The State Newspaper: Erskine Out $1M after Charter School Loan Default
News and Observer Reports
Zak Koeske, a reporter at The State newspaper is reporting that Erskine College is out $1 million after the operator of several Erskine Charter Institute schools the district oversaw defaulted on a loan deal.
A lawsuit filed May 9, (Erskine College filed a General Creditor - Creditor case represented by Norton, Erik Tison against Icelaven Development Group), is seeking information on why the college loaned money to the holding company for the for-profit Education Management Organization (EMO). The move also raises questions about how the Charter Institute, funded by South Carolina taxpayers, which oversees more than two dozen charter schools, can objectively oversee the schools in which its parent company holds a financial stake. According to the court filing, the $1 million was borrowed in 2021 with a five percent interest rate and a six-year term, with yearly payments expected. The filing notes a single payment of $35,000 in 2022.
The boards of Belton Preparatory and Summit Classical, two of the Charter Institute’s most esteemed schools, recently cut ties with the EMO to align themselves with the Charter Institute, which has temporarily taken over their finances.Derek Black, a University of South Carolina law professor who specializes in education law and policy, asked The State: How do you engage in good faith oversight on behalf of the state when you have a financial interest in the thing you’re overseeing?”
The issue was revealed earlier this month when it sued Icelaven Development Group for breach of contract in hopes of recouping the loan, plus interest.
Icelaven is the parent company of Reason & Republic, a for-profit charter school management organization founded by James Galyean that, until recently, operated three charter schools authorized by the Charter Institute. Galyean is running for the S.C. House 9 seat which represents Anderson County.
Galyean helped found the Charter Institute in 2017 and previously served as its general counsel. Erskine raised $600,000 at the time for the Charter Institute from private donors, whom at the time Galyean said wished to remain anonymous.
At that time questions were raised about the fact that as a private institution Erskine would be required to report financial statements if it received state funds. Several elected state officials expressed concerns about the source of the $600,000.
The South Carolina Charter School Act does allow institutions of higher education to sponsor charter schools, but what the Charter Institute of Erskine requested was different. The institute was the official registered entity registered with the S.C. Department of Education, not the college, which gave authority to the group to manage and run.
Three of the Charter Institute’s initial board members in 2017 had a vested interest in Erskine, including: former College President Rob Gustafson, his wife Beth Gustafson, and former Erskine Provost John Basie. None of these are currently associated with the institute.
Former Columbia City Council Member Cameron Runyan is the current CEO and Superintendent of the institute.
Meanwhile Galyean, declined comment to The State and The Anderson Observer on the outstanding loan through an Icelaven representative, citing the pending litigation, but said the company looked forward to its day in court.
Erskine, which failed to report the loan to Galyean’s company on federal tax forms, did not respond to a request for comment on the transaction. A 2022 audit of the college obtained by The State newspaper shows a $1 million loan receivable listed as a related party transaction, but has scant details on its recipient and no details on its purpose.
Read more, including background on this issue at The State newspaper.