March 16, 2014

EXCLUSIVE: Financial, legal troubles dog SC school-choice advocate

The unofficial leader of one of the new S.C. nonprofits created to help students with disabilities pay for private school has a bankruptcy that disqualifies him from being on that group’s board of directors.

The unofficial leader of one of the new S.C. nonprofits created to help students with disabilities pay for private school has a bankruptcy that disqualifies him from being on that group’s board of directors.

Palmetto Kids First has avoided any impact because of Jeff Davis’ 2011 bankruptcy, following a failed business deal and a lawsuit, because Davis has assumed the role of volunteer and advisory board member with the group.

Davis said he took those roles, in part, because of his financial history. He said, eventually, he hopes to move on to other endeavors, handing the reigns of Palmetto Kids First entirely to his wife, the nonprofit’s operations director.

News of Davis’ bankruptcy surfaces as state lawmakers debate whether to renew for one year the temporary state-sponsored, private-school scholarship program, which expires June 30, or make it permanent law.

Davis formed the Mount Pleasant nonprofit last year when the state launched its first private-school choice program. The program offers state tax credits for donations made to nonprofits, including Palmetto Kids First, that are formed exclusively to offer private-school tuition grants to students with disabilities. Supporters of the program say that private schools offer smaller class sizes and individualized learning that allow students with disabilities to excel.

However, the state law governing the scholarship program prohibits the nonprofits’ governing boards from having members who have declared bankruptcy in the last seven years.

Two state senators who have offered ideas for improving the scholarship program said Friday that Davis’ financial history warrants a closer look, but neither sounded alarms.

Sen. Wes Hayes, R-York, said the program was adopted quickly on the Senate floor last year in the heat of budget negotiations.

“Often when that happens, you’ve got to come in (the) next year and really make some changes,” Hayes said, adding the rules governing who can participate in the nonprofits could be re-evaluated. But, he added, “I hesitate to pass judgment too quickly. It’s certainly something that the committee needs to consider.”

Sen. Joel Lourie, D-Richland, said he would withhold judgment about Davis until he had more information. But he wants lawmakers to continue to reauthorize the program each year, a process that would force an annual re-evaluation.

Davis said Palmetto Kids First’s board members and other staff have “long known” about his financial history. As a volunteer with the organization, Davis takes no salary — distance he said he intentionally wanted to create. In part, that was because of his financial past, but more so because, eventually, he wants to pursue other endeavors when his wife, Olga Lisinska, can run the program on her own.

Now, no one associated with a Palmetto First takes a salary, he added.

Lisinska, who helped Davis run a similar program in Georgia, said Davis’ communication skills and knowledge of how scholarship programs work have made him key to the nonprofit’s success so far.

The S.C. nonprofit has raised more than $820,000 since launching in January. It has awarded 87 tuition grants to students who go to 14 private schools, totaling more than $620,000.

About $825,600 has been claimed in state tax credits for the scholarship program, according to the S.C. Department of Revenue. That leaves more than $7.1 million in unclaimed tax credits that can reduce a company’s or individual’s tax bill by up to 60 percent.

Failed investment deal

Davis has been dogged by an ongoing legal matter related to his bankruptcy.

A couple, who Davis advised financially, sued him in 2009, accusing him of misleading them on how $950,000 they invested in 2008 to buy stock in a bank would be used. The stock, which Davis purchased with a $5 million loan, became worthless in 2009 when the bank failed.

The couple, who Davis said were like family, sued when a bank began efforts to collect on the $5 million loan from them. The litigation has been “nasty” and personal, Davis said, with the parties suing each other.

The investors said Davis did not make it clear to them that their liability was for the $5 million loan, not the $950,000 they invested. According to court proceedings, some of the couple’s money went to Davis’ business and personal expenses.

Davis told The State he made mistakes in the way he structured the loan, making the couple liable along with him for the $5 million loan. He also erred, he said, in using a personal home-equity bank account to deposit their money. He chose that route, he said, because he did not have a bank account set up for one of the companies he used to buy the bank stock.

In July, S.C. Chief U.S. Bankruptcy Judge David Duncan ordered the debt that Davis owed the couple would not be dissolved in Davis’ bankruptcy proceedings because he misrepresented aspects of the deal and the couple’s liability.

Davis’ appealed of that order is pending, as is the couple’s original lawsuit in Georgia, which would determine the amount of the debt that Davis, a tax attorney, owes them.

‘Very good person’

On Thursday, after The State asked Davis about his financial history, he emailed the directors of private schools around the state, informing them of what he called a “single isolated event in my personal and professional life.”

Asked for their reaction, two private-school directors said Davis’ background has raised concerns, but they also praised his work for the school-choice program. Palmetto Kids First’s board members, not its volunteers or staff members, ultimately will be liable for that organization, they said.

Anne Vickers, chief of Sandhills School in Columbia, said 12 of that school’s students have tuition grants because of Palmetto Kids First, the only scholarship organization that has given grants to her students. One grant allowed parents to enroll their daughter for the first time this year, something they had wanted to do before but could not afford.

Vickers said she was surprised to learn of Davis’ bankruptcy but respects his “transparency” in contacting school leaders.

Vickers said Davis is a “very good person, and I truly think that he has the interest of students with special needs as his first priority.”

Dan Blanch, chief of Camperdown Academy in Greenville, said he did some research on his own when he first heard about Davis’ bankruptcy.

“I was walking on eggshells, I was a little hesitant” to work with Davis, he said. “(But) he hasn’t misled me, hasn’t provided any false hope.”

Blanch said Palmetto Kids First has provided 26 grants totaling $250,000 to students at Camperdown, which has about 100 students with learning disabilities and 33 teachers. The grants have allowed those students to cut their $20,000 annual tuition in half.

“I take credit for all Jeff’s work,” Blanch added. “He’s the one really pushing the program.”

School choice in S.C.

South Carolina approved its first private-school choice program last year. The program offers tax credits for donations that support private-school tuition grants for students with disabilities. A look at the program, by the numbers:

$8 million: Money the state will grant in tax credits this fiscal year

$7.1 million: Credits that remain unclaimed

$10,000: Highest tuition grant available

65: Number of schools now eligible to accept tuition grants from students

5: Number of nonprofits cleared by the state to accept donations and make tuition grants

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