RALEIGH, N.C. (WTVD) -- The accreditation challenges that have St. Augustine's University embroiled in controversy have hit another hurdle after school leadership received a letter from the North Carolina Attorney General's office.
The letter, sent to school leaders on January 27, outlined specific reasons why the Office of the Attorney General could not approve a multi-million dollar funding deal the school hopes to receive from Florida-based 50-Plus-1 Sports.
If approved, the deal would greatly benefit the school in such a way that their immediate $32 million debt would be cleared and SAU would receive enough money to operate through June 30, 2025.
As part of the deal, 50-Plus-1 Sports would give St. Augustine's $60 million to address its outstanding debt and pay off existing liens. No more than 60 days later, SAU would receive an additional $10 million for operating expenses for the remainder of the school year.
Additionally, the deal also meant St. Augustine's would lease an undisclosed amount of on and off-campus property to 50-Plus-1 Sports. The agency would then sublease 70 percent of its academic campus back to SAU for $1 a year for the next 99 years.
"We were introduced to the University back in October, and from that very first moment, our first statement was that we wanted to help the university keep its land and be self-sufficient," said 50 Plus 1 Sports CEO Monti Valrie in an interview with media outlet Black Enterprise.
Details of which academic property the school owns have not been obtained by ABC11.
However, the deal goes on to detail that 50 Plus 1 Sports would turn the property into a mixed-use development made up of multifamily housing, condominiums, retail spaces, and other purposes.
"This letter outlines our chief areas of serious concerns we have about the proposed sale," wrote senior deputy attorney general Kunal Choksi, to the university. "First, to date, SAU has not provided sufficient documentation to support the proposal. Second, based on our review of the documents submitted thus far, we are concerned about SAU's ability to continue to operate and fulfill its mission if this proposed lease agreement is finalized without substantive improvements."
Referencing the structure of the deal and how much the university would receive against the nearly $200 million the school's property was appraised for, Choksi wrote, "That large of a gap raises red flags about the defensibility of the deal. Absent further information or justification from the parties, to ensure that SAU's assets remain dedicated to a charitable purpose, the deal should be renegotiated to, among other things, reflect the true value of the property being transferred. For example, 50+ could either provide SAU with a greater upfront payment or the deal could involve a smaller percentage of SAU's property for the same payment."
Choksi's comments were also in reference to the 65-35 revenue split, favoring 50 Plus 1, the school would receive for the first ten years. From years 11 through the end of the lease, the revenue split would shift to 60-40 in favor of 50 Plus 1.
In response to the three-page letter, SAU leadership fired back with a statement Tuesday accusing the AG's office of going to Durham-based Self-Help Credit Union, a former lender the school was interested in, to gain more information about why their proposed deal was rejected by the university.
"We requested a meeting to address their concerns directly and collaboratively. Instead, the Attorney General's Office met with Martin Eakes of Self-Help Credit Union, who once employed the former Attorney General-now Governor and currently employs one of the Governor's closest relatives," the statement from SAU reads. "We are alarmed that the contents of the Attorney General's letter to SAU mirror the comments in printed media spoken by Mr. Eakes from Self-Help Credit Union. Based on our correspondence with the Attorney General's Office, our proposal was shared with Mr. Eakes without our consent before we received a response. Therefore, we suspect that the Attorney General's Office used Mr. Eakes' counsel and input to subsequently influence their decision. Such interference by Self-Help raises significant concerns about fairness. It suggests their attempt to weaponize the NC Attorney General's Office to obstruct the approval process for the 50 Plus 1 Sports deal."
Self-Help Credit Union provided ABC11 with this statement about the deal: "Self-Help did our own analysis of the developer's proposal but did not share that analysis with any staff at the office of the NC AG. We did not see nor know the results of the AG review prior to seeing news reports and the release of the AG letter. Instead of creating fiction about anyone who disagrees, let's find sensible solutions. The fact remains the lease deal proposed is very unfavorable to SAU's continued financial health. The risk of losing the entire campus under this proposal is very high. Anybody who reads and reviews the proposal would reach the same conclusion."
The letter from the AG's office continues to say it cannot issue a "non-objection to the proposed transaction" unless university leaders provide financial projections to justify the transfer, due diligence on 50 Plus 1 Sports and its financial, a legal opinion of diligence regarding SAU's continued tax-exempt status, and more information on how SAU will continue as an educational institution after this deal.
"Despite these challenges, SAU remains committed to working collaboratively with the Attorney General's Office. We believe transparency and open dialogue are essential in securing the funding for our university's sustainability and growth," the university said in its statement. "We encourage our community to stand together and demand accountability and fairness while navigating this critical juncture in the university's history."
Meanwhile, higher education expert Dr. Renee Pellom said the current dilemma with St. Augustine's is one she has never seen.
"And if there is another example out there, I'm not aware of it. But I promise you, there are not many of them. But I think it's really hard to judge where this will go. These are dire situations that the school is in."
The school is scheduled to submit an appeals brief to SACSCOC in early February on how it intends to comply with accreditation requirements and submit any new financial information for accreditors to consider. Later next month, school leaders will meet a final time with an SACSCOC special panel on the status of its appeal for having its accreditation revoked in late 2024.
"There's still questions about board leadership and whether they can come up with something to get the school out of this debt without real changes," said SAVESAU committee organizer, Dr. John Larkins in a phone conversation with ABC11.
"We are all willing to help and work with the school leadership to raise money and to do the things that are necessary to get the right type of loans," added Larkins. "If you have to lease or sell some property to work with them to get the support they need, they're gonna need alumni support. I think the board and the school leadership needs to do more in terms of outreach to get input from people to support them."