How To Throw Away A Million Dollars
In the memorable words of Forrest Gump, “Stupid is as stupid does!”
- The action by the Erskine Board on August 1, 2021, has to be the Home Run of stupid things done at Erskine. In the name of education and sweet Jesus, the members of the board voted to lend ONE MILLION DOLLARS to a flimflam charter school operation which has no assets (HTTPS://ARPTALK.ORG/WP-CONTENT/UPLOADS/2024/05/PROMISSORY-NOTE-TO-ICELAVEN-DEVELOPMENTGROUP-AUG-1-2021.PDF).
- The only asset Icelaven has is a piece of paper (HTTPS://ARPTALK.ORG/WP-CONTENT/UPLOADS/2024/05/ICELAVEN-DEVELOPMENT-GROUP-LLCARTICLES-OF-ORGANIZATION.PDF.)
- Here is a copy of the lawsuit for nonpayment the Erskine administration filed in the Court of Common Pleas at the Courthouse in Anderson, South Carolina, against Icelaven Development Corporation LLC (HTTPS://ARPTALK.ORG/WP-CONTENT/UPLOADS/2024/05/ERSKINE-LAWSUIT-AGAINST-ICELAVENDEVELOPMENT-GROUP.PDF).
Below is the article which appeared in The State newspaper on May 31, 2024.
ERSKINE COLLEGE STIFFED ON $1M LOAN
TO CHARTER SCHOOL OPERATOR, LAWSUIT CLAIMS
By Zak Koeske Updated May 31, 2024 8:39 AM
presentations by charter school applicants on April 17, 2024.
Zak Koeske/ The State COLUMBIA, S.C.
The private Christian college behind South Carolina’s largest charter school district says it’s out $1 million after the operator of several schools the district oversaw defaulted on a loan deal.
The transaction, revealed in a new lawsuit, raises the question why cash- strapped Erskine College loaned money to the holding company of a for-profit education management organization, or EMO. It also sows doubt that the taxpayer-funded Charter Institute at Erskine, which oversees more than two dozen charter schools, can objectively regulate schools in which its parent institution has a financial stake, experts said.
“How do you engage in good faith oversight on behalf of the state when you have a financial interest in the thing you’re overseeing?” said Derek Black, a University of South Carolina law professor who specializes in education law and policy.
The college’s questionable lending practices came to light earlier this month when it sued Icelaven Development Group for breach of contract in hopes of recouping the loan, plus interest.
Icelaven is the parent company of Reason & Republic, a for-profit charter school management organization founded by James Galyean that, until recently, operated three charter schools authorized by the Charter Institute.
Galyean, who helped found the Charter Institute in 2017 and previously served as its general counsel, was a major contributor to Ellen Weaver’s 2022 state superintendent campaign and is currently running for an Anderson County House seat.
He declined comment on the outstanding loan through an Icelaven representative, citing the pending litigation, but said the company looked forward to its day in court.
Erskine, which failed to report the loan to Galyean’s company on federal tax forms, did not respond to a request for comment on the transaction.
A 2022 audit of the college obtained by The State newspaper shows a $1 million loan receivable listed as a related party transaction, but has scant details on its recipient and no details on its purpose.
The Due West college and its affiliated Charter Institute have come under increased scrutiny this year following reporting by the State Media Co. that shed light on its spending and operations.
Over the past several months, the newspaper has reported on the Charter Institute’s formation and funding of a nonprofit called Teach Right USA, its leaders’ involvement in a plan to open schools in Tennessee through Teach Right USA and its approval of a new Lexington County school that plans to partner with Teach Right USA and Erskine College.
While not explicitly prohibited by South Carolina’s charter schools law, the Charter Institute’s engagement in activities beyond its statutory scope has attracted the attention of state lawmakers who have requested an investigation.
A bipartisan group of House lawmakers, led by Education Committee chairwoman Shannon Erickson, R-Beaufort, recently asked the state’s Legislative Audit Council to look into Erskine with a specific focus on the EMO loan deal and allegations that charter school vendors and prospective vendors use donations to curry favor with the Institute.
“We are concerned that if transactions like these have occurred, they may compromise the ability of Erskine to perform its duties under the (Charter Schools Act) with fidelity and/or may cause Erskine to apply inconsistent standards of accountability to different charter schools that it sponsors,” Erickson wrote in a May 8 letter to Legislative Audit Council Director Earle Powell, whose agency conducts independent audits of state agencies.
Erickson said it was past time the General Assembly update the Charter Schools Act, which doesn’t address many of the complex issues that have emerged since colleges and universities began authorizing charter schools roughly a decade ago.
“If I’m going to be an all-of-the-above education choice proponent, I also have to be an all-of-the-above accountability proponent,” she told The State this week. “We can’t afford to have silence on issues that are making the work of our school choice situations not accountable.”
Erskine’s loan to Galyean
The loan agreement between Erskine College and Icelaven Development, signed Aug. 1, 2021, appears to have unraveled quickly.
Icelaven, which had agreed to pay back the money plus 5% interest in annual installments, missed its first payment on Dec. 31, 2021, and has repaid only
$35,000 to date, according to the lawsuit Erskine filed May 9 in Anderson County circuit court.
The suit claims Icelaven failed to respond to the college’s repeated demands for the money, which have escalated in recent months, culminating in Erskine declaring the loan in default and demanding repayment in full plus interest, a sum of roughly $1.2 million, by April 30.
The financial dispute coincided with a fracturing of the once-tight relationship between Reason & Republic and the Charter Institute amid allegations that Galyean’s EMO overcharged its schools for services, exerted undue control over their finances and mismanaged money.
The boards of Belton Preparatory and Summit Classical, two of the Charter Institute’s most esteemed schools, recently cut ties with the EMO to align themselves with the Charter Institute, which has temporarily taken over their finances.
Charter Institute CEO and Superintendent Cameron Runyan did not respond when asked whether Erskine College’s dispute with Icelaven had influenced the Charter Institute’s treatment of Reason & Republic schools.
The college, which has dealt with cash flow problems for years, entered into the loan with Galyean’s company at a particularly precarious time for the institution. The following year its accrediting agent denied reaffirmation of its accreditation and placed it on warning status for not meeting governance and financial management standards.
The Southern Association of Colleges and Schools Commission on Colleges, commonly referred to as SACS, dinged Erskine’s governing board in December 2022 for failing to exercise fiduciary oversight; failing to demonstrate a stable financial base to support its mission and programming; and failing to manage its financial resources in a responsible manner.
It isn’t known whether the loan to Icelaven factored into the sanctions levied by SACS.
The accrediting body will reassess Erskine in December and decide then whether to lift sanctions, place it on probation or revoke its accreditation.
This story was originally published May 31, 2024, 5:30 AM.
In 50 years of watching, of all the things I have seen and heard at Erskine, this beggars belief.
It is not possible to make up this story!
Let’s ask a few questions.
- Who were the members of the Erskine board at the time of the loan?
From the Minutes of General Synod, 2021, the members were: Mr. John
Bouwkamp; Mr. Alan Broyles; Rev. Alexander Campbell; Mrs. Karen Claxton; Mr. Phillip Cook (Ex-Officio, Alumni President); Mr. Marshall Davis III; Rev. Tom Hellams (Interim President); Rev. Brian Howard; Mrs. Margaret Kiser; Rev. Patrick Malphrus (Synod Moderator); Mr. Rob Nelson; Mr. Lance Ragsdale; Rev. Lee Shelnut; Mrs. Kelly Sims (wife of Rev. Kyle Sims, Clerk of General Synod), Rev. Mackay Smith; Mr. Michael Whitehurst (CHAIRMAN).
- Were ALL the members of the board informed of the loan?
I ask this question because in the past many actions were taken without informing the members of the board. Tom Hellams signed the note. Michael Whitehurst as Chairman had to know. I would think Alexander Campbell as Jim Galyean’s pastor also knew. So, who takes responsibility for the loan?
- How does one spell N·E·P·O·T·I·S·M?
Who is James Galyean? Obviously, he’s an attorney, who’s also a member and an elder in the Christ Reformed ARP Church in Anderson, SC. His pastor is Alex Campbell, and he is a member of the Erskine Board. By the way, Mr. Galyean is running for South Carolina House District Nine.
- Why did the Erskine officials file a lawsuit against Icelaven?
This one puzzles me. They could have kept the matter a secret. The people on the Erskine administration/board must know they have no chance of recovering the million dollar loan they made to Icelaven. They may get a few pennies here-and-there, but the million dollars is gone. Personally, I don’t think I would have filed a lawsuit. I wouldn’t want the world to know how stupid I was. As Forrest Gump says, “Stupid is as stupid does.” And the people responsible for this loan did stupid!
- What was the source for the $1,000,000 loan?
There is only one place: THE ENDOWMENT. And, is this the purpose for which the endowment was created? Let’s be honest: the level of bad stewardship on the board reflects prodigious incompetence.
- Has this transaction been reported to the IRS?
In looking over the IRS 990 form that Erskine supplied to the IRS for 2023, I could not find anything about a million dollar loan or loss. I’m sure the IRS will be interested in this. A million dollars is still a large sum of money.
- What will be the response of General Synod?
Nothing! Probably! $385,000 has been designated for Erskine from the Budget of General Synod for 2024. If this matter is even allowed to make it to the floor for discussion, delegates will moan-and-groan a little, but nothing will be done. The ministers and elders who constitute General Synod don’t have the time or inclination to be mindful of this matter. In other words, the Erskine Finance Company must be supported. However, it seems the Erskine Finance Company is as much a failure as a financial organization as Erskine College is a failure as an educational institution.
- What positive thing has come out this debacle?
Well, this has succeeded in uniting Democrats and Republicans in the South Carolina House and Senate in bringing a joint resolution calling for an investigation of Erskine, Icelaven, and other matters pertaining to this.
Remember, in the words of Forrest Gump, “Stupid is as stupid does!”
Indeed, most folks don’t know how to throw away a million dollars!
With a few remaining thoughts, I am
Charles W. Wilson
So sad to see an institution I revere so much descend into a “Jimmy Swaggart style” of governance and fiduciary failure! For the life of me, I cannot understand why a theological higher educational institution could have any direct or financial link with a charter school! Now, I do believe in our depreciated public education the operation of charter schools is valid and much needed. But to link a private business operation with Erskine is “beyond the pale.” It wouldn’t take a GED to envision the possibility of a quagmire like this, and the damage to Erskine’s reputation, as well as the ARP’s reputation, will suffer seriously. I will pray for the best outcome for this, and I do hope people on the appropriate boards will learn some hard lessons. The people of the ARP must demand it!
Dear Don Yancey,
It’s good to hear from you old friend. I pray you are well.
You better watch out posting of ARPTalk, you will be called a cult-follower of Chuck Wilson
Don, the situation at Erskine is worse than you think.
You still have a friend or two in Due West who will answer when you call. Ask them. Find out if i’m a liar!
Regards,
Chuck Wilon
ARPTalk
$1,000,000 = $100,000,000 Widow’s Coppers = SHAME on you Erskine.
I don’t always agree with you Charlie but you are rock solid on this one.
Stay healthy for our sake.
Chuck White,
Thank you for reading ARPTalk and taking the effort to comment.
It was kind of you to inquire as to my health. I am now almost a year past where my Docs said I would die. It is interesting lining on top of the cherry on top of the whip cream on top of the pudding of life. When people ask me how I’m doing, I say, “I’m not dead yet, but the day isn’t over.”
Regards,
Chuck Wilson
ARPTalk