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Sunday, March 27, 2005



Pete Talbot was president of the Brown schools for the last week. He was asked to step in and replace the former president George E. McCown and negotiate in the final week.

The TIAA-CREF was the primary loan holder of Brown Schools. McCown DeLeeuw was the secondary loan holder. George McCown was head of Brown Schools.

Apparently the debt service to those two lenders was what ultimately drained the company of cash. Those two companies got 8 million dollars in interest payments. The result was that George and the TIAA-CREF guys drained the Brown schools of operating capital. In the final week Pete was asked to try and save the schools. The plan was to get a bridging loan of 2.2 million dollars from the two investment groups to extend the life of the schools, pay salaries and file chapter 11. Then they would begin deconstructing the Brown Schools to the various groups who were already expressing interest in buying the individual schools.

On Friday TIAA-CREF and McCown DeLeeuw announced there would be no loan agreement. Pete went to Herb Allison to beg for 500,000 dollars to meet payroll and extend into next week so they could work out a deal.

In the end, there is no loan and Pete was ordered to close CEDU and file for chaper 7.

Staff of the schools are not paid for the last two weeks' work, but they will ultimately get paid from the bankruptcy court. Meanwhile the court appointed trustee will pay employees who worked after 4:30 Friday.


Herb Allison is the CEO of TIAA-CREF.

TIA-CREF is the Teachers Insurance andAnnuity Association/College Retirement Equities Fund (TIA/CREF)

TIAA-CREF. Call for $280 billion pension giant to invest in positive ventures

Activists, community groups, and professors are rallying outside the headquarters of TIAA-CREF, the largest pension system in the country, calling on it to do the right thing with CREF investments: "Get Out of the Bad, and Into the Good".

As the nation's largest pension fund, TIAA-CREF, a retirement fund mainly for educators, prides itself on being responsive to shareholders and a "concerned investor"on social responsibility matters. The fund, however, continues to hold large investments which put public health, factory workers, and citizens at risk. Why should life-giving pension money be invested in deadly tobacco, sweatshop labor, energy companies tied to brutal dictatorships, or economic ventures that promote miseries for Third World citizens? There are more positive ways to invest and still earn good returns. A broad-based coalition is calling for funds to be invested in affordable housing and in companies which are, for example, pioneering socially or environmentally responsible products or services.

Contacts for further information [ Main contact in NYC is Dave Wilson, 212--674-9499, nicadlw at ; or national campaign organizer, Neil Wollman, 219-982-5346, njwollman at

A CEDU Teacher

For those who are curious.

I am one of the 250 or so who lost their job on Friday in North Idaho.

None of the staff, or even the regional managers were aware that the financial problems at CEDU had reached such dire proportions until we did not receive our paychecks on Thurs (March2005)

We were told that a meeting of the upper management/financial backers would take place on Fri., and that an announcement would be made late in the day informing us of when we might receieve our checks.

I have since been told that the two primary investors in Brown Schools 1) George McGowan and his partner, Delough (sp?) and 2)a group called "Teachers" could not reach

1) George McCown and his investment group McCown deLeeuw
2) Teachers = Teachers Insurance andAnnuity Association/College Retirement Equities Fund (TIA/CREF)

could not reach agreement on a plan or price for a possible sale to other investors, and instead chose to immediately close the schools and have filed for Chapter 7 bankruptcy, which means all the schools' property and assets will be sold off to pay debts.

I am not sure if corporations or subsidiaries, such as CEDU, can file Chapter 7

The root of CEDU's financial problems as it has been explained to me goes back to the time 6-7 years ago when Brown Schools purchased it from Mel Wasserman.

Apparently just prior to the sale, the Wassermans made an effort to fill the schools up quickly (particularly Rocky Mountain Academy), and created an inflated picture of what CEDU's revenue producing capacity was, which resulted in Brown Schools paying way too much for CEDU.

They (Brown School's managememt team have tried numerous measures in the past few years to rectify this, but were unsuccessful.

This is particularly troublesome to those of us who currently worked there, as for the most part BCA, NWA, and Ascent were profitable in the context of their own budgets, but not in the context of paying off loans for the inflated price paid for them.

There are attempts being made by some staff, current parents, and ed consultants to reach out to alumni students and families or other investors to reorganize and create an ongoing program or programs, but it is likely that the window for this, at least on the current properties will be short.

Parents of current students have also been making donations to help the staff, who have not been paid a cent for the last 3 weeks work, and are unlikely to see much or any of the money as it is tied up in bankruptcy. Many have continued to come to work and help the kids and families get ready to move on.

As a relative newcomer to the CEDU system, I am sympathetic to those who had to endure some of the "old school" CEDU approach. Someone earlier posted about how the best staff and therapists were those that tried to create a bond with students and then appealed to their desire to create something better for themselves and their families. I couldn't agree more. While I'll acknowledge that there were vestiges of the "old school", while I was there I never saw anything that I considered abuse, and had I, I would have reported it to Child Protection.

I can understand those who may have been mistreated feeling a sense of relief or even some kind of vindictive joy at CEDU's closing. But I hope some can understand that there were many who worked there out of a sincere desire to help and care for kids, and not for money. I made a decent living at this, but not enough to, for example, send my child to a CEDU, let alone a regular boarding school. The loss of 250 jobs to the Bonners Ferry area will be a devastating blow to a community that doesn't have much to begin with.

A CEDU Parent

One thing that tells you how the Brown schools operate. Most of the families are on credit card debit or bank account debit for tuition.

CEDU charged everyone March 24th for the month of April, knowing that they were going to shut down on March 25th and declare bankruptcy. In addition they immediately shut down the CEDU email system so all of the remaining staff (that is working free to try to make sure the kids get home) don't have email.

My daughter went there, but I pulled her out 3 months ago.

Matthew Kaufman

I was a CEdu Middle School Graduate. I must say I am shocked to hear this. they were successful when I was there. I graduated on December 15, 2005. I have been fond of CEDU Middle School but I was never fond of the school they recomended to me for After CEDU, King George School in Sutton VT. I must Say that King George School waqs never very Successful in my two years there. But CEDU shocks me! I wounder what all of my friends who went there will think? Where will the Staff Go? I have a lot of friends who are staff there. I wish them the best of luck.

Matthew Kaufman

Matthew Kaufman

I mean December 15, 2002! Sorry


I was very saddened to hear that the CEDU schools were closing down. I am extremely close to my brother who graduated from Rocky Mountain Academy a couple years ago, and without the help of RMA I truly believe he would either be dead or in jail. He has turned out to be a fine young man; RMA taught him skills to better his life and reminded him of the ones that had been taught by my parents but had been ignored. He finally learned to deal with things from his childhood and adolescence that had haunted him for years. He is one out of two of the people I admire and respect the most in this world. He always had a good soul, but it was only through particular staff members that he was reminded of it.

My heart goes out to all the families and students that are going through this pain right now. I'll never forget the hell my family went through during those times before RMA, and I can't even imagine what life would be like for all of us if he had abruptly been sent home halfway through his journey at the school.

It is undeniably wrong that CEDU charged parents antother full month of tuition knowing the schools were going to be mandated to close within days. My parents were one of the ones that had take out another mortgage on our home in order to help pay, along with the whole of their retirement savings and both me and my brother's college funds.

However, I do praise RMA and the other CEDU schools for their mission, but moreso the staff and counselors that worked day in and out to help turn the kids' lives around. The staff is the main reason for CEDU's high success rate.

It is devastatingly unfortunate that the money-hungary investors decided to pull the plug. Though I know it is wrong, a part of me wishes their families could have gone through the pain and crises my and many other families of CEDU have gone through. Then maybe they would have thought twice about slamming the door on one of the last opportunities some of those kids will probably ever have to positively and healthfully turn their lives around.

Jennifer Lefler

i did the whole program at CEDU and while i didnt like it and still dont they saved my life i think is crap that brown closed it they bought it right after i left and i hope and pray they open that school back up i may have hated it at the time but now im a grow woman and make better choice thanks to them and i was hurt by the fact that brown closed my school down with 24 hours notice to the parents but i might say its a process and that is totally detrimental to all those younge children they have opened up wounds and left them to fester the cedu program is ment to be 2 and a half years long to get to our cores and rebuild i am soooooooooo upset that they have closed this school i cannot say enough

liz Ditz

Forbes article:
School's Out

Therapeutic boarding schools for the troubled kids of wealthy parents were growing fast when we wrote about them three years ago. Now one of the biggest players in the field, the Brown Schools of Austin, Tex., has abruptly shut down. With no prior notice to families, the company shuttered operations in four states on Mar. 25 and sent some 300 children packing. Most of the students were struggling with severe emotional problems, and some were in the midst of drug detox regimens.

Because Brown filed for liquidation under the bankruptcy code's Chapter 7, parents have little hope of recovering money already paid for tuition, which runs as high as $100,000 a year. They must line up alongside 40 other creditors owed $40 million. According to court filings, Brown's assets are worth between $1 million and $10 million. Brown's major investors, the Teachers Insurance & Annuity Association and Menlo Park, Calif. private-equity firm McCown De Leeuw & Co., could not agree on financing for another loan, which led the board to close the schools. Neither company will comment on why the decision was made so precipitously.

Brown's financial problems stem from its 1998 purchase of CEDU Education, a company many credit with founding the therapeutic movement to help troubled students, starting in the 1960s. Brown paid $72 million for CEDU, a sum one former Brown executive says was three times what the asset was worth. Brown also faced mounting legal costs arising from a spate of suits, some alleging abuse of students. Even while the company was struggling to pay legal fees and service its debt, investor McCown De Leeuw was extracting a monthly consulting fee of $100,000, according to two former Brown executives, who also contend that McCown turned down an offer by a competitor to buy five CEDU boarding schools in June. A McCown spokesman claims there was never a formal offer and says McCown stopped taking the consulting fee two years ago.

Only one Brown boarding school remains open, the King George School in Sutton, Vt. A group of parents of King George students have pledged to purchase the school if no other buyer steps forward. John T. Carroll III, counsel for Brown's bankruptcy trustee, says parents are scrambling to raise money to purchase and reopen other Brown schools. In addition, parents have contributed $95,000 to emergency funds to pay displaced staff members. Days after the shutdown, plaintiff lawyers started contacting parents with offers to investigate legal action.

Though Janice Moss, executive director of the National Association of Therapeutic Schools and Programs, calls Brown "an isolated case," the sudden closures highlight how difficult it is for parents to know whether these unregulated programs are good bets for their kids.

John Greenwood

What is the status of worker's comp claims in this bankruptcy proceeding?

I was injured while employed at a Brown School and was in mid claim when the school where I work (Ocala, FL) was taken over by another company that refuses to give cognizance to my claim. What can and should I do?

Brian Williams

As a student of CEDU in Running Springs 78/79, my horror story began when I graduated. I returned home ,turning my back on
many opportunities and returned to a life of mind numbing addiction and self pity going against all I had been taught. I was the kid who ran away the first day straight down the mountain cross country to San Bernadino. Only to be returned by my parents because they did'nt know what to do with me. Expelled from Two high schools and using PCP almost on a daily basis at 16. Much of it was very intense but never abusive, far from it. Myself and many others made up stories of poor treatment . What else can one do when your 16 full of anger and pain all knowing. Fabricate and over exaggerate. Teaching an adolescent to have respect for themselves and others when there off the edge is no easy task, but that is no excuse for physical abuse or humiliation. I don't know who was running the schools when you attended but I can assure you that was not the case when the Wasserman's,Padget's, Allgood's etc. etc. etc. were in charge. So please be careful not to make blanket accusation's or you might harm people who would never let what you speak of happen to another. Responses to this letter may be sent to [email protected]. although I doubt this will ever see print.
Brian Williams
CEDU School 78/79

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Its very informative for students who are learning the basis of computing.

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Liz Ditz you never seem to amaze me. Your blogs are great!

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