For the residents of Jefferson County, OH, Eastern Gateway Community College’s court drama (trauma?) soldiers on. This week, the Student Resource Center (SRC), the college’s former online program manager (OPM) filed a motion to place a lien on the land that EGCC sits on, as well as its assets.
Problematically, of course, EGCC sits on land that has a deed restriction. Jefferson County granted the land to EGCC with strings attached. Said land must return to the County if it is not used for educational purposes. That’s likely to occur on October 31, when EGCC ceases operations. I hope the county gets its land back because the County’s agreement with EGCC is no less important than SRC’s agreement is.
If you don’t dig too deeply, the case is a breach of contract suit. As usual, the devil is in the details. SRC claims that EGCC wrongfully terminated its agreement with SRC in late 2021 following a hasty change of personnel at the top of SRC’s org chart. SRC was trying to sell itself to Sterling Partners, a venture capital firm. It also alleges that its former CEO and EGCC’s former president conspired to hide the fact that the Higher Learning Commission had placed EGCC on probation.
(HLC sanctions are public, so I am not sure how one could hide something like that.)
SRC claims tens of millions of dollars in damages including lost revenues that it surely would have earned through 2027. However, in July 2022, the US Department of Education ordered EGCC to shut down the Free College Benefit program that SRC was specifically formed and contracted to manage. It’s inconceivable that the free college benefit program would have been able to continue, given the sheer gravity of the Title IV violations that the Department of Education found.
Is EGCC Case in The Wrong Court?
This begs the question: If the EGCC program was such a cash cow (and according to the EGCC financial statements, it was), why would SRC want to sell itself quickly and quietly? As the OPM, SRC had enormous influence over the way the Free College Benefit program operated at EGCC, and the way the program operated was exactly what got EGCC in trouble with the HLC and the Department of Education.
The circumstances here make it ridiculously hard to accept SRC’s narrative that its broken contract should have any legal priority over the other millions of dollars of debt that EGCC has on its books. Like its bond debts. Or its unfunded pension liabilities. Or its contracts with other vendors.
It’s also hard to care about the travails of a tragic operator of a program whose sole purpose was to wring tens of millions of taxpayer dollars out of the US Treasury in a financial aid scheme that was shaping up to put Corinthian Colleges to shame.
What happened to EGCC belongs in a criminal court, and I really hope to see the responsible parties there someday. But to be fair to all of EGCC’s creditors, this matter really should be in front of a bankruptcy judge. Colleges and universities don’t declare bankruptcy because a provision of the Higher Education Act terminates their accreditation immediately if they do. In EGCC’s case, that ship has already sailed. So, why not file for bankruptcy and give all of EGCC’s creditors the opportunity to settle their outstanding claims instead of worrying about making whole a vendor who had an active role in EGCC’s demise?
Photo Credit: Cory Doctorow, via Flickr
