The end of LCAP

[lenoxxx]

Another bit of shameful reporting from the LCAP newsfront... from the C&C website. I found the title of the article very very true.


Brothers When Convenient

July 2nd, 2008 by Joe Manzella. Popularity: 4%.
Loyalty, Duty, Respect, Service & Stewardship, Honor, Integrity, and Personal Courage. These are the core values of the new True Brother Initiative - something I wish we started long ago - to better capture the meaning of brotherhood and to better live it as brothers.

At the same time our fraternity is moving toward a very idealistic and hopeful future (read:hope for the future), some of national’s actions are setting us back years.

In late 2007, as I headed my first few meetings as the proud High Alpha at Gamma Omicron Zeta (Michigan State), I sat at the helm of a chapter responsible for raising over $30,000 for cancer with our Greek Week team the year prior, one of the few chapters with zealously dry recruitment, a Chapter that initiated a local pastor as an honorary, a chapter that took home more than half of all awards handed out in the greek community for the past 2 years - we have 26 fraternities.

So, you can see my surprise when I heard that LCAP was divesting itself of our property because they were ‘losing money’ on the chapter and that membership was ‘weak’. AND that the alumni would be responsible for making an offer by April 1st and close on the house by July 1st.

What?

They want us to start a housing corps, do fundraising, and have a loan ready by April?

There’s more…

They are holding us liable for past ‘losses’. A property with a reasonable value of around $400,000 could be OUR cess-pit again for $806,000! Thanks LCAP! I was quite astounded by the large amount of losses, i wondered how they could have gotten a loan on the property with that kind of negative cash flow, and then they showed us their books… the past 3 years worth, because they don’t keep any more than that. They were calculating ‘depreciation’ with their losses. So a year they take in roughly $13,000 positive cash flow, the house ‘lost’ $30,000 in value, so that year they lost $17,000 on the property.

With a wild fundraising drive and a sizeable loan, this chapter may be able to purchase this property, but anything more than $500,000 will put us back in the territory that LCAP has well tread: overspending ourselves.

A quick recap:

-Chapter was weak in the early 1990s

-Lambda Chi Alpha took it over in 1993

-LCAP in 1997-ish

-2004 LCAP pulls out a balloon loan, joining millions of other idiots that spent more than they could afford over the next few years and wound up defaulting on a loan they should never have qualified for

-2007 LCAP gives the alumni a 6-month ultimatum to buy the house or have it sold out from under them.

With me so far? Here is the rest:

I called the house a cess-pit earlier, maybe that is not fair, so I’ll let you judge for yourself. Would you buy a 26-bedroom house with no functioning kitchen, a basement that floods because of the parking lot slope, 2 functioning toilets(of 6) and 4 functioning showers (of 7)? Still interested? How about if I ask you to pay $300-400,000 over value because you would be a bad brother to burden the fraternity by paying a fair value on the house? Still having trouble justifying that?

LCAP has put a price on brotherhood, and that price here at MSU is $306,000. They hired a real-estate law henchman to head the discussions and forced our alumni to spend thousands of dollars in consulting and lawyer fees before the sale even became feasible, just because they would not be up front with their finances.

This past month, our chapter presented legislation to the fraternity through the General Assembly, essentially asking that the general fraternity vote to require LCAP to sell the property to us for a fair value of $506,000 with a promise that we do $200,000 in renovations within the first year. This is fair, and does not penalize us for LCAP’s failure nor doom us to the same fate with a huge loan. We were just made aware that our resolution would not be heard on the floor of the general assembly because it would jeopardize the ’seperate’ relationship of Lambda Chi Alpha and LCAP (all board members are brothers, btw).

We are being called bad brothers because paying a fair value would hurt the fraternity, BUT we cannot use legal means to enforce fairness because LCAP isn’t part of the fraternity.

What does all of this mean?

Brothers When Convenient.

Gamma Omicron Zeta started in 1907 as the Forensic Literary Society, was Chartered in 1922, was one of the few fraternities to experience a merger on campus with Theta Kappa Nu in 1939, and depending on how this house sale goes, may have its last year of existence in 2009. In the past 4 years our membership has bounced almost cyclically between 55-81. Right now we are at 51 pre-rush, with 35 of those guys living in the house and ready to recruit. This chapter has been the focal point for inter-zeta relations since I first started college in 2004 and especially after the 2008 conclave, and losing this chapter will lose much of the connections that our zeta started within the State of Michigan and Great Lakes Conclave. We, in our hour of greatest need, have worked very hard to build the chapter into something we can be proud of, and the fraternity as a result of its own failure is turning their back on us.

So, I leave you with these few words: Always trust your brother. If he breaks your trust, rebuke him. If he asks forgiveness, forgive him. If he breaks he breaks your trust again, he was never a brother in the first place.

“Those who know the true meaning of brotherhood must practice it” - Harry S. Truman.

[EE-BO]

Originally Posted by lenoxxx

They are holding us liable for past ‘losses’. A property with a reasonable value of around $400,000 could be OUR cess-pit again for $806,000! Thanks LCAP! I was quite astounded by the large amount of losses, i wondered how they could have gotten a loan on the property with that kind of negative cash flow, and then they showed us their books… the past 3 years worth, because they don’t keep any more than that. They were calculating ‘depreciation’ with their losses. So a year they take in roughly $13,000 positive cash flow, the house ‘lost’ $30,000 in value, so that year they lost $17,000 on the property.

Please forgive me dropping into this forum, but I just had to respond to this. I am very sorry to hear about what is happening with this chapter and their house. Assuming the facts as presented are accurate (I am just saying that since I only know what I have seen here- I have no reason to not believe them), then this is far beyond bad brotherhood.

Let's say the house is worth $400,000 as you say. $30,000 a year in depreciation is pretty steep for two reasons.

First, land is not depreciable- and certainly not for tax purposes! (more on that in a moment.)

Second, even assuming the structure itself is worth 75% of the total value of the property including the land- that would still mean they are depreciating the house in 10 years time ($300K/$30K a year) and that is overly aggressive. 15-40 years is a more typical depreciation period for a structure.

What kind of organization is LCAP? How is it designated? Is it a non-profit entity? Do they have to prepare annual audited reports?

If so, then I would encourage you guys have a legal/accounting whiz or two do some serious digging. Because if the numbers they are presenting to you are what they are using to do their own internal accounting- then there are potentially issues based on the information I am seeing here.

Next- if LCAP is a non-profit entity, then what is its mission statement?

If the mission statement is, as I assume, to provide housing for members of the non-profit entity LXA- then by trying to force you to purchase the home in excess of fair market value they are violating their non-profit purpose and that is your best ammunition to hit them hard and force them to sell a new Housing Corporation the property at a fair price- which would be LCAP's initial investment LESS any net returns they have seen, and by that I mean tangible returns- none of this over-aggressive depreciation nonsense.

If we were talking about a public company, I would assume there is a lot here I do not know since this deal- as described on this site- is so far afield of what is appropriate. But when you get into the realm of non-profits and non-business management of entities like fraternities where politics can take over common sense very quickly, then this scenario is actually pretty believable even though a seasoned businessman cringes at the sight of it.

The stupid thing here is that if you do not raise the money they are demanding, LCAP has to sell the house on the open market for a lot less money and then LCAP risks costing LXA a chapter- or at the very least doing it serious damage. It becomes a lose-lose for everyone. The only reason I can imagine this is happening is that those balloon notes that were referenced have crippled the organization and they need to get extra money in some places to make up for capital losses or payment demands in other places (which is also legally tricky.)

Best of luck to you guys in this. What a mess!

PS- I almost forgot. It would be interesting to know what kind of loans LCAP was taking on. An organization in that kind of role is expected to invest very conservatively. If they were riding the rails in getting loans, that is potentially another actionable issue for which the Board- and not individual chapters- could be held personally financially responsible.