Bankruptcy a hard hit for town

Sprinkled throughout the list of creditors in the Brown Schools bankruptcy case are dozens of individuals and businesses in North Idaho that are out more than just the several thousand dollars owed them by the emotional-growth schools in Boundary County.

They’re also expecting the loss of many customers who help keep the local economy ticking.

Some of the 300 employees laid off by the schools will have to move to find work. Others might not find jobs, or as well-paying jobs, and will have to make tough financial decisions.

“Right now it’s probably too early to know the impact,” said Gary Morgan, co-owner of Bonners Ferry’s biggest grocery store, Boundary Trading Co. “But when you take 266 jobs out of the community, from one of the biggest private employers in our community, it’s going to be felt by every business – including us.”

Boundary Trading Co. is one of more than 700 unsecured creditors owed money by Brown Schools, which owns the four CEDU Educational Services programs in North Idaho – Northwest Academy, Boulder Creek Academy, Ascent and Milestones Transitional Living.

Businesses with unsatisfied accounts will have to “scramble” to make up for them, predicted Bonners Ferry Mayor Darrell Kerby. “It takes a lot of sales to others to offset that huge loss. That’s a big impact to the businesses left holding the bag.”

The company’s biggest debts are to the investment company that bought it in 1997, California-based McCown, De Leeuw & Co., and its primary lender, TIAA-CREF. Brown Schools owes McCown, De Leeuw $20 million and TIAA-CREF $18 million, said Sam Singer, a spokesman for the investment company.

“They made us aware they were facing a significant financial deficit,” Singer said. “They were working to raise additional cash and MDC (McCown De Leeuw) was hoping such a solution would be reached.

“Unfortunately, the schools were unable to secure the money needed to continue operations for the sale of the schools, which was required by its senior secured lender, TIAA.”

Brown Schools’ board of directors approved the decision to file for Chapter 7 last Wednesday, according to the voluntary petition filed by CEO Fenton Talbot in U.S. Bankruptcy Court’s Delaware district. Local school officials didn’t find out until Friday, when it was abruptly announced that the schools were closing, employees were not going to be paid and the students had to be sent home immediately.

“The program looked pretty good,” said Lon Woodbury, an educational consultant for behavioral schools who used to work for CEDU. “The real trouble comes from the people handling the finances, the ownership. … It comes back to the finance people.”

While the liquidation of assets might help restore the millions owed the investors and bankers, it may not pay the $100,169 in overdue taxes to Boundary County, the $10,500 in advertising fees owed to Woodbury Reports, the approximately $4,800 in purchases from Far Country Outfitters or the $7,000 in building materials owed to Northern Home Centers.

And it certainly won’t replace the estimated $9 million that the schools generated annually for the local economy. Butch Short, owner of Far North Outfitters, estimates that CEDU schools and parents spent nearly $200,000 a year equipping students at his outdoor store.

“We had several of the counselors and support staff out there build homes in the last several years,” said John Tice, manager of the Northern Home Centers, a building supply business. “One thing it (the bankruptcy) has done for us in business terms is to reassess past due accounts and tighten things up.”

Local businesses are already getting calls from former CEDU employees, asking that they have more time to pay their bills.

Paul Johnson, director of the Boulder Creek Academy, said everyone in Bonners Ferry will be affected one way or another, and he worries that the debts the schools incurred might make it harder for former employees to find work.

“Everyone who works here has been put in a compromised position and they have to go look for jobs,” he said.

By day’s end Tuesday, between 175 and 200 former CEDU employees had filed for unemployment with Idaho Commerce and Labor, according to Dave Darrow, manager of the agency’s Bonners Ferry office. Darrow said other private behavioral schools in the region have contacted him and said they would post jobs with the agency and hold job fairs to recruit counselors from North Idaho.