Parents move to put beleaguered Croft School in receivership to keep it open in R.I. - The Boston Globe

PROVIDENCE — Parents at the Providence campus of the beleaguered Croft School are asking a judge to put the school in receivership, a state-level version of bankruptcy, as a last-ditch effort to keep the school open past next week.

The Croft School, which serves about 220 students in Providence and another 370 at two locations in Boston, is in dire financial straits amid allegations of fraud by its founder and former executive director, Scott Given. The private school only has enough funds to operate through March 31 and could furlough teachers as soon as April 1, according to court documents.

The emergency receivership petition was brought by eight parents of children at Croft’s Providence location, including several who prepaid tuition for the next school year, according to court filings. They are seeking to remove the school from the control of its existing board so they can attempt to raise money to keep the school open.

Tom Carlotto, a lawyer for the parents, said one parent is willing to fund the next payroll cycle at the school, and an anonymous donor is willing to fund the rest of the school year. But the donation is contingent on removing the Providence school from the control of Oxford Street Education LLC, the Delaware-incorporated entity that owns all three Croft schools.

“They have little trust left in this board,” said Carlotto, who accused the board of allowing the alleged fraud to go on unchecked for years. “The board is unable to continue operations and deliver what was promised, which is schooling for their children.”

The receivership would only apply to the Providence school, not the other locations in Jamaica Plain and the South End of Boston.

At a hearing on Tuesday afternoon, Superior Court Judge Brian Stern did not immediately rule on the receivership petition, but said he would ask Mark Russo, who is currently the receiver for the Providence Place Mall, to examine the case and make a recommendation as to whether a receivership is appropriate. A recommendation could come as soon as this week.

If appointed, the receiver would have the authority to operate the school “to preserve value and protect students, staff, and creditors, to manage and administer all assets and property of Respondent, to implement cash controls, and to take such actions as are necessary and appropriate to stabilize operations,” according to the petition.

Alison Weber is one of the parents who pre-paid next year’s tuition in full for her two daughters. Weber, who receives financial aid from the school, says she borrowed money from friends and family in order to scrape together the funds, since it came with a 6 percent discount for pre-paying.

“We don’t have assurances that any additional money will be handled well,” said Weber, who is one of the plaintiffs in the receivership case.

“There is pretty universal desire to keep the school open until June,” she said. “The idea of a school transition this close to the end of the year feels pretty tough to swallow.”

If the receivership petition fails, Weber is leaning toward joining a homeschool group for her daughter Eleanor, who is in second grade. Her younger daughter Audrey was set to enter kindergarten at Croft in the fall. Parents who are forming groups have talked about potentially hiring teachers who are set lose their jobs as soon as Tuesday.

Kevin Morse, an attorney for the four-member Croft board, argued the three schools should remain under a single umbrella, and said the board has brought on a restructuring team within the last week to oversee the finances and attempt to keep the schools open.

“The relief requested here will throw an overall cooperative process with most of the parents during extremely difficult circumstances into uncertainty,” Morse said. He asked the judge to give the board another week.

A memo from board member Mike Goldstein attached to the receivership petition said parents at each of the three schools have asked how to fund-raise to keep the schools open, without exposing the money to creditors.

Goldstein wrote that families could create an LLC, deposit funds into a bank account controlled by that entity, and then directly pay the payroll processing company.

Goldstein said the board would need to know by Friday if enough money has been raised for the next payroll. Otherwise, employees would be furloughed on April 1.

The board has $489,000 in cash on hand, which has been reserved to make the March 31 payroll, according to court documents, and would need about $5 million to remain open for the rest of the school year at all three campuses.

The school has about $13 million in unsecured debt and another $2 million from “short-term, high-interest” financing companies, according to communications the board has sent families.

The board has told families they learned of the alleged fraud on March 6, when the owner of a South End building attempted to cash a $500,000 letter of credit from Given. The bank flagged it as fraudulent, according to a lawsuit filed by the Boston landlord.

Given told the Croft board that day that he had “mismanaged and misrepresented the school’s finances over the past several years,” according to a letter the board sent families.

Last week, Given’s lawyers said he was cooperating with the school’s investigation and “has never used any school funds for his own personal benefit.”

“At all times, he has used school funds solely for appropriate school-related purposes,” the lawyers said.

Another parent who invested $160,000 in Croft bonds filed a separate lawsuit Monday accusing Given of running a “Ponzi scheme.”

The board waited a week to inform families — many of whom were away on spring break — and began scrambling to find new schools for their children. Some are forming home-school pods or seeking limited spots in other private schools, while others are enrolling in public schools.

Many of the families receive financial aid at the school, which was marketed as a more affordable private education compared to surrounding private schools. Tuition at the Croft in Providence is $31,690 a year, according to the school’s website.

“Obviously, our first hope is that the school can stay open,” said Mandy Roman, a parent of a kindergartner who said she was “shocked and devastated” by the turn of events. She received a deep discount on tuition through the school’s financial aid program.

Roman, who is not one of the parents who filed for receivership, said she would enroll her 6-year-old in the Providence Public Schools next week if Croft closes. But she will likely lose thousands in tuition paid for the rest of the year, plus a 10 percent deposit she put down for first grade next year.

“It’s just sad,” Roman said. “I worry that people will think this is just a rich person problem, but it’s not. The school was trying to do something different and make education accessible to everyone.”

Material from previous Globe stories was used in this report.

This story has been updated with comments from Alison Weber.

Steph Machado can be reached at steph.machado@globe.com. Follow her @StephMachado.