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Oak Ridge Military Academy in talks with private investor

Wednesday, June 17, 2009

(Updated 3:46 pm)

By Robert Bell,
Donald W. Patterson
Staff Writers

OAK RIDGE — Oak Ridge Military Academy is trying to partner with an investor in a deal that would rescue the cash-strapped school from closure, the school’s president said Tuesday.

If the deal goes through, Roy Berwick said the investor would absorb most of the academy’s debt — about $4.8 million — and infuse the school with additional money to stay open.

He declined to elaborate or name the investor, saying the school had signed a confidentiality agreement.

“This is very serious for us,” Berwick said. “I’m not going to mess it up because I have a big mouth.”

Berwick called the proposed deal “a long-term fix” that would bring stability.

The 158-year-old academy is coming off one of its most difficult academic years. Oak Ridge’s enrollment this year was about 130 students, a 12 percent drop over the previous year and well off its peak of about 300 in the 1990s. The school also faced a significant decline in giving and the ongoing burden of a $4.8 million debt on an academic building that opened in 2001.

In April, about 45 faculty and staff members agreed to relinquish about five weeks of salary.

In May, Oak Ridge officials laid off 11 workers and decided to end school a week early.

Berwick said the proposed deal would enable the school to pay its employees their back wages. “That’s very important to us that they be the first ones paid,” he said. “They’ve been very loyal and understanding to us.”

Discussions about the potential partnership have been under way since last month, Berwick said. He said the school would likely shut down this summer unless the deal goes through or a benefactor steps forward.

“This needs to happen and it needs to happen quickly,” he said.

Berwick also said he met with Stan Kowalewski this month about the former Northern Guilford High School basketball coach taking a similar position at Oak Ridge.

Berwick said the talks were “very rough and very preliminary.”

He said Guilford County Schools’ investigation into Kowalewski and his basketball program remain an issue with Oak Ridge Military Academy and its executive committee.

“It’s an issue that has to be resolved before we go any further in our discussions,” Berwick said.

Kowalewski said Tuesday he wanted to know what direction the school was headed before exploring a possible job there.

Contact Robert Bell at 373-7055 or robert.bell@news-record.com

Contact Don Patterson at 373-7027 or don.patterson@news-record.com

Accompanying Photos

File photo (News & Record)

Photo Caption: Oak Ridge Military Academy

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get the facts straight

June 17, 2009 - 6:38 am EDT

This is interesting considering that Mr. Kowalewski has already been announcing to the world that he is already been hired as the basketball coach at Oak Ridge Military Academy. Apparently when confronted by the newspaper, he changed his tune.

Panacea

June 17, 2009 - 9:58 am EDT

Why would an institution that teaches discipline, self sacrifice, and honor want a dirty coach at their school?

DaveW

June 17, 2009 - 11:36 am EDT

Could it be that Stan either is or knows the private investor?

Robert Bell

June 17, 2009 - 12:24 pm EDT

DaveW,

I spoke with Mr. Kowalewski and Mr. Berwick. Both men said the coach was not part of the current negotiations.

ccook

June 17, 2009 - 3:59 pm EDT

I am an ORMA Alumnus, and I am upset with the News & Record and Don Patterson for continuing to chase this story in such a negative light. Don, can you not write anything that is positive about the school, or without suspicion of wrong doing? I guess that does not sell papers!

I have no other information to support this statement, but I seriously doubt the talks (and that is all they are) with the Northern Guilford High School coach, and the possible investors with the school, are related. These are two separate and unrelated situations that the News & Record incorrectly put together.

Oak Ridge is hurting financially - they made some mistakes, and counted on things that did not come through. Sounds like the rest of us, does it not? But I would not be the success I am in life right now without Oak Ridge Military Academy, and there are a thousand more graduates (men and women) just like me who can say the same.

The Piedmont Triad, North Carolina, and this Nation would be at a loss without Oak Ridge. ORMA graduates have gone on to become successful leaders and innovators within business & industry, served in our armed forces (including being injured or killed in every conflict since the Civil War), and worked in countless other areas in their community or state (or even country). Our local area and state would be at a loss without Oak Ridge.

get the facts straight

June 17, 2009 - 7:59 pm EDT

Mr. Cook- not sure what you are griping about exactly. Where in the article does it imply that the issue of the investor and the basketball coach are related issues? It does not. However, it is a reasonable question to ask. This is a story because of the financial situation of the academy. How is the media supposed to put a positive spin on it? Also, it is not their job to do so. Since the school can't name the possible investor due to confidentiality, if one actually exists, then certainly it is reasonable given the history of this basketball coach, for the news media to ask the question. I know a lot of people have been asking that question. My other question is this: if the investor is not the basketball coach, and we shall assume that it is not, then why would an institution that teaches integrity, character and ethics even spend time interviewing this basketball coach. I know that is what a lot of us would like to know. That having been said, I am sure everyone including myself and including the people reporting this story, are all rooting for the academy to succeed despite the odds. Nobody wants to see this school closed. However, the fact that an institution that has been a part of this community for so long could be on the verge of closing is absolutely a news story that should be covered.

ccook

June 17, 2009 - 10:09 pm EDT

Get The Facts Straight: How does this article relate the issue of the investor with the former Northern Guilford HS basketball coach? Well, the mere mention of these two issues in the same article implies they are related. This article is titled "ORMA In Talks With Private Investor,” so where does the mention of the basketball coach fit into this subject? The article is attempting to make a connection - and that is an obvious slant based on the intention of the writer, not based on fact. If there is fact that the two are related, the writer should state that clearly, and explain the relationship.

I agree that Oak Ridge, a school that teaches being honest and forthright in all your dealings, should hire only those employees that are honest and forthright (you must set an example of integrity to the Cadets). As Dr. Berwick stated in the article, the issue of whether Coach Kowalewski may have improperly led and operated the basketball program at his former school must be resolved before any further talks can occur between the coach and the Academy. Has Coach Kowalewski been found responsible for wrongdoing by anyone in authority? Not yet, from my understanding. If he is, then ORMA should not continue engaging with him about possible employment. If he is cleared of these charges (or not found responsible), then ORMA (and any organization for that matter) should be open to interviewing him without prejudice.

It is news worthy that ORMA is in a terrible financial situation and may cease operations if it cannot find monetary help. I am glad that the News & Record has brought this to the attention of its readers. But the only stories written in the last three months (with the exception of the ORMA Cadets serving as page’s story) have focused on the negative facts surrounding the school’s financial situation. ORMA just graduated several Cadets, 100% of them have been accepted into college – where was the story in the News & Record? Did the other high-schools in this area reach such levels of acceptance with their students into college? Several ORMA graduates have served in the current military conflicts, some maimed in their service. Where was the story in the News & Record?

Consider This

June 17, 2009 - 11:28 pm EDT

The writer may be closer with a possible linkage than you think. While Mr. Kowalewki may be a consideration for coaching when his other difficulties are behind him, he remains as a hedge fund manager. One instrument used by hedge funds is an insurance and real estate backed investment offering. The hedge fund manager, for a fee, links a business owner who needs capital with investors. The investor's principle is protected with real estate and insurance. The investor wins when the business succeeds. He gets his principle back if the business fails. The insurance company gets the property. Other instruments bundle home mortgages is in similar manner. When the economy was fine and real estate appreciated, such investments were great for investors and insurance companies liked them because few defaults made such good business sense. They got paid for premiums with low risk. When the economy and real estate dived, investors got their principle back and insurance companies, like AIG, got left with defaulted and lower valued mortgages. Sometimes this risk is spread in a manged portfolio with multiple investors. Fund mangers make money brokering deals and managing pooled investments.

Linking Mr. Kowalewski with Oak Ridge Military Academy may seeming insinuate that he is brokering such a deal, besides looking for a side job as a basketball coach. To accomplish this type of funding, the Academy will likely need to consolidate all property under a for profit limited liability company which will lease the property to the non-profit company who will run the school and take donations. The real question is who profits? Investors, brokers, a private board... Private and public schools go to great lengths to ensure a level playing field. Grades, transfer rules and recruiting prohibitions allow for this leveling. There are some coaches who run small private home study programs to recruit rare and raw talent in order to make hopeful athletes marketable to colleges and ultimately the NBA. There are private schools who recruit talent from overseas by providing air fare, allowance, clothing, tuition, trips, meals, books and activities to gain an unfair advantage. Sometimes these schools broker out of state talent in a similar manner. Some schools have disguised corporate sponsored programs to bring together talent. Some become independent, but because of their obvious recruiting and player advantage, no one wants to play them. Legitimacy is gained in maintaining a program that participates in the public high school or combined private school leagues. I hope Oak Ridge is not being brokered into a basketball factory model. I guess desperation makes for poor decisions.

get the facts straight

June 18, 2009 - 6:37 am EDT

Mr. Cook,
First, the things you mention...most private schools can also claim most of the claims you are making. That is not really newsworthy. If you had read the documents on wfmy's site regarding Mr. Kowalewski including the letter from the county attorney to Mr. Kowalewski's attorney, you would realize why it is newsworthy that any school would consider hiring Mr. Kowalewski regardless of the outcome of the investigation. Hence, it is clear to most who follow sports in this area that Oak Ridge is the only school in North Carolina that would or is considering Mr. Kowalewski. That is also newsworthy. The question was asked by the reporters because there are lots of rumors in this area wide spread that Mr. Kowalewski was the investor in question and even more rumors that he has been hired already as the coach, something that Mr. Kowalewski appears to be spreading himself by all accounts. If he is not, then you should thank the writers of this story for pointing that out in this article which they did. They have probably cleared up a lot of questions and done your school a PR favor by saying he is not the investor and that he has not yet been hired as the coach if indeed that is the case. The only other option would be a seperate article on Mr. Kowalewski and Oak Ridge, and I imagine that would not be a good PR situation for Oak Ridge. Again, most of us are rooting for your school to make it. The community would suffer a great loss if it closed.

ccook

June 18, 2009 - 2:34 pm EDT

Consider This and Get The Facts Straight: Dr. Berwick just confirmed with me a few moments ago that this is NOT correct. The two issues, Coach Stan Kowalewski, and the “private investors,” are not related.

I have known Dr. Roy W. Berwick and his family for over sixteen years, and he has never been short of being a total, honorable gentlemen – he would not lie to me. Dr. Berwick did not disclose any more details to me, as he has to be discreet with what he tells people in his role as ORMA President.

I am confident that the relationship implied in this article is not the case. I could always be wrong and if I am so be it, but I think the News & Record is incorrect in what they have implied (and it WAS implied in the story as written).

Consider This, you may be correct that the “private investors” will have a personal interest of their own in engaging in a relationship with ORMA. That is generally what happens when someone engages in a business transaction. However, I do not believe that this partnership with the investor(s) will end up with ownership of Oak Ridge Military Academy.

We will have to wait and see what happens with this transaction - everything else is speculative rumor. Obviously, someone spilled the beans (or what they incorrectly knew to be “the beans”) to the News & Record before this deal was completed. I hope that this story does not jeopardize this relationship and investment that may be ORMA’s last attempt of survival.

Consider This and Get The Facts Straight, I will assume you are good folks who have the best intentions in your responses on this story. Your statements of support in regards of ORMA continuing are appreciated. I am sure the writers, Robert Bell and Don Patterson, are good folks and want to see ORMA succeed in the long run. I have actually been interviewed by Don, and if you are reading Don, how about another story detailing the services of ORMA graduates in our Armed Forces of recent? I think people would find it newsworthy to see how such a little school like ORMA has produced people willing to sacrifice their all for their community and nation.

Consider This

June 18, 2009 - 3:32 pm EDT

ccook..nicely stated. I really believe that there are many, like me, who want to see the Academy succeed. I, unfortunately, do not have the where-with-all to help them. Given that about $5 million is needed to pay the building debt, about $500K is needed to pay back and accrued wages and about $500K is likely needed to help them get ahead of fall expenses, the Academy will need about $6 million to survive. It will be very unlikely that a benefactor will arrive with that kind of ability any time soon. A hedge investor will actually invest $12 million, in which $6 million will pay for a default insurance policy, As such, the Academy will have to pay a return on that investment that will need to be stronger than stock, bond or annuity interest. It is possible that the Academy will pay about 18 to 20% annually on the $12 million. The investors will become share holders and it is likely the real estate will secure that stock or be a further hedge against losses. Ultimately the Academy will need to buy out the investors and that will be expensive. Further, the investors will likely hold board voting authority and will be sure to protect their investment, even if it means new management.

Given that the Academy struggled to pay their bills this year and obviously have little funds to work on attracting new students for next year, I believe that the school will have another cycle of poor attendance. The problem is exacerbated with the prospect of paying investors besides the normal bills associated with running a school. I have seen previous articles that indicate the school has struggled with finances for multiple years. I am sure that financial audits of the past five years will do little to dispel the possible risk facing an investor regarding next year's performance.

Again, I hope they succeed. They need to clearly understand that short term gains will yield long term investment obligations which may become a hardship very fast. Given fewer students, the school should scale down. They should try to pay back salaries over the next year and try deal on a cash only basis with vendors. If they can survive the summer, they need to look at their cash and payables position in the fall and budget the year to make those funds last to the next fall. Somehow, interest on the loan needs to be factored. The Academy needs to try to stimulate donor interest. I believe that it can do so if it can show the donors that it doesn't need the donation to pay for light bills. I hope they make good decisions and consider everything.

Consider This

June 17, 2009 - 2:58 pm EDT

Terrific school with a great staff who are doing a magnificent effort in holding it together. It is sad that, as other schools, Oak Ridge seemed to rely upon prepaid tuitions, which haven't been obviously forthcoming, to sustain its current cash position. Such as using 2010 dollars to pay 2009 bills. An investor, who seeks a profit position from a non-profit organization, seems awkward. I am sure all discussions are being reviewed from the perspective of protecting that non-profit status so that future donors can enjoy some form of tax benefit. A benefactor donor would be better. The hiring of Mr. Kowalewski would likely be high dollar and do little to enhance the school's image given current investigatory concerns. Save the salary so that this situation is not repeated..

awright43

July 20, 2009 - 11:37 am EDT

Do not count on Oak Ridge Military to be paying big monies on a basketball coach or anyone else for that matter. The basketball thing was a big time PR mistake. I am an alumni who has an appointment today where I will offer to serve for no salary at whatever capacity. I hold a graduate degree, know a little about basketball, football, and baseball (having being taught by the best), Walter 'Tee' Fry. We did not win many games, yet Coach Fry taught us that what one does off the field is often more important than any scoreboard. And that seems to sum up the philosophy and culture at Oak Ridge. This country can use a whole lot more of that kind of thinking. That school really needs to continue because it is what it is.

Al Wright