Dive Brief:
- A federal judge ordered Bacone College into Chapter 7 bankruptcy Tuesday, kicking into motion a court-managed liquidation process for the institution’s assets.
- The private Oklahoma college, which describes itself as American Indian-serving, filed for bankruptcy last June with the aim of managing its debts and staying open in some form.
- Last week, a U.S. bankruptcy trustee moved that the case be converted to a Chapter 7 case, citing “gross mismanagement” by college officials, one of whom the trustee alleged used the institution’s bank account to pay his personal expenses.
Dive Insight:
In a short but blistering court filing, Ilene Lashinsky, a U.S. trustee with the U.S. Department of Justice assigned to the bankruptcy case, argued that untoward financial activity at Bacone warranted the conversion to Chapter 7 bankruptcy, effectively forcing the college into a full wind-down.
Specifically, the trustee pointed to a payment of nearly $16,500 made by the college to the federal Small Business Administration to pay a loan owed by Leslie Hannah, who became acting president of Bacone in April 2024. The payment, according to Lashinsky, was made at Hannah’s direction to pay his SBA debt.
Hannah did not immediately reply to a request for comment Thursday, nor did the college’s bankruptcy attorney.
Lashinsky said that “Hannah claims that he, in his personal capacity, obtained an SBA loan prior to the Debtor’s bankruptcy filing in the approximate amount of $15,000” to pay the college’s payroll. But neither Hannah nor the SBA was listed among Bacone’s creditors when the college filed for bankruptcy last June.
Also named in Lashinsky’s filing was Josh Johns, a board member of the college, whom Bacone listed as overseeing the institution during bankruptcy along with Hannah.
“It is unclear whether Hannah discussed this payment with Johns but neither Hannah nor Johns did anything to prevent this payment to the SBA,” Lashinsky said.
Lashinsky also cited the college’s failure to provide timely financial information.
“This case is stagnant and the Debtor’s only hope is that an investor may come in and purchase the real estate assets of [Bacone],” Lashinsky said in the filing. “This is the best option for creditors to get paid.”
The college’s property is valued at $3.8 million, according to court documents.
Bacone’s history stretches back to 1880, when it was established on land donated by the Muscogee Nation to the American Baptist Church. It was meant to provide a Christian education to Native American students. The American Baptist Home Mission Society had the final say on decisions of the college until the 1950s.
After years of financial struggles, Bacone filed for bankruptcy last June and stopped taking new students after graduating nine that May, according to The Oklahoman. Days after it filed, the Higher Learning Commission pulled accreditation for the college, citing noncompliance with several criteria.
Before that, amid reports that it was in deep distress, the college posted on its website in bold type that that Bacone “is not closing and plans to graduate another class of our outstanding students again this May.”
“The Board of Trustees are committed to the future of this historic college, and believe that Bacone will continue to provide a quality education for our students for decades to come,” the college said then.
