The end of LCAP

[GammaZeta]

Tom's right.

HQ does have a responsibility

We need to look at this in two ways: a short term probelm and a long term probelm.

Short term - how do we handle the current crisis, get our brothers housing, and not throw away people's hard work.

Long term - how do we prevent this type of issue from rising again? Maybe HQ needs to be more open with the financials. Quarterly, or semi-annual financial reports to the membership.

[lxa29]

This is a sad occurence for our chapters who now face a tough problem with figuring out how to financially sustain their houses. However, I don't think there is an easy answer for this. Something has to be done and wether i like the outcome or not I think our HQ is doing the best it can given the circumstances. I read some of these posts and to me it almost paints a picture a bunch of evil people in Indy who are out to make a buck and screw all of our brothers over, which i know is not true. Tough choices have to be made, unfortunate mistakes have occurred in the past, but they are doing whats best for the fraternity as a whole, please try and keep that in mind. Wether you agree with the outcome or not, I am pretty sure alot of thought and attention went into the desicion to get rid of LCAP.

"Its easy to shout from the back of the bus when your not in the drivers seat."

[Tom Earp]

Originally Posted by lxa29

This is a sad occurence for our chapters who now face a tough problem with figuring out how to financially sustain their houses. However, I don't think there is an easy answer for this. Something has to be done and wether i like the outcome or not I think our HQ is doing the best it can given the circumstances. I read some of these posts and to me it almost paints a picture a bunch of evil people in Indy who are out to make a buck and screw all of our brothers over, which i know is not true. Tough choices have to be made, unfortunate mistakes have occurred in the past, but they are doing whats best for the fraternity as a whole, please try and keep that in mind. Wether you agree with the outcome or not, I am pretty sure alot of thought and attention went into the desicion to get rid of LCAP.

"Its easy to shout from the back of the bus when your not in the drivers seat."

Okay LXA29, I can agree to disagree on some points you made.

Yes, I learned over a period of time that while LCAP seemed to be a great idea it turned out to be a big mess.

Yes, there is a new group in place at IHQ that I have more respect for than I have had for a very long time. I have worked with them and seen what they have done to cut back expenses and get us back in line so there can be expansion of either new colonies or going back to those closed over the years. Bill and Biff both explained that was this they felt was the best effort and a two pronged attack which makes sense.

I am not really sure how many houses are in jepordy of being lost as that has not been reported to my knowledge. We only know of a few that we have seen on here, but they could be still a major part of LXA.

It has and still my proposal tht they while act as landlords, the payments come to them to keep paying off the mortgages until at the time a Alumni group and take them over. Not just try to seel the houses back at inflated prices that were beyond their control.

As GammaZeta pointed out there seemed to be little oversight from what I have seen and heard.

One of the jewells was at the Un. Ak which the Zeta now owns again.

But, what of the others?

Am I soured over this, yes I am and I still feel that more could be done to keep those Zetas alive and in house.

[lenoxxx]

lxa29;

Im glad you now feel ok about what is being done with LCAP- because you are sure people "put alot of time into it". We all assumed that when it started and were basically "sold up the river".

The facts are that the liquidation plan was handled poorly, and continues to be handled poorly with all of the evidence at hand. Your blind faith in this is exactly why is got so out of control in the first place. I was willing to give the new folks a clean slate, however, when they put the house up for sale with no buyers ready to go, and told the renters to move on, and now there will be an empty or near empty house, and have started asking our alumni for help to fill it after they were told that would not work and blindsiding us with selling the property in the first place with no plan.

That story needs told

[GammaZeta]

Some major flaws in your thinking:

"Tough choices have to be made, unfortunate mistakes have occurred in the past, but they are doing whats best for the fraternity as a whole,"

Unfortunate MISTAKES? Is it a MISTAKE when your property organization has no one with any experience in charge and is LOOSING THOUSANDS of dollars on a monthly basis? That's not a mistake. Something is seriously wrong with that.

They're doing what's best for the fraternity as a hole? Even better idea. Hire someone who is competent and not just a BUDDY from the fraternity to run the damn thing.

Don't give me this bullshit of "oh, we made a mistake in the past but now we're trying to fix it".

Seems like this happens every couple of years, doesn't it? DOESN'T IT?

Quit the patronage, quit hiring exclusively from within the fraternity, quit throwing our money down the drain. Those aren't mistakes, that's incompetence.

WE DON'T LEARN FROM OUR MISTAKES, PERIOD.

That's how we are always ending up in this situation. It was the mid 90's, then the late 90's, then the early 00's, and now it's 08.

"HQ is doing the best it can given the circumstances"

Maybe if HQ actually did something YEARS ago, they wouldn't be in this "circumstance". Maybe if they didn't get themselves into this mess.

What I want to know is, WHO is accountable and WHAT we will do in the future to prevent this from happening again.

I'll tell you what:

QUARTERLY REPORTS OF OUR ENTIRE FINANCIAL STATUS MAILED TO EACH CHAPTER AND ALUMNI ORGANIZATION...

Every three or four years we take another financial hit.

Let's find out where the money is going. Let's find out where it is spent. It's time we hold HQ responsible.

[JonoBN41]

Originally Posted by GammaZeta

Seems like this happens every couple of years, doesn't it? DOESN'T IT?

I'm right here. You don't have to scream.

[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.

[GammaZeta]

Your blind faith in this is exactly why is got so out of control in the first place.

AMEN!!!!!!!! That's what I've been saying the past 4 years.

Ask questions....demand answers.

[GammaZeta]

"Brothers When Convenient." Ya know, when LCAP took over Gamma Zeta,they said they would take brotherhood out of the equation. Then when we had to SUE them to get releif (we won), they accused us of NOT being brothers.

[GammaZeta]

Ok, ok, ok.

I've been holding off doing this for a while. Five years ago I originally joined this board to tell others about what shady business practices LCAP had pulled on Gamma Zeta.

When I told the TRUTH about what happened between LCAP and Gamma Zeta, people called me a liar, that I was bitter, that I didn't know what I was talking about, tha LCAP was a stand up group for LXA and that us trouble makers at Gamma Zeta were always in the wrong.

Well, I HAVE to say it...

I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO...

Wow, does that feel good.

[docroc67]

Originally Posted by GammaZeta

Ok, ok, ok.


Well, I HAVE to say it...

I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO...

I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! ... AND SO FORTH AND SO ON!
Yours in ZAX,

ZetaUpsilon

[GammaZeta]

DocRoc, at least give me SOME credit for waiting this long to do it.

I originally wasn't going to, but that last letter by Lenoxxx forced me to.

[GammaZeta]

EE-BO, that is a GREAT post. A lot of answered questions still linger about MILLIONS of dollars.

I believe that LXA should open EVERY BOOK AND EXPENDITURE of LCAP and post them online, immediately. Salaries, travel, expenses, repairs, etc.

Millions of dollars were put into the hands of people with NO real estate experiece, NO landlord experience, NO construction experience, NO management experience.

What experience did they have? They were friends with and sucked up to the higher ups.

Where did that get us? IN THIS MESS.

LCAP IS LXA'S DIRTY, DARK SECRET.

OPEN THE BOOKS NOW!!!!

[EE-BO]

Originally Posted by GammaZeta

Millions of dollars were put into the hands of people with NO real estate experiece, NO landlord experience, NO construction experience, NO management experience.

Again, assuming this is how things really are (just my way of being open-minded since this is not a situation I know about), that is a real shame because I would think the key advantage of a centralized Housing Corporation for an entire fraternity would be the ability to have one management team of alumni who were experts in real estate, business law, property management etc.

Beta is going the complete opposite direction. We never had nationally centralized management of chapter housing, but these days there is no support at all- not even to give alumni basic assistance with small legal questions and the like. I do not like this at all since it pretty much "hopes" that every chapter will have alumni with the right expertise to run a housing corporation.

I very much like the concept of what LXA did, but it appears the trouble was in the execution.

Being on my chapter's housing corp. I hear a lot of stories about other chapters and even other fraternities since a lot of us keep in touch to share advice and the like.

Many years ago, there was a particularly strong chapter of a fraternity at a very good school which had a Housing Corporation that owned the house outright. The original donors had long since passed away and at the time of this incident the Board members were not people who had put in much, none in most cases, money to the housing corporation- nor was there really any appropriate expertise.

After 2 major renovations to the house in a 10 year period, there was a new mortgage taken out and the housing corp did not want anything to do with it, so 2 alumni took on personal liability. Then when the chapter had some rough times numbers-wise, the housing corp did nothing and the 2 alumni panicked and sold the house without telling anyone for well below market- in fact below tax appraisal- to a real estate speculator who flipped it for a 6 figure profit not long after. The proceeds barely paid off the second mortgage and so there was almost nothing left where just weeks before there had been a $1 million + house.

This is one of the worst stories I know of, but I have heard similar ones. Housing Corporations tend to have very strict charters and rules, but if they are not being followed- and if the properties are not being well managed- then multi-million dollar assets can be completely screwed up by people who are in charge of them but never made any contribution to their creation and maintenance.

A well-run central housing corporation authority could avoid those risks, and I am just sorry it appears that you guys' case it was the same old story that happens to all of us- only now on a larger scale.

For all practical purposes, I doubt any of the LCAP Board will ever suffer for anything they might have done inappropriately. But the questions I outlined above would at least help any movement from the alumni in determining just what they are facing and how to proceed. If LCAP is a non-profit entity or has some other special tax designation, then that gives outsiders with a connection to the entity (ie the alumni) a lot of ability to force the books to be opened.

The good news is that when people do something inappropriate with someone else's money and there is a paper trail, it is not too hard to knock them into shape fast. You just need to know where to get the right baseball bat.