Florida Courier Publisher Charles W. Cherry II believes that the embattled bank is the key to Bethune-Cookman University’s survival.
Dr. Mary McLeod Bethune’s final resting place is within walking distance from anywhere on the Bethune-Cookman University Campus. As the Wells Fargo foreclosure action against Bethune-Cookman University rages on, what will the bank do with the school’s hallowed ground on which the school’s founder and another president, Dr. Richard V. Moore, are buried?
According to a recent financial audit of Bethune-Cookman University, the school is a dead man (woman) walking. From the Moore Stephens Lovelace CPA accounting firm in their financial statements dated January 16, 2019:
“…the University has suffered recurring, significant operational losses, is operating under a probationary accreditation status, and its borrowing arrangements are subject to acceleration by the creditors due to a technical default. These matters, among other things, raise substantial doubt about its ability to continue as a going concern.”
But “substantial doubt” doesn’t mean mathematical certainty. Here’s my humble opinion on the only way forward for B-CU, in the general order of which events must occur:
The current members of B-CU’s Board of Trustees have a few remaining responsibilities. When completed, they should all walk away and focus on fundraising and recruitment. First, they must unanimously elect a new president. This would send a message to stakeholders that they are fully supportive of him or her from the outset. Second, they must change their bylaws to reduce the board to five members, the minimum number permitted by the Commission on Colleges of the Southern Association of Colleges and Schools (“SACS”), the university’s accrediting agency. Then, all trustees other than the remaining five should walk out the door, with Interim President Hubert Grimes and his current leadership team at the front of the line.
My suggestion? Of the five, one current faculty member; one alumni member (not necessarily the National Alumni Association president); one student member (not necessarily the Student Government Association president); and two others.
This would go a long way toward satisfying two of SACS’s five deficiencies: integrity and governing board characteristics. The rest of my proposed “roadmap” can address the other three deficiencies (financial resources, financial responsibility, control of finances) that led to B-CU’s accreditation probation.
The new president, with his NEW leadership team and a smaller and more agile Board of Trustees, must commit to settling the Wells Fargo lawsuit on terms that include complete forgiveness of the debt. A review of the audit and the lawsuit documents indicates that B-CU owes Wells Fargo $88,151,398.56 as of March 4. If the Wells Fargo loan was immediately reinstated, B-CU would be paying a minimum of $600,000 per month for the next 30 years, totaling more than $300 million. IMPOSSIBLE.
Wells Fargo is treating B-CU as it would any other “distressed” debtor that couldn’t pay a mortgage. It asked the presiding judge to put the school in the hands of a court-appointed receiver who could run the school under court supervision (including hiring and firing, and selling assets as he or she saw fit).
Both the bank and the university’s leadership know that receivership would have been a death blow to accreditation, and thus to the institution. So instead, Wells Fargo temporarily allows B-CU to pay approximately $100,000 per month against the debt.
Reason No. 1. Wells Fargo should walk away from $88 million because it must make some good news that’s sorely needed for its own corporate survival.
Search online for “Wells Fargo scandals.” What pops up? “Wells Fargo can’t outrun its scandals” in The Week magazine. Or “Wells Fargo’s 20-month nightmare” on CNN.com. Or “Scandal-plagued Wells Fargo faces cap on growth: regulators” in the New York Post. Want to know what the scandals are all about? Read “Every Wells Fargo consumer scandal since 2015: A timeline” on Yahoo.com.
How about another headline to be printed first in 200 Black newspapers around the country? “Wells Fargo decides B-CU is ‘too important to fail.’” Would that assist the bank in rebranding itself and rehabilitating its reputation?
Would a press conference in front of the Bethune statue (or gravesite) of bank, university and local and Black Press officials burning the mortgage and lawsuit papers get the positive attention of Rep. Maxine Waters, chair of the U.S. House of Representatives Financial Services Committee (which regulates banks) and her eight Congressional Black Caucus members who also sit on the committee? I think so.
If that means Wells Fargo gets to appoint a substantial (but not controlling) number of trustees appointed to B-CU for a term of years, or other conditions in exchange for full loan forgiveness, that’s a small price to pay.
Reason No. 2. The bank should forgive the loan – because it can. Wells Fargo is filthy stinking rich. It had net income (after all expenses) of almost $23 billion last year.
According to Page 93 of Wells Fargo’s 2018 Annual Report, the bank had an allowance for credit losses of $1.7 billion as of Dec. 31, 2018. (That’s how much it was ready to “eat’’ in bad loans.) It actually wrote off $429 million in commercial loans in 2018.
Any way you look at it, forgiving B-CU’s debt is insignificant to Wells Fargo’s financial performance. B-CU’s debt would have been a one-time hit of five percent of last year’s allowance for credit losses. It would have been a one-time reduction of the bank’s net income by about four-tenths of one percent. That’s less than a rounding error for a company with $1.9 TRILLION in assets.
B-CU must continue to pay its bond payments while restructuring a reinstatement of the repayment agreement. Right now, bondholders have not sued. If they do, the $18 million owed to them will be due immediately.
ALL other active lawsuits must be settled. It’s time to clean the legal slate. The university is fighting a number of parties in court, including former President Edison Jackson and former Vice President of Institutional Development Hakeem Lucas, the dormitory construction project development firm, and an offsite building developer. And those are just the most-costly lawsuits among others that have been filed.
The university must establish a completely separate and fully transparent fundraising foundation complete with audited financials. A future president or Board of Trustees should not be able to dip into the school’s endowment at whim. Without a separate organization to receive donations, big money donors, especially those living in B-CU’s home of Volusia County, will continue to sit on the sidelines.
Many donors and supporters, big and small, believe that Edison Jackson and his administration used and abused their trust and their money. The days of B-CU’s leadership hiding behind the “private institution” curtain are over, if the school is to survive.
This goes for the current well-intentioned effort by B-CU alumni faculty and staff requesting donations for the school’s current operations. Right now, B-CU’s operations are a black hole sucking energy and resources from wherever it can. There’s no way we can support the alumni effort without full transparency, including disclosure of budget and actual operational financial statements and sources and uses of funds posted at regular intervals to the university website.
Assuming B-CU survives, here’s a partial list of what must happen next:
B-CU must begin a serious and authentic outreach to Volusia County residents, especially in Black Daytona. Since the end of the Richard V. Moore administration, B-CU has slowly but surely walked away from the average people in Daytona Beach, particularly from the Black community in which it is located. Most people no longer believe the college is relevant to or connected with their everyday lives in Daytona Beach.
Alumni must refocus on fundraising, raising the percentage of alumni giving, and recruitment. Many B-CU alums seem to think that traveling with the football team or cheering them and “The Pride” on at the Florida Classic is the best way to support the institution. According to U.S. News and World Report, only FIVE PERCENT of B-CU alums gave ANYTHING to the institution in 2017. That’s disgraceful.
In case you don’t know, it’s the percentage of alumni giving that attracts outside donors, NOT the size of their donations. Corporate, institutional and wealthy donors favor 20 alums giving $5 each per year rather than one alum giving $100. Why? They rightly believe that if alums, who are the school’s “finished products,” are not its greatest and most numerous financial supporters, why should they bother?
There’s more, but I’ve run out of room for this week. I believe B-CU can and should survive, and that its greatest days are still ahead. Watch this space…