Marlboro: What's next?

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Marlboro: What's next?

Wed, 05/05/2021 - 2:29pm -- tim

With federal charges against Andrew and questions of ownership, Degrees of Freedom and Marlboro Music Festival still plan to open

by C.B. Hall, Vermont Business Magazine Last week, residents of Marlboro, in the hills of Windham County, got big news – twice. On April 27, the US Attorney's Office for the Southern District of New York filed a criminal complaint against Seth Andrew, the motivating force behind Democracy Builders Fund, which purchased the campus of the defunct Marlboro College last July. On April 30, Degrees of Freedom, an innovative but non-accredited educational institution and a DBF project, announced it was delaying launch of its operations on the 533-acre campus.

The events generated new shock waves in Marlboro, a community of about 1,000 that has already lived through plenty of controversy surrounding the fate of the liberal-arts college and its erstwhile home on the town's Potash Hill.

The questions of the moment – in addition to the obvious issue of Andrew's guilt or innocence – are several.

Who's to blame for whatever has gone wrong? What will happen next on the campus? Was its sale to DBF legitimate? And, even, who owns the place?

It's not as if no one saw it coming.

Last spring, when the college announced it intended to sell its property to DBF and transfer academic programs and all of its $20-plus million endowment to Boston's Emerson College, skeptics got vocal.

Among other things, they questioned DBF's finances.

According to federal tax forms filed by the organization for the year 2016, the most recent then available, DBF's net assets totaled only $349,201. That fell far short of both the real estate's assessed value – a bit under $4 million, by one calculation – and the estimated $1-1.5 million annual cost of simply maintaining the grounds and buildings.

In a June 18 letter, six Marlboro residents accordingly asked the Vermont attorney general's office (AGO) to "thoroughly investigate Democracy Builders Fund to reassure Vermonters that it has a reasonable likelihood of fulfilling its financial obligations under the sales agreement."

In a late June 2020 interview with VBM, Andrew said, "We're extremely confident in our financial ability to sustain a model that is more sustainable than the old one."

Although Andrew, a former Obama Administration official, had announced plans to launch Degrees of Freedom in September 2020, DBF chief growth officer Chandell Stone informed the Marlboro select board on July 20 that the opening would be delayed until September 2021, in her words, "to make sure that not only are we partnered with an institution that ... speaks to the strides we want to make as an organization, but until we are able to secure our own accreditation."

Little information on the money involved in the transaction was released as the deal took shape, and the college meanwhile did not budge in its intent to sell despite concerns about both the lack of accreditation and undocumented but strident allegations of racism directed against Andrew. In 2005 founded Democracy Prep, a network of charter schools operated in largely non-white neighborhoods such as New York's Harlem.

On Friday, May 7, DBF sent this statement: "Last week, the Democracy Builders Fund Board of Directors terminated the employment of Seth Andrew as CEO of Democracy Builders Fund. This has been a painful time for everyone, but we remain focused on the mission of serving our students and community.

"The Board is currently focused on seeing Democracy Builders Fund through the moment in a manner that results in the best possible outcome for all its stakeholders. Democracy Builders Fund is cooperating with authorities and we have been advised by our counsel to not comment further on the ongoing investigation. All that stated, Democracy Builders remains steadfast in its mission of expanding innovative civic education, advocacy, infrastructure, and technology.

"Kind Regards, Jazel Smith, Director of the Board, Democracy Builders Fund, INC."

And Then ...

The AGO lodged no objections to DBF's purchase; but, immediately following the July 22 transaction, the AGO disclosed the sale proceeds: $225,000 cash, plus DBF's assumption of a 40-year, $1.5 million debt obligation. A fresh uproar ensued, but the deal was done.

Then, on January 12, Democracy Builders Fund I, Inc, over Andrew's signature, conveyed the real estate by quitclaim deed to Type 1 Civilization Academy Marlboro Campus, a newly formed LLC controlled by an Ontario company whose principal is Adrian Stein.

Type 1, Stein told VBM in a recent email interview, forms part of "a larger technological initiative that is launching a social media network that facilitates creators, makers, inventors and entrepreneurs of all kinds... Our objective is to use the Campus solely for pedagogical purposes."

The pertinent notice of no objection from the AGO, which reviews the transfers of nonprofits in advance, states that Stein's LLC paid a total of $9.4 million for the property, which includes 56 buildings with 230,000 square feet of floor space.

The package encompassed $2.5 million in cash, $2.5 million in escrowed pre-paid rent, $2.5 million as a mortgage-backed structured donation, $416,000 in rent abatement, and $1.5 million in Type 1's assumption of certain lease obligations to the Marlboro Music Festival, which has been holding its summer music programs on the campus since 1951.

Then, on February 25, the Marlboro town office recorded a second quitclaim deed conveying the property back to DBF.

Stein described this document as "a pre-signed postdated instrument that was supposed to be designated and attached specifically and only to mortgage documents that come due at later date, and was to be held in strict trust by a mutually agreed upon title or escrow agent."

The document obtained by VBM, is dated "this ___ day of January 2021," without any day specified. The notarization, executed in Ontario and likewise dated "this ___ day of January 2021," bears no notary's commission number.

The real estate transfer tax record gives the value of the transaction as zero, Marlboro town clerk Forrest Holzapfel reported. The legal requirements for executing such documents in Ontario, he added, may differ from those in Vermont.

He described the second deed as appearing "questionable"; but, for now at least, the town is listing DBF as the property's owner.

"I've never seen anything like this before... I just don't understand," he said, noting that he'd been the town's clerk for eight years.

Stein called the February 25 quitclaim "a fraudulent re-conveyance."

"This was done in a personal capacity by the principal of DBF," he wrote. Andrew was DBF's board chair at that time, and the secretary of state gives his email address as the contact for Democracy Builders Fund I, Inc.

And Then ...

In an invite-only Zoom meeting held March 9, Andrew told participants that the deal with Type 1 had fallen through, and that the campus once again belonged to DBF, according to an article in the Emerson College newspaper, the Berkeley Beacon.

Andrew also told the participants that Degrees of Freedom would have to "rely heavily on philanthropy to remain in operation," in the words of the article, which reported that only 150 students were expected to attend next fall's session, as opposed to the 500 needed, at an annual tuition of $9,000, to reach the break-even point.

In addition to not being accredited, the nascent program has lacked a certificate of degree-granting authority from the Vermont State Board of Education, according to a fine-print disclosure on the Degrees of Freedom website, as accessed on May 5.

Degrees of Freedom has however convened listening sessions and a "Freedom Builders Fellowship" of students to help design its programs, as well as hosting other events, according to Chandell Stone, now the program's CEO.

The activities appear to have proceeded amid some suggestions of financial urgency, however.

A November email blast from the organization congratulated the Biden-Harris ticket on its election victory, then immediately trumpeted the need for the federal government to double the size of its Pell grants, which help defray college costs for low-income students.

In an April 8 email blast, a month after the Zoom talk reportedly noting the reliance on philanthropy, Andrew announced that "we're opening a college" – and asked for donations, mentioning that the 500-student goal would only be reached in 2022.

Then, on April 27, the feds arrested the 42-year-old educational entrepreneur for allegedly stealing $218,005 dollars from escrow accounts of the Democracy Prep in Harlem. The complaint alleged that he had used the ill-gotten gains to get a lower mortgage rate on a New York City apartment, valued at $2.368 million, that he subsequently purchased.

Three days later, announcing the delay in Degrees of Freedom's full-scale launch, Chandell Stone, by then the program's CEO, said in a Brattleboro Reformer story that Andrew's actions "have implication for the rest of the team, reputationally. And that is really frustrating.”

Degrees of Freedom has been a DBF project, but, "It was always the intention that DoF would form its own separate entity," Stone wrote in a May 4 email to VBM.

No program activity was taking place at the moment, she stated, but "our team of advisors and supporters have been convening to plan a program launch for fall 2022." Both an associate’s degree program and a gap-year program will be offered, she wrote.

"We've been in close contact with our HS partners who are very eager to offer a high-quality & affordable option to their students. We owe it to them to see this project through."

Asked if Degrees of Freedom still had an association with Andrew, she responded, "Not at all."

Immediately following his arrest, the program removed him from his position on its board and the DBF board removed him from his position as that organization's board chair.

As for the organizational relationship, Alize-Jazel Smith, who identified herself as the director of DBF's board of trustees, said on May 4 that, "Degrees of Freedom is a program of Democracy Builders, not a separate entity. We are them and they are us."

"Through all the madness that's going on, my main mission is being true to the focus of the mission," she said. "We want the Degrees of Freedom program to be successful in its entirety."

Andrew did not respond to requests sent to his email address at Democracy Builders on April 28 and 30. A third inquiry to the same address, on May 3, bounced back, with a notice saying "The address couldn't be found, or is unable to receive mail."

Messages left with the New York-based lawyer reportedly representing him in the federal case did not receive any response.

Complications

At this juncture, the position of Stein and his Type 1 company presents particular complications.

In an email interview, he told VBM that he had first heard in August, from a Boston area real estate agent, that the campus might be available for purchase. That was only a few weeks after DBF acquired the property.

"It appeared initially that he wanted to do a quick simple transaction due to the commotion with the activist group that had emerged," Stein stated, referring to Andrew and the group alleging racism on his part. "The deal waxed and waned and changed in structure and urgency according to the presumed pressure that was being exerted by these activists and local community antagonists."

It would be five months before Andrew signed the deed conveying the campus to Type 1. The document was recorded in Marlboro on January 21 – one day before a right of first refusal held by the music festival with regard to the property was to take effect.

Chris Serkin. Courtesy photo.

"There are significant legal and practical questions that we are in the process of evaluating," the festival's president, Chris Serkin, wrote in an email. "This much is clear: our right of first refusal is part of our lease that runs with the land. As a result, whatever the state of title of the campus right now, our right of first refusal is now fully vested and will apply to any new covered transaction... [T]hat right of first refusal was negotiated with Marlboro College when we entered into the lease, but it carved [out] a two-year window before it would become effective. That window closed on January 22, 2021."

In conjunction with the January transaction, Type 1 rented the property back to DBF under a 100-page lease agreement. On behalf of Type 1, Stein also signed a quitclaim deed back to DBF, by which the property would revert to Andrew's organization under the terms of certain triggers referenced in the lease.

"There was a clause buried in the lease agreement (unbeknownst to my lawyers) that allowed the quitclaims to be effectively 'activated' if I had exceeded a 50K threshold of unpaid [contracted property maintenance] expenses after being given notice and a subsequent 30 day cure period having elapsed/expired," Stein wrote in an email. (He referred to the quitclaims in the plural because one also pertained to a small chunk of land, part of the campus, in the neighboring town of Halifax.)

DBF, he continued, "essentially declared me in default of the 50K threshold on my acquisition of the property, without presenting any proof of payments on the submitted invoices. It is patently absurd that I could have been in breech [sic] of the threshold on acquisition. More than half of these invoices could not be confirmed. Further DBF presented on February 19th an additional $225,000.00 in invoices representing bills that DBF had supposedly paid on behalf of Type 1. None of the invoices, on investigation, could be confirmed as paid. They were determined to be bogus."

The 30-day "cure period" having expired February 22, he wrote, the quitclaim returning ownership to DBF was "wrangled" by Andrew, who took it "personally" to the Marlboro town office for recording three days later.

Asked if Type 1 was litigating or planning to litigate the matter, Stein wrote, "Yes... We do intend to vigorously defend our ownership rights in the property... The Vermont based legal entity Type 1 Civilization Academy Marlboro Campus LLC owns the Campus."

Not surprisingly, DBF's Chandell Smith disagreed, stating that "DBF has the deed and owns the land."

Following the April 27 arrest but before Stone's April 30 announcement, two local residents attempted to answer the question of what would come next.

"I think that it's quite possible that Degrees of Freedom will flounder if Seth is removed from working on its developing program," was the reaction on April 28 from Adrian Segar, a Marlboro resident who has made pointed criticisms of Andrew throughout the unfolding saga.

That same day, VBM spoke also with David Williamson, a professor of management who graduated from the college in 1998 and lives in Marlboro. "This whole thing is going to fail," he said of DBF and Degrees of Freedom. And when it does fail, I'm interested."

Williamson, that is, has a dog in the race.

In November 2019, shortly after Marlboro College announced it was going to close, an investor group led by him offered the institution $4.9 million for the property, which Williamson described in his recent interview as "my preferred location" for a new educational institution "firmly rooted in the liberal arts."

He conveyed the offer in an email to the college's president, Kevin Quigley – who rebuffed it immediately. According to Williamson, Quigley told him "it was too low and would not be considered."

Quigley could not immediately be reached for comment.

Williamson was not the only party seeking the property.

Stein also put in an offer. And the music festival put in a proposal "on terms that were very similar to the offer by Democracy Builders," Serkin wrote in an email statement.

There may have been other bidders, too, but non-disclosure agreements binding the members of the so-called Campus Working Group that reviewed the offers makes that uncertain.

Right, aerial view of Marlboro College campus. Top photo of outdoor classes held at the former college. Marlboro photos courtesy of Marlboro College.

The ownership dispute, the federal charges, and even the original deal between the college and DBF are difficult to separate from one another.

The nearness of the $218,005 Andrew allegedly stole to the $225,000 in cash that DBF paid for the property has acted as salt in the wound for residents and alumni who fought that deal.

Williamson raised the possibility that the outcome of the federal proceedings could nullify the July 2020 sale.

"If Seth Andrew is guilty of what he's accused of, and if he knew that he had committed a crime when he bought the campus, I would think that the contracts would be invalid, since they had been executed with money that had been criminally acquired."

"It doesn't surprise me when someone comes in and gets a bargain deal without any experience and then doesn't know what to do" in operating an educational program, said Will Wootton, a Marlboro graduate who played a tangential role in events surrounding the college's closure, and who worked there in various positions between 1983 and 2002, before serving for six years as president of Craftsbury's Sterling College.

"I have no prognosis. I hope it winds up in the hands of some wealthy, progressive people who want to do good."

Of course, the predictions of failure have not come true, at least not yet.

"We still plan to launch, just shifting our open date," Stone told VBM. "All necessary stakeholders are informed and agree with the decision to do so."

Whatever the ultimate outcome of events, Degrees of Freedom is thus keeping its rudder on course – while the music festival offers Marlboro residents the prospect of some relief from the ongoing troubles.

"We are fully engaged in planning to welcome our musical community back to campus this summer," Serkin wrote. "This will be our 70th Season, will mark the opening of our new rehearsal facilities and residence hall, and represents an important milestone for the musical community in emerging from the global pandemic."

C.B. Hall is a freelance writer from Southern Vermont.