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Tuesday, March 29, 2005

More on CEDU Closing Immediately

Additional news reports  Among other things, Boundary County's unemployment rate will double. 

Because Brown Schools are in Chapter 7 bankruptcy, the parents who pre-paid tuition are just like other creditors.  One widow stands to lose about $75,000. -- small change in the creditor line, but big bucks to her.

"This is a relationship-based program, and they closed this like it was a factory," a counselor at one of the schools told the Spokesman-Review newspaper in Spokane, Wash.

Brown Schools operate 11 boarding schools and educational facilities in Idaho, Texas, Vermont, Florida and California, according to its Web site. Facilities in Austin and San Marcos were sold to Psychiatric Solutions Inc. in 2003.

Schools' shutdown troubles community
Bankruptcy filing angers parents, leaves hundreds unemployed

Susan Drumheller and Becky Kramer
Staff writers
March 29, 2005

BONNERS FERRY, Idaho – Employees of CEDU Educational Services' three schools in Boundary County filled out unemployment forms in droves Monday while a straggling handful of students packed their things to leave Idaho.

Brown Schools Inc., CEDU's parent corporation, filed for bankruptcy Friday, the same day employees learned they were losing their jobs. About 300 people in North Idaho are out of work, and about 300 students in CEDU's seven schools across the country were abruptly sent home.

Emotions over the schools' sudden closure ranged from resignation to "beyond angry" in the unemployment queues and at the schools for troubled teens.

"This is a relationship-based program, and they closed this like it was a factory," said Boulder Creek Academy counselor Silas Thompson. He and many other employees volunteered to stay around the clock at the school over the weekend to safeguard students until they could be turned over to their parents.

They haven't been paid for three weeks, and they have no guarantees they'll get their back wages. With the bankruptcy filing, they take a place in line with other creditors.

"This is devastating to our community," said laid-off staff member Norm Aldridge. He also worries about the impact on the students, many of whom are emotionally fragile. Some students "went ballistic" Friday when they learned they had to leave, he said.

Diane Stock Kern said she had been traveling since 1 a.m. Texas time to come pick up her nephew, 16-year-old Jason Stock, who was one of the last students to leave Boulder Creek.

Stock's mother is a single working mom in St. Louis. His dad died five years ago. He'd been at the academy less than two months.

"I felt like Jason was finally in a stable position here," Kern said. "We don't know what our options are now."

Other parents worried they won't be refunded for tuition. They were offered a 7.5 percent discount on the $5,950 monthly tuition if they paid several months in advance.

April Moore of Fairbanks, Alaska, recently cut a check for $74,000 to pay for the rest of her son's schooling. She was in tears Monday, fearing she'd lost it all.

"My husband just died, and that's the only reason I have it," she said. "Apparently there are other parents who are trying to get their tuition back and can't."

As parents scrambled to get their kids home, former employees started looking for work. If they don't find it, Boundary County's unemployment rate will jump from 6.5 percent to 12.7 percent, said Dave Darrow, manager of the Idaho Commerce and Labor office in Bonners Ferry.

The opening of Rocky Mountain Academy in 1982 helped diversify Bonner County's timber- and agriculture-dependent economy, said Kathryn Tacke, Idaho's regional labor economist for the Panhandle. Through payroll, CEDU pumped about $9 million annually into the local economy in 2004. Even after the closure of Rocky Mountain Academy in February, the three remaining programs tied with the Boundary County School District as the county's largest employer.

"It's going to be very hard for a small community like that to make up the loss of those 270 jobs," Tacke said. "It doesn't help that this was sudden, that there wasn't the usual 60-day notice."

In a petition filed with the U.S. Bankruptcy Court in Delaware, Brown Schools listed debts of $10 million to $50 million, and assets in the $1 million to $10 million range. In a statement accompanying the bankruptcy filing, the board of directors said the Chapter 7 filing was in the best interest of the company, its creditors and stockholders. Company officials did not return phone calls.

The bankruptcy filing includes 63 pages of creditors. A listing of the 40 largest creditors includes a $1.5 million arbitration settlement, and $1.2 million for other legal settlements and fees.

CEDU paid a $300,000 settlement in 2002 to the families of two former students who alleged that the staff at Northwest Academy was poorly trained and abusive, according to previous press accounts. More than two dozen parents filed lawsuits against Rocky Mountain and Boulder Creek academies in October, alleging misconduct and breach of contract.

A 17-year-old who was enrolled in a Brown Schools wilderness program in Texas died in 2002 after he was restrained by at least three camp staff members after what the company described as a violent outburst, according to a 2003 article in the Austin American-Statesman.

In 1999, Brown Schools purchased the California-based CEDU programs for about $72 million, according to the Austin American-Statesman.

Brown Schools has changed ownership several times. A California investment firm, McCown, De Leeuw & Co., purchased it about eight years ago. The firm has a broad array of business interests, including 24 Hour Fitness Worldwide and Aurora Foods, which includes Duncan Hines cake mixes, Van de Kamp's frozen foods and Mrs. Butterworth's pancake syrup.

Although the chain of events could not be confirmed with corporate headquarters, the popular theory is that the bankruptcy resulted because the debt service for the purchase of the schools drained the company of cash.

Employees smelled trouble earlier this year when the company stopped direct deposit of their paychecks, said laid-off counselor Rob Goldworm. They were told the company was changing banks, but paychecks were still drawn from the same bank. Vendors also weren't getting paid. Then, on Thursday, employees weren't paid.

But Boulder Creek Academy director Paul Johnson had reassured staff that the school wouldn't close. Boulder Creek Academy, Northwest Academy and Ascent were all profitable, he said.

The worst-case scenario, Johnson thought, would be Chapter 11 bankruptcy, which would keep the schools open while allowing the company to reorganize. The news Friday was as much a surprise to him as to everyone else at the schools, he said.  "It's hard for me to understand why it had to happen this way," Johnson said Monday. "It doesn't make sense."

Johnson said the last 48 hours had been the most emotional in his life. The parents he's spoken with are furious.  "They entrusted us to care for their kids and we did not follow through," he said.

Still, Johnson is buoyed by the support shown by parents and others. Over the weekend, parents – including some who'd lost tens of thousands of dollars in tuition payments – donated more thousands to start a fund to assist employees.

Also, there's a move afoot to try to start a nonprofit organization to purchase the Boulder Creek campus and reopen the school.

Parent Barbara Plesser is solidly behind the plan.  "We've rechristened the company CEDID," she joked.  And she's got a suggestion for the name of a newly formed school: "CEWILL."

Students, Staff Devastated By Closure

Thursday, March 24 was a big day for students, staff and parents from the area’s CEDU Schools, including Northwest Academy and Boulder Creek Academy south of Bonners Ferry. It was parent/teacher conference day, and parents from around the country traveled to Coeur d’Alene for what they expected to be a pleasant affair.

It turned out to be anything but.

The students performed skits, played music, entertained the assembled parents and everyone was feeling good. Then staff was called to a meeting just before they broke for lunch, where they were informed they weren’t getting paid for the previous two weeks.

The company, they were told, was insolvent.

They were stunned, but didn’t let it diminish the occasion.

The other boot dropped on Friday when, during a Rose Ceremony, the director of Northwest Academy was called from the room for a phone call, during which she learned that all seven CEDU Schools were being closed immediately. She then had to return to the ceremony, where she informed those in attendance. The same day, CEDU filed for bankruptcy, leaving suddenly jobless employees wondering if they would ever be paid, if their benefits were still there … if they would even be able to draw unemployment.

Over 150 employees descended on Bonners Ferry Job Service on Monday, praying for jobs to make up for their loss, jobs that simply aren’t there in a community that’s already economically strapped.

CEDU Schools was founded as a family-owned corporation by Mel Wasserman in 1967. Around 1998, following Wasserman’s death, the schools were purchased by Brown Schools, which had a 60-year history of helping troubled teens. While not many staff members knew it, ownership transferred yet again to a Menlo Park, California, investment firm, MDA Partners, within the last year or so.

On Monday, March 21, CEDU announced the appointment of Fenton “Pete” Talbott as chairman of the board and chief executive officer of the Brown Schools, which operated CEDU.

“Pete Talbott is the ideal individual to lead the company,” said Brown School board member George McCown in a release sent to parents. “He listens well, speaks frankly and acts decisively. Pete is strongly committed to our educational goals and he brings extensive experience in operations and finance.”

The release went on to list over 40 years’ experience Talbott brought to the position, most of it in the banking industry.

“I believe he was brought in to make sure the bankruptcy went smoothly,” one parent said.

Attempts to reach MDA Partner officials by deadline were unsuccessful. Email sent to corporate contacts were returned as undeliverable, and some parents reported the same results.

In early February, CEDU closed the former flagship of the organization, Rocky Mountain Academy, which had dwindled in enrollment from a high of about 120 students to just 19. In a press release announcing that closure, the corporation blamed the shutdown on their inability to hire qualified staff. In closing the remaining schools, including schools in Bonner and Kootenai Counties, Vermont and California, no reasons for the closures were cited, no warning given.

The final CEDU closure impacts about 300 students and their families.

“The corporate giants didn’t have the guts to face anyone after they promised a month or so ago that everything was fine with the other schools,” one parent said. “Parents are frantically trying to get airplane reservations over this holiday weekend to pick their children up, children who are being supervised by non-paid staff out of the kindness of their hearts. It’s funny how they always choose holidays to help the destruction of the families.”

Parents of students at RMA were informed that it would shut down over the Christmas holiday.

Her comment about the staff reflects what made Wasserman’s approach so successful for over three decades. On Saturday, just hours after the bombshell, the sprawling campuses were packed with cars, hugs and tears as those parents who’d attended the so-called festivities loaded their children’s belongings in trunks, as students hugged staff members and fellow classmates goodbye.

In the Boulder Creek Academy office, a teacher was on the phone non-stop, working to make arrangements for students whose parents had not been able to attend, including a student from Brussels. While her voice was professional and cheerful while on the phone, it cracked when she hung up and prepared to dial the next number.

John Soriano worked at the academy for 11 years as a team leader. He and nearly every other member of the staff showed up for their shift despite the devastating news, knowing full well they’d not likely be paid for their time, and not really caring.

“This is what the corporation forgot and why we’re here … the kids,” he said. “We’re making sure these kids are taken care of, their parents are taken care of. We want them to remember the good things they gained while they were here, and enable them to leave with dignity. These kids are what it is all about … not the money, not the job. They didn’t give them a chance, just kicked them out. They didn’t give us a chance. But we’re proud of what we’ve accomplished, of what we helped these students become.”

Examples of Soriano’s statement on dignity could be seen everywhere.

When two students entered the office, John’s mien went instantly from glum to cheerful.

“It’ll be okay,” he said to one, wrapping him in a bear hug, “you’ve got a lot to be proud of, and this place will be part of you for the rest of your life. You’re going to do great!”

When the students departed, he reflected on the successes of the students he’s worked with over the years, nearly breaking into tears.

“We’re survivors,” he said of himself and other staff members. “We’ll move on. It’ll take time, but we’re secondary. We haven’t forgotten why we’re here, and we’ll be here until the last student is gone.”

The CEDU Schools were developed to provide emotional and educational support to troubled teens. Wasserman, who owned and operated a successful furniture business in Palm Beach, Florida, noticed wayward kids gathered on the steps of a library across the street, and he went to them. He next invited them to his home, where he learned more about their plight, their hopes and aspirations, their sense of hopelessness. Out of that he developed CEDU Schools, an industry pioneer.

Tuition wasn’t cheap, and many of the students who attended were the children of celebrities. But not all. Some parents took out second or third mortgages to afford sending their children to North Idaho, where countless troubled lives were transformed into stories of personal success.

“Our son was one of the last students at Rocky Mountain Academy when it closed,” said Maryellen DiSilvio, Virginia, in an email soon after the final closures. “The program saved his life – no exaggeration! The staff that worked directly with our son were all wonderful. The businessmen making the profits were not. I am writing to thank the community for being so welcoming toward troubled kids. My husband and I were amazed at how friendly and helpful everyone was in your community during our visits there. Our son was even allowed to play basketball for Bonners Ferry High School. The acceptance of the other players and kind coaches meant a great deal to him and was an important part of his recovery. Thank you to all who touched our lives. We are so sorry this had to happen to your community.”

“They never told us why, never even said they were sorry,” Soriano said of the corporation. “When this was for the kids, we worked miracles. But in the end, it was just about the money to them.”

In 2002, CEDU settled a lawsuit filed by the parents of two Rocky Mountain Academy students who alleged their children had been abused and that staff was not properly qualified, paying $300,000. But in closing RMA, the corporation said the remaining schools remained viable and that there were no plans to close them. According to staff, enrollment was rising at the remaining schools, and there was no indication of financial trouble until they were informed there was no money to pay them on Thursday.

CEDU Schools were a major private employer in Boundary County, where the brunt of the economic impact will be felt. Over 250 employees, including several couples and families who derived their sole income here, were affected by the closure. In all, CEDU employed about 500 people.

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