How to Throw Away a Million Dollars — and Much More!?
On June 4, 2024 (ARPTalk(173): “How to Throw Away a Million Dollars”), Million Dollars”), via an article in The State Newspaper, the editor of ARPTalk reported (1) that the Erskine board, on August 1, 2021, voted to make an unsecured loan of $1,000,000 to Icelaven Development Group (founded by James Galyean); (2) that, after only one payment of $35,000, Icelaven defaulted on the loan; and (3) that Erskine has filed suit against Icelaven for non-payment of the loan.
The action by Erskine was puzzling. At first glance, it seemed little Erskine was being taken advantage of by an unscrupulous businessman and attorney; however, the narrative and landscape have changed. Icelaven/Gaylean (Icelaven) has responded.
The Plot Thickens
The response of Icelaven is in the form of a counter-suit. The lawsuit is aimed at Erskine College, The Charter Institute at Erskine (Cameron Runyan, Vamshi Rudrapati, Deidre McCullough, Jordan McCullough O’Quinn, Patty Barrett, Michelle Ul saker, Megan Pat terson) . A copy of the document (“DEFENDANT’S ANSWER AND COUNTERCLAIMS, AND THIRD-PARTY CLAIMS [JURY TRIAL DEMANDED])” is below:
https://publicindex.sccourts.org/Anderson/PublicIndex/PIImageDisplay.aspx
It is important to notice who Icelaven has obtained as counsel. Using the words of the movie The Verdict, Icelaven has obtained “the prince of darkness.” Counsel for Icelaven is HAYNSWORTH SINKLER BOYD, P.A. Haynsworth) This firm does not take on cases unless there is a high probability of success. The attorneys at Haynsworth do not take prisoners; they take money.
There is no way Erskine can get out of this without a mountain of pain, financial loss, public embarrassment, and years of legal agony!!
A Simplistic Analysis
I’m not an attorney; however, I can read. The document is 33 single-spaced pages, comprising one section of 29 paragraphs and a second section of 132 paragraphs. Below is what I see. Perhaps this very simplistic analysis can help the reader navigate the document.
ONE. The parties involved: (1) Erskine College; (2) Charter Institute at Erskine, Inc., as a non-profit corporation for the purpose of administering Erskine’s charter school program; (3) Teach Right USA was established by CIE to create charter schools in other states; (4) James Galyean, attorney in Anderson, SC, and member and elder in the Christ Reformed Presbyterian Church (ARP) in Anderson, SC; (5) Icelaven, a limited liability company started by James Galyean on July 12, 2018, in order to raise funds to develop charter schools; and (6) Reason & Republic, owned by Icelaven, another limited liability company which operates an “educational management company” (p. 7, ¶ 6).
TWO. Icelaven acknowledges payment of $35,000, “but denies that this allegation encompasses the full scope of the payments Defendant made to the Plaintiff” (p. 2, ¶ 6).
THREE. Icelaven’s contention is the loan is not a conventional loan in the sense the reader understands a loan, but a buy-in to a charter school enterprise.
FOUR. (p. 8, ¶ 21) We read the following: “Galyean met with the President and Board of Trustees of Erskine to propose ways that Erskine’s educational expertise could be projected in the classrooms of charter schools. Galyean proposed to the Board of Trustees that an investment by Erskine in a newly-formed management company (i.e., Reason & Republic) would create an avenue for Erskine to have a service-providing relationship with charter schools.”
FIVE. (p. 8, ¶ 22) We read: “The Board of Trustees voted affirmatively for Erskine to become a founding owner of Reason & Republic via an initial $1 million capital contribution.”
SIX. (p. 8, ¶ 26) Erskine and Charter Institute at Erskine (CIE) decided to withdraw from the business of planting charter schools with Reason & Republic. We read: “In or about 2021, CIE asked Erskine to unwind Erskine’s ownership interest in Reason & Republic. Erskine and Reason & Republic agreed to unwind Erskine’s ownership relationship by way of a promissory note. Icelaven would purchase the interest of Erskine over time through annual interest-only payments and a balloon payment in 2027. The parties agreed that the previous payments made to Erskine (to fund dual-enrollment development) would be credited as interest under the new promissory note. The resulting promissory note document was the promissory note (the “Note”) attached as Exhibit A to Erskine’s Complaint. No other documents or written agreements were executed by the parties. There was an express or implied agreement that Erskine would cooperate during the term of the Note with Reason & Republic to allow Icelaven and Reason & Republic to earn revenues in order to repay Erskine’s ownership interest, and not thwart the ability of Reason & Republic and Icelaven to perform its management agreements over the duration of the Note. Through the acts recited herein, Erskine and CIE have breached that agreement.”
SEVEN. The crux of Icelaven’s lawsuit is that Erskine and CIE interfered with Icelaven’s ability to repay the capital investment, allegedly evidenced by the promissory note (p. 9, ¶ 26).
EIGHT. CIE started Teach Right USA to create charter schools in other states (particularly, Tennessee) (p. 10, ¶ 28). Icelaven also alleges that Teach Right USA employees used South Carolina state funds to pay for travel to Tennessee to meet with the Chief of Staff of the Tennessee Governor, to discuss the founding of charter schools in Tennessee (p. 10, ¶ 28-29).
NINE. Icelaven claims Teach Right USA and CIE interfered with Reason & Republic’s management of charter school and defamed Reason & Republic’s management of charter schools (p.11, ¶38; and pp. 22-24). The charter schools identified are: Belton Preparatory Academy, Summit Classical Charter School, and South Carolina Preparatory Academy.
TEN. Icelaven accuses Erskine and CIE of engaging in unfair trade practices.
ELEVEN. Most significantly, Icelaven accuses Erskine, CIE, and seven individual defendants with operating a RICO enterprise, to injure Icelaven and Reason & Republic by extortion, specifically threatening to withhold state funds if the charter schools did not agree to Erskine’s demands (pp. 27-32).
TWELVE. (p. 32, ¶ 132) The “WHEREFORE” goes in this manner: “Reason & Republic and Icelaven pray that a jury trial be had on all issues so triable and that the Court enter judgment in their favor as follows:
- That Erskine’s claims against Icelaven be dismissed with prejudice;
- That Reason & Republic join this action by permissive joinder pursuant to Rule 20 SCRCP, or in the alternative by intervention pursuant to Rule 24 SCRCP, and that Reason & Republic and Icelaven recover from all Third-Party Defendants, an amount of actual, trebled, and punitive damages to be determined by a jury;
- That Reason & Republic and Icelaven recover from all Third-Party Defendants, the costs of this action, including litigation costs, court costs and attorney’s fees; and
- For such other and further relief as the Honorable Court deems just and proper.”
A Few Concluding Thoughts
- Just because a person has a PhD in education or theology or a DMin in some sort of arcane church activity that is irrelevant to life does not mean he/she is omni-competent. The folks at Erskine have acted way beyond their level of competence. In their arrogance, they have entangled themselves in a Gordian Knot of misery. Alas! Alexander is long dead!
- With all the shell organizations floating around in this sour soup of personalities, intrigue, and money, did anyone pause to ask: “Why is all this complexity needed to start a charter school? What is the most straight forward thing to do?” Usually, the most straight forward thing works, and it is easiest to understand and communicate to others.
- This may destroy the charter school movement in South Carolina. Thank you Erskine and Icelaven!
- At Erskine, how is it that a $1,000,000 loan/investment (?) was made to Icelaven and Galyean when Galyean is a member and elder at the Christ Reformed Presbyterian Church (ARP) in Anderson, and his pastor, Alex Campbell, was a member of the Erskine board? Also, how is that Cameron Runyan is the head of CIE and his father is the Chairman of the Erskine board? This looks like organizational nepotism. As a matter of fact, it looks like incestuous nepotism on an industrial scale.
- In the immortal words of Forrest Gump, “Stupid is as stupid does!” Indeed, in this case, STUPID is going to be very expensive and painful.
Reported by,
Charles W. Wilson
Below is an article from The State Newspaper today. The article also addresses the goings-on at Erskine. Koeske adds comments regarding SC lawmakers.
Regards,
Chuck Wilson
ARPTalk
SC Charter Institute accused of conspiring to tarnish school operator and steal its business
By Zak Koeske July 24, 2024 6:00 AM
A bombshell court filing accuses South Carolina’s largest charter school district and its leaders of a criminal conspiracy to damage the reputation of a for-profit education management company in order to take its business.
The accusations, filed last week in Anderson County circuit court, represent the latest volley in an ongoing dispute between the Charter Institute at Erskine and Reason & Republic, a once-favored charter school operator that until recently ran three Upstate schools authorized by the Charter Institute.
The long-simmering feud became public in May after Erskine, a private Christian college in Abbeville County, sued the education management organization’s parent companyalleging it had defaulted on a $1 million loan.
A counterclaim filed Thursday charges that Erskine College, the Charter Institute at Erskine and its leaders — collectively the Erskine Enterprise — conspired to destroy Reason & Republic’s reputation and interfere with its business operations in order to prevent it from meeting its financial obligation.
Erskine’s alleged sabotage of the charter school operator coincided with the Charter Institute’s formation of Teach Right USA, an education service provider it positioned as a competitor to Reason & Republic and pressured schools to employ, the filing asserts.
Such interference, the counterclaim alleges, violated the Racketeer Influenced and Corrupt Organizations Act, or RICO, a federal law commonly used to prosecute organized crime syndicates that commit apparently unrelated crimes to fulfill a common objective.
Both Erskine College and the Charter Institute at Erskine declined to comment on the allegations, citing the pending litigation.
Reason & Republic’s claims add to a series of recent revelations about the Charter Institute at Erskine that raise questions about the taxpayer-funded district’s operations, spending and capacity to provide independent oversight of the more than two dozen charter schools it regulates statewide.
Publicly-funded charter school authorizers, such as the Charter Institute, have historically served a relatively circumscribed and largely regulatory role. By statute, they are responsible for reviewing charter school applications, negotiating charter school contracts and providing oversight and accountability to the schools they sponsor.
The Charter Institute, by contrast, has taken a more entrepreneurial and activist approach to its work. Formed by Erskine College in 2017 with a vision to transform public education in South Carolina, the Institute operates with an increasingly expansive view of its role under the law that some argue exceeds its statutory authority and poses serious conflicts of interest.
In recent months, The State Media Co. has chronicled the Institute’s formation and funding of Teach Right USA, a controversial nonprofit run by Charter Institute employees and associates that, among other things, sells services to Charter Institute schools; the Institute’s involvement in a plan to open schools in Tennessee through Teach Right USA; and the Institute’s approval of a charter school run by close associates that proposes to partner with Teach Right USA and Erskine College.
Most recently, Erskine’s lawsuit against Reason & Republic revealed the cash-strapped college had secretly invested in the for-profit charter school operator in contravention of industry standards that recommend authorizers remain independent of schools they oversee.
The counterclaim Reason & Republic filed last week sheds more light on the Due West college’s relationship to the education management company, revealing that Erskine not only invested money in the company, but co-owned it.
According to Reason & Republic’s filing, the Charter Institute’s two top executives, Cameron Runyan and Vamshi Rudrapati, approached Anderson County attorney James Galyean in 2019 about forming the management company that became Reason & Republic.
Galyean, who had worked with Runyan and others to help found the Charter Institute two years earlier and briefly served as its general counsel, then went before Erskine College’s board of trustees to propose that the college invest in the newly-formed management company, the counterclaim states.
The Erskine College board voted to become a “founding owner” of Reason & Republic and made an initial $1 million capital contribution to the company, according to the filing.
In exchange for its investment, Erskine College received a 10% ownership stake with an option to purchase an additional 10% ownership interest in the future; the exclusive rights to provide dual enrollment services at all Reason & Republic schools in South Carolina; and 10% of the company’s distributed net profits, increasing to 12% if combined enrollment reached 2,400 students, documents show.
The company’s financial ties to Erskine College raise the specter that, for better or worse, its three schools may have been treated differently than others in the Charter Institute’s portfolio.
Such concerns prompted S.C. House Education Chair Shannon Erickson, R-Beaufort, and several other House lawmakers earlier this year to ask the state’s Legislative Audit Council to investigate claims the Charter Institute had entered into improper financial relationships with for-profit management companies that operate many of the schools it oversees.
“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.
Powell told The State last week that South Carolina’s internal performance auditing body expects to vote next month on whether to open an investigation into the Charter Institute.
Erskine distances itself from EMO
The partnership between Erskine College and Reason & Republic shifted in 2021, after Erskine asked to be bought out of its ownership stake in the education management organization, the counterclaim asserts.
The parties agreed to unwind Erskine’s ownership via terms set out in a $1 million promissory note. Specifically, Reason & Republic’s parent company Icelaven Development Group would make payments to Erskine totaling $1 million plus interest, due and payable in full by Jan. 1, 2027.
The exact terms and timeline of the payments are in dispute.
Erskine College alleges in its suit that Icelaven defaulted on the note. Icelaven denies it defaulted and asserts that Erskine reneged on aspects of the deal and attempted to collect the money early.
Things came to a head in late 2023, according to Reason & Republic’s counterclaim, when Erskine officials allegedly called Galyean to discuss collecting on the note early and closing out the college’s relationship with the education management company.
The conversation apparently was not fruitful.
Afterward, Reason & Republic claims the Charter Institute and its associates initiated a smear campaign to discredit and extort the company by falsely claiming it had mismanaged money and exerted undue control over the school’s finances.
A December 2023 letter obtained by The State outlines some of the concerns Charter Institute officials raised about Reason & Republic’s management of Belton Preparatory Academy in Anderson County, one of the charter district’s highest performing schools.
The letter, written by an attorney for the Belton Prep board, asserts that school staff notified Charter Institute officials of “academic compliance violations, funding discrepancies, firing of key employees and workplace harassment.” The Institute’s subsequent financial review of Belton raised various concerns with the school’s operations, management and delegation of authority and control to Reason & Republic, particularly with respect to issues of fiscal management and employment structure, the letter states.
Reason & Republic’s filing alleges the Charter Institute intimidated its local school boards by threatening to withhold state funds and revoke their charters unless the schools terminated their contracts with the management company.
These tactics, according to Reason & Republic, were intended to damage the company’s reputation and steer its schools into contracts with the Charter Institute and Teach Right USA.
In the end, two Reason & Republic schools — Belton Prep and Summit Classical School — parted ways with the management company and temporarily put the Charter Institute in charge of their finances. Summit’s board has since voted to close the Laurens County school.
The company’s third school, South Carolina Preparatory Academy, a virtual school headquartered in Anderson, rebuffed the Charter Institute’s demands and is in the process of transferring to the Limestone Charter Association, where it will continue to contract with Reason & Republic for services.
SC lawmakers vow to rein in charter school authorizers
SC Prep’s transfer to the Limestone charter district, an affiliate of Limestone College in Gaffney, was made possible by a one-year measure, known as a proviso, that lawmakers inserted in this year’s state budget.
The temporary measure lets charter schools unilaterally transfer to another district if their authorizer is under sanction by its accrediting body.
Erskine College, which was denied reaffirmation of its accreditation in 2022 and remains on warning status for not meeting governance and financial management standards, is the only authorizer whose schools are currently subject to the proviso.
Other temporary charter school-related measures added to this year’s budget that were inspired by lawmakers’ concerns with Erskine include potential repercussions for authorizers that spend taxpayer dollars for any reason other than those listed in statute and a 2% cap on the percentage of state appropriations that authorizers can retain from schools they oversee.
The provisos are intended to serve as a stopgap until next year when lawmakers have pledged to take a serious look at overhauling South Carolina’s outdated charter schools law, which is silent on many of the complex issues that have emerged since colleges and universities began approving and regulating charter schools roughly a decade ago.