Cooperation emerges in two SVC lawsuits

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BENNINGTON — Apparent progress was made this week toward resolving aspects of two lawsuits involving the now-closed Southern Vermont College.

With nearly a dozen attorneys and other involved parties represented in person or via telephone, Judge David Barra encouraged efforts toward resolving some basic ground rules for proceeding. The suits were filed by two financial supporters and donors to the college who have raised issues concerning their gifts and pending disposition of college assets.

At one point during the combined hearing Monday at Bennington Superior Court Civil Division, the judge called for a recess to allow the numerous attorneys involved in the suits to discuss areas of possible agreement.

Lon McClintock, who represents Bennington Center for the Arts founders Bruce Laumeister and Elizabeth Small, said Tuesday that "the upshot is that we should have communication [among the parties] on both lawsuits."

Following the hearing, the judge issued an entry order that stated in part, "After reviewing the status of both matters and the pending motions, the court recessed to give the parties an opportunity to discuss how to proceed. After the recess, the parties announced that they had reached an agreement for a proposed order to resolve all pending motions in both matters but would need time to write it up in acceptable form."

Barra directed the parties to file a proposed order for the court's review by July 19.

The arts center founders, who donated their 36,000-square-foot facility off Gypsy Lane to SVC in late 2017, seek in their suit to have that agreement annulled and the center returned to them — contending the college misrepresented its financial ability to continue operations as promised.

In late February, the New England Commission of High Education called SVC officials to a show-cause hearing on why the college's academic accreditation should not be withdrawn because it had insufficient financial resources to support programming.

In early March, the college trustees decided to close the school after the spring semester, citing declining student enrollment and mounting debt, and NECHE simultaneously withdrew accreditation as of Aug. 31.

The last SVC class graduated in May, and the 371-acre campus is now being maintained by a management and liquidation firm.

3 Cubed Advisory Services, LLC, based in Maryland, was retained with Charles Goldstein hired to act as a restructuring officer for the college. In addition to directing management services, Goldstein is expected to oversee the closeout and disposition of real estate and other assets.

McClintock said Tuesday that there is an interim agreement with the trustees that the arts center and its art collection, which Laumeister has said was valued at $2 million, will continue to be insured and maintained according to an agreement with the college when the facility was donated to SVC.

The donation agreement also called for the facility to continue to be operated as a nonprofit community arts facility, which would preclude sale to a for-profit entity.

Some of the artwork can be marketed for sale, under the agreement, McClintock said, but the founders have a right of first refusal to repurchase that work.

Any sale proposal for the real estate or other property at the center would require consent of the founders, he said.

McClintock said the aspect of the suit seeking annulment of the donation agreement and the center's return to the founders is continuing.

During the hearing, attorney Alexander LaRosa, one of the attorneys representing college supporter Fredric Poses, who also has filed suit against SVC, said Poses was particularly concerned when filing suit about the lack of information being provided by the college trustees about plans to sell assets and manage the school's closeout.

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But LaRosa indicated recent communication between the parties has allayed some of those concerns.

Poses in 2011 provided $2 million in collateral to the college to help it secure $8.5 million in bond funding for campus projects and upgrades. That collateral account was to be tapped if the college ever defaulted on its bond debt, which occurred in March.

The major mortgage holder, Community Bank, was represented in court Monday by Douglas Wolinsky. The attorney expressed similar concerns about the process for managing the college shutdown and sale of any real estate or other assets, saying the bank is owed $4.2 million and is the lead creditor.

LaRosa could not be reached Tuesday for further comment. In court, he indicted that his client might drop a request in the suit to have a receiver appointed to over oversee the college closeout and asset sales and for a writ of attachment on SVC assets. He said that when the suit was filed Poses was concerned that the remaining assets were not being properly managed to allow completion of the school year, graduation and payment of outstanding obligations to staff members.

The Poses suit also questioned whether the trustees and remaining administration could be trusted to manage the remaining funds and assets in light of SVC's financial problems and debt.

Budget plan review

McClintock said that under the interim agreement reached Monday, the college will now prepare and circulate among the parties a budget for review, with the possibility the judge would impose a spending plan if there is disagreement among those involved.

He added that he believes Goldstein, who is acting as the administrator, "seems very capable and very knowledgeable" about issues that come up during an organization or business closeout or shutdown.

"He is trying to minimize the objections of the creditors," McClintock said.

David Newell, president of the SVC trustees, said following the hearings, "We are hammering out a budget and some procedures with all parties so we can all move forward to market our campus, the arts center, and our personal property. That has not yet been finalized."

He added, "We are communicating with all parties. We can still show the arts center and our art for potential sale with the approval of the Laumeisters."

McClintock also said there have been "ongoing very productive discussions with the college. There is a lot of good will on both sides," and the parties are working on the outstanding issues.

Justin Banard, one of the attorneys representing the college, said in court that the trustees "share their goal" that the arts center continue as a nonprofit community center.

The main college campus assets, which are being marketed, are assessed by the town at more than $9 million. But the property also includes restrictions that could factor in any sale, such as historic preservation issues with the Everett Mansion and a conservation agreement with Vermont Land Trust and a first purchase option on more than 200 acres of mostly wooded hillside land at the base of Mount Anthony, west of the mansion.

As part of the arts center suit, Barra in May had granted a temporary restraining order preventing the college from contracting to sell the center, pending a hearing.

In the suit, filed in late May, Laumeister and Small sought to block any deal to sell the center and want their donation to the college annulled because of alleged bad faith and/or misrepresentations on the part of the college and SVC President David Evans.

Evens, who left in June to accept a position as interim president of the American University in Bulgaria, was represented in court by attorney Stephen Ellis, who declined comment Tuesday about the hearing.

Jim Therrien writes for New England Newspapers in Southern Vermont, including the Bennington Banner, Brattleboro Reformer and Manchester Journal. Twitter: @BB_therrien


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