MARLBORO — The saga of troubles that followed Marlboro College's 2019 announcement that it was closing may have reached its denouement, and a happy one at that.
On Sept. 24, Democracy Builders Fund (DBF), which purchased the 533-acre campus and its 52 buildings in 2020 for a pittance in cash, conveyed the property to Potash Hill, Inc., an entity under the control of the Marlboro School of Music (MSM), which operates as Marlboro Music.
“While it will create some important challenges, the purchase brings a vital measure of stability to our organization, to the surrounding community, and to the many patrons and constituents who feel as protective as we do about this special place,” MSM President and Board Chair Christopher Serkin said in a news release announcing the sale.
According to incorporation papers filed with the Vermont Secretary of State's office, the board of Potash Hill Inc. includes Serkin, of Nashville, Tenn.; Anthony Berner, of Brattleboro; Miles Cohen, of Philadelphia; Philip Maneval, of Philadelphia; and Ellen McCulloch-Lovell, of Montpelier. McCulloch-Lovell served as president of Marlboro College from 2004 to 2015.
A 15-member task force, consisting of musicians, trustees, and staff members, will oversee an in-depth planning process to help determine the future use of the property from September through May each year.
Many neighbors, critical of the original sale of the campus to DBF and/or concerned about a questionable future for the campus, expressed outright joy over the sale to a long-established nonprofit whose summer festivals have taken place on the campus since 1951.
“I can't [even] begin to describe the waves of emotion flowing through me right now! This is as it should be! Hallelujah!” wrote one neighbor on a private Facebook group dedicated to discussions about the campus.
“Me too,” wrote another. “I even did a happy dance.”
“Not gonna lie, I definitely freaked out in a good way when I saw the email come in!” wrote another.
A legal Pandora's box
Marlboro Music, headquartered in Philadelphia off season, paid DBF $2.74 million for the real estate. If certain conditions are met, MSM will also release DBF from paying the $1.5 million it owes to MSM for improvements to the property.
The property is assessed at $3,771,600 but was appraised at $10.4 million in 2018, the year before the college announced it would close.
In July 2020, soon after its last commencement exercises, Marlboro College sold the real estate to DBF for $225,000 in cash and the assumption of the $1.5 million construction obligation.
The cash proceeds went to Boston's Emerson College, which simultaneously accepted transfers from some of Marlboro's students and received all of its remaining endowment, totaling more than $21.7 million.
The bargain-basement cash price reflected Emerson's lack of interest in owning the property.
According to Randy George, a Marlboro alumnus who served on the so-called Campus Working Group that advised his alma mater on the sale, “Emerson was allowing the Marlboro College community, which is what the working group was representing, to decide what sort of organization they would like to occupy the campus in the future, with the money not being a concern.”
The college's decision to sell to DBF opened a legal Pandora's box that wearied Marlboro residents and generated work for at least six law firms.
Democracy Builders Fund intended to launch a hybrid secondary/post-secondary educational program - Degrees of Freedom - on the campus.
But that dream withered in the wake of the pandemic, financial woes, and the arrest of DBF's guiding figure, Seth Andrew, in April.
He is facing federal charges of wire fraud, money laundering, and making false statements to a financial institution.
Andrew, an educational entrepreneur who served as an advisor in the Obama administration, and who had been living on the campus prior to his arrest, moved to Rhode Island as he awaits resolution of his case. Under the terms of his bail, he is barred from leaving that state without permission of U.S. District Court.
The preliminary hearing in the case against Andrew has been postponed five times since May as “Defense counsel and the Government are discussing a potential disposition to this case and other matters,” according to a Sept. 24 filing in the Southern District of New York by Assistant U.S. Attorney Ryan B. Finkel.
For DBF, bills to pay
In part because few details about DBF's finances were publicly available, the organization's wherewithal became the subject of controversy even before the organization purchased the campus.
In a public IRS filing dated May 16, the organization, a nonprofit formed in Delaware but headquartered in New York City, reported a loss of $737,744 over the tax year from July 1, 2019, to June 30, 2020.
DBF reported net assets - that is, its assets minus liabilities - of $132,053 as of the latter date, three weeks before DBF purchased the campus for the $225,000 in cash.
A Dec. 31, 2020, statement of accounts found that DBF's liabilities totaled $2,820,016, including the debt to MSM.
Whether the $2.74 million in cash paid by MSM can cover DBF's outstanding obligations is unclear.
“There are quite a few creditors,” said Mark Oettinger, DBF's attorney, based in Burlington.
“If every creditor were to get 100 percent of the money they are presently claiming, there would probably be a modest shortfall,” Oettinger said.
He said the biggest creditor is the U.S. government, to whom DBF is obligated to repay two Payment Protection Program loans - for $943,364 and $312,107, respectively - that DBF received through federal pandemic relief legislation.
“One question is whether one or both of those loans are going to be forgiven,” Oettinger said.
The loans are backed by the Small Business Administration. The larger one, as Vermont Business Magazine reported in May, has raised questions because DBF's application claimed that the cash infusion would save 270 jobs, while the magazine's investigation found no evidence that more than 41 individuals benefited.
The smaller loan was approved early in 2021; its application claimed that only 18 jobs were at stake.
Like any other debt incurred - or any obligations disposed of - in 2021, it is not included in the 2020 end-of-year accounting.
DBF applied for forgiveness of the larger loan, apparently in April 2021, as allowed for under the pertinent federal legislation. Whether DBF has applied for forgiveness of the second loan is uncertain, but a knowledgeable source, who requested anonymity, said that neither loan had been forgiven. The source said that DBF's debts amounted to “millions.”
Oettinger and DBF “are trying to resolve this as effectively as possible, so that the stakeholders can walk away as best they can, and DBF can be dissolved,” the source said.
“There's no future for DBF. There's been no payment on anything.... [Oettinger and DBF] want to resolve this in a manner that's happy and fair for all the stakeholders, including the Marlboro community. There's been a lot of collateral damage.”
Given the significant role of the SBA loans, and the time that federal agencies can take in making decisions, a final resolution of the outstanding debts could take months.
In an interview in May, a representative of one of the first loan's ultimate recipients recounted a visit from FBI agents on the morning of April 27, the day Andrew was arrested. The agents posed two hours of questions about the larger loan and related matters.
A second source - who, like the first, requested anonymity - confirmed that the recipient in question had been cooperating with the federal investigators.
As the PPP's administrator, SBA does not comment on pending investigations. The program approved almost 11.5 million loans, totaling nearly $800 billion, according to the agency's website.
“The magnitude of the fraud [in PPP and related programs] we are seeing is unheard of - unprecedented,” SBA inspector general Hannibal Ware stated in an ABC News report on Aug. 5.
The claims against DBF also include one from William Kaplan of Montpelier. The website of the Montpelier Development Corporation, whose board he chairs, describes him as a commercial real estate developer.
The claim stems from a May bill to DBF for vaguely described services aimed at “creating a path forward” for DBF and Degrees of Freedom.
On Sept. 3, Kaplan filed a copy of the bill, with the amounts in question and some other wording redacted, with Marlboro Town Clerk Forrest Holzapfel.
With the bill, he also filed a document headed “Recording of Obligations,” which states that the amounts due on the bill “must be paid in full before or upon any transfer of real property” owned by DBF.
In an interview for this article, Holzapfel described the filing as “an incredibly weird instrument.”
He said that Kaplan presented the documents by appearing at the former's home on a Sunday afternoon.
“I opened it and it said 'Democracy Builders' - and I wasn't surprised,” Holzapfel said.
Both Oettinger and MSM President Christopher Serkin stated, however, that the claim submitted by Kaplan did not impede the property's sale; all the claims are now DBF's responsibility to settle out of its own resources.
Kaplan was also retained by Marlboro College's Campus Working Group to facilitate the 2020 sale of the campus to DBF. He could not be reached for comment.
'Complexity,' indeed
MSM's road from campus tenant to campus owner has had its twists and turns.
The organization made an offer on the campus when the college originally offered it for sale. That offer was rejected, but the music people reentered the story early this year.
In January, while DBF struggled to get Degrees of Freedom rolling on the scenic rural campus, a Toronto-based entity called Type 1 Civilization Academy bought the campus - sort of.
In a complex sale-and-leaseback deal valued at $9.4 million, DBF, over Andrew's signature, gave Type 1 quitclaim deeds for the property's many parcels.
Per the purchase-and-sale agreement, Type 1 also committed itself to giving DBF a “founder's wallet” in an amount not to exceed $10 million as part of a cryptocurrency venture, under the terms of a letter dated Aug. 1, 2020.
That letter has not come to light.
The purchase-and-sale agreement - released to the public by the Vermont attorney general's office following its legally required review of the sale documents - refers to the communication as a schedule to the agreement, but the schedule, as released, is devoid of text.
What is apparent, however, is that, within days of DBF's purchase of the campus, it was on its way to a new owner.
But barely a month after DBF's sale to Type 1 closed, Andrew took another quitclaim deed - this one conveying the property back to DBF - and recorded it at the Marlboro town office.
This deed had been signed back in January by Type 1's principal figure, Adrian Stein. DBF appeared to be acting much as a bank might in repossessing a property - under circumstances best summarized as bewildering.
The deed appeared “questionable,” town clerk Holzapfel said in a subsequent interview. Stein described Andrew's action as “a fraudulent reconveyance.”
MSM, whose summer events take over part of the campus under a 99-year lease, was thus left wondering to whom it needed to pay its rent in the wake of the DBF–Type 1 head-scratcher.
On May 12, the music festival therefore filed a complaint in Windham County Superior Court which demanded that DBF and Type 1 settle the ownership question.
As an outgrowth of that action, the lawyers for MSM, DBF, and Type 1 came to a meeting of minds: DBF owned the property, and would sell it to the music festival. MSM announced the agreement on July 21. Judge Katherine Hayes approved it six days later.
On Sept. 2, the attorney general's office, per the statutes, issued a notice of no objection to the conveyance.
Throughout the tribulations in Marlboro, the town continued to list DBF as the campus's owner. The organization's personnel occupied the premises until shortly after Andrew's arrest, which ushered in the collapse of the organization's dreams for the campus.
It is unclear how much money, if any, Type 1 may have lost in the resolution to the bizarre sequence of events - or may have recouped in conjunction with the sale to MSM.
Under the agreement negotiated between the attorneys in July, Stein's entity renounced all claims to a “break-up fee” enforceable against DBF, under a Type 1–DBF agreement made last December, if DBF were to sell the property to the music festival.
That agreement described the breakup fee as 4 percent of the price paid by the music festival, plus unspecified expenses incurred by Type 1 in - ostensibly - acquiring the property in January, just before the music festival's right of first refusal on the property was to take effect.
Stein had no comment on the details of the sale to MSM, or on the labyrinth of events leading to the transaction.
In a Sept. 18 email, he did, however, report “that things have been satisfactorily settled and that the Marlboro Music Festival will have a long term secure home on Potash Mountain [sic].“
“I remain on very good terms with the soon to be new owners and the door remains open to potentially utilizing the Campus for some of Type 1 Civilization Academy's activities as circumstances dictate,” Stein said.
Anticipating the deal in a Sept. 9 interview, MSM attorney David Dunn referred mildly to “the complexity of the transaction.”
Other witnesses to the unfolding events have used stronger language.
Alumnus George said in a Sept. 21 interview, “If there's any one thing that all sides agree on, it's that it's a convoluted, messy thing.”