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Role Models files for bankruptcy

May 20, 2002|BY SCOTT BUTKI

scottb@herald-mail.com

Role Models America Inc., the military-style academy at the former Fort Ritchie U.S. Army base, has filed for bankruptcy.

Despite the bankruptcy filing, and faced with the expiration of federal funding on May 30, Role Models President Robert Alexander said Friday he is optimistic the school will resume operations sometime this summer with private funding. He said he has received promises of funding, but nothing has been confirmed.

Meanwhile, Alexander said Role Models is owed $1.8 million by PenMar Development Corp., from which it has been leasing the property for its academy for high school dropouts.

The bankruptcy filing on May 10 in U.S. Bankruptcy Court, District of Maryland, came less than two weeks before federal funding for Role Models is to end. The school has been operating on a two-year, $10 million U.S. Department of Labor grant that Labor officials have said they will not renew.

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The current session of the school, which has about 40 students, ends at the end of May.

Role Models filed for Chapter 11 bankruptcy, which frees it from the threat of creditors' lawsuits while it reorganizes its finances.

Alexander said it was necessary to file for bankruptcy so he could have a federal court examine his allegations against PenMar, including his claim of money owed.

Alexander said Role Models has been unable to use 100,000 square feet of the 253,000 square feet it is leasing because PenMar has refused to make improvements and repairs needed for occupancy.

He said PenMar should pay Role Models $1.8 million for overpayment of rent and utilities for buildings and services not provided, including $450,493 for renovations PenMar failed to make.

PenMar Board Chairman Brett Wilson has said PenMar will make the repairs when Role Models specifies what work needs to be done.

"PenMar owes Role Models America nothing. Period," Wilson said Friday.

PenMar will petition the bankruptcy court to evict Role Models, Wilson said.

Role Models and PenMar have been involved in a series of legal disputes.

Among them is an allegation by Alexander that Role Models should have been notified it was possible under federal law to get the Fort Ritchie property at no cost since it was being used for an educational facility. Wilson said it was not PenMar's responsibility to notify Role Models of the law.

Role Models alleged in the bankruptcy filing the school was deprived of the chance to get land on the base at no cost.

That allegation was previously part of a July 2001 federal lawsuit in which Role Models sought a temporary restraining order to block the Army from transferring property to PenMar, Alexander said.

A judge refused to approve the restraining order, and the case is in the U.S. Court of Appeals for the Fourth Circuit.

In mid-2001, the U.S. Army Audit Agency investigated the complaint regarding the free use of land and concluded proper procedures were followed.

The bankruptcy filing blocks, at least temporarily, legal action against Role Models.

On Wednesday, PenMar filed suit claiming Role Models owed a $329,874 quarterly rent payment and $34,874 in utility payments.

Alexander said that claim is negated by the $1.8 million he believes Role Models is owed by PenMar.

The bankruptcy filing also blocks a $35,216 lien the Washington County treasurer filed against Role Models, alleging the school is delinquent on property taxes.

Alexander said additional documentation may rectify the property tax situation.

As a result of the filing, PenMar and Army officials decided Friday to delay a planned ceremony on Monday to sign a deed transferring 236 acres from Army ownership to PenMar.

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