle of Higher Education the decision to seek Chapter 11 protection came after investors exercised a call option on $13 million worth of bonds.
In order to reduce the interest rate and make the bonds, which were initially issued in 1996 as part of the build-up for the Summer Olympics, tax-exempt Morris Brown College financed them through the Fulton County Development Authority. Since the bonds were only routed through the development authority, Fulton County taxpayers won’t be required to repay them, reported the Atlanta Journal-Constitution.
Morris Brown pledged several pieces of property, including the administration building, as security for the bonds, which are only a part of the school’s overall $30 million debt. The decision to pursue bankruptcy protection was undertaken by Morris Brown’s board of trustees in order to prevent an auction of the school’s assets on Sept. 4, reported Inside Higher Ed.
Since losing its accreditation and access to both federal financial aid and funds from the United Negro College Fund in 2003, Morris Brown has struggled financially. Two of the harshest blows dealt to the school were the 2006 convictions of the university’s former president, Dolores Cross, and financial aid director, Parvesh Singh.
Cross and Singh pled guilty to using the names of 1,800 ineligible students — some of whom were only attending Morris Brown part time, while others had never enrolled or had left the school — to fraudulently obtain $3.4 million in federal financial aid, reported the Washington Post. The money was used to cover operating costs and pay down the school’s debt, which had risen due to a series of spending increases Cross implemented.
In a deal to avoid a trial, and a mandatory 10-year prison sentence if convicted on multiple counts, Cross pled guilty to one count of illegally obtaining a student loan, was sentenced to 5 years’ probation, and ordered to pay $13,942 in restitution. According to a contemporary account from The Chronicle of Higher Education, as part of the deal, federal prosecutors dismissed 27 other charges against Cross.
Morris Brown’s problems did not end with the sentencing of Cross and Singh. A prolonged period of financial mismanagement led to the college being presented with $380,000 worth of water bills in 2008. Even though the college was able to raise $100,000 to settle the bills, which dated back to 2004, the administration was not able to turn the school’s finances around, reported The Chronicle of Higher Education.
According to the Associated Press, a Department of Education audit of Morris Brown’s financial aid records for 1999-2004 discovered that the school had not returned nearly $10 million in unused federal financial aid, which is distributed to a school at the beginning of the academic year for student assistance and other reasons, and if any remains at the end of the year is required to be returned to the government. In 2011 the department allowed the school to settle the debt for $500,000, reported Fox News.
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