PRESTONSBURG — A complaint filed by the Attorney General’s Office against the David School paints a picture of a school struggling to survive chronic financial troubles, due largely to official mismanagement and misappropriation.
The complaint, seeking to liquidate and involuntarily dissolve the nonprofit corporation that owns the school, was filed Friday in Floyd Circuit Court. In addition to seeking a court order barring the school from disposing of any assets and barring any current directors from continuing to serve in any capacity with the school, the AG is also seeking a restraining order against Greene, director Emma Criz and “any other persons claiming to be current officers” of the school, barring them from entering school grounds or contacting the school, and prohibiting them from taking any action on behalf of the school.
The complaint alleges that school founder and director Danny Greene has presided over worsening conditions at the school, even as his own personal fortunes have risen.
The complaint notes that this year Greene ended the school lunch program and cancelled employee’s health insurance plans without informing them he was doing so. However, over the past 11 years, the school has contributed $18,000 a year, in addition to an initial lump-sum payment of $54,000, to Greene’s retirement account, as well as $14,000 for a $300,000 life insurance policy on Greene.
The document also alleges the David School Board of Directors — which the AG maintains has at most two members, including Greene — has not met regularly since 2009 and “has failed to provide oversight of the David School’s finances.”
“Upon information and belief, since February 2009, funds have been expended without oversight and accounting safeguards by the Board of Directors,” the complaint says.
In particular, the complaint alleges Greene was paid twice during two pay periods and that he negotiated a sale of property “in which there was a conflict of interest … and the transactions were grossly unfair to the David School.”
The result of the spending and lax oversight, the complaint maintains, has been disastrous for the David School’s finances.
“Plaintiff believes that defendant the David School is not able to pay its debts as they become due in the usual course of affairs,” the complaint says. “Plaintiff believes that such financial problems are a direct and proximate result of Mr. Greene’s unauthorized, self-dealing actions.”
A report on the school’s financial condition, completed May 1 by state Auditor Adam Edelen’s office and included as an exhibit along with the complaint, shows that even as the school was purchasing property from Greene and contributing over a quarter of a million dollars to his retirement account, it was selling other property and extending its line of credit, simply to pay its bills.
The report shows that, between 2007 and 2012, employees of the school were at times voluntarily not cashing their payroll checks to help the school through financial difficulties and the school’s bank account was often in the red. To remedy those problems, the school extended its line of credit, obtained a mortgage and home equity loan, and put school property up for sale, including rental houses, a faculty residence and a school-owned Arby’s restaurant.