Experts weigh in on failed CCU donor’s dubious $237M gift to FL college. What went wrong?
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Gregory Gerami
Gregory Gerami’s $237 million donation to Florida A&M University was fake, investigators say. Here’s the story behind how he deceived the Florida HBCU, South Carolina’s Coastal Carolina University and others.
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Florida A&M officials appear to have not fully vetted a $237 million donation before publicly announcing it, according to experts in the financial and higher education industries, who conclude it’s unlikely the school will receive the full amount.
The school’s governing board is scheduled to meet Wednesday to discuss the gift, which is thought to be the largest ever promised to a historically Black college or university.
“This is not going to end well, I don’t think,” said C. Zachary Meyers, a West Virginia-based certified valuation analyst who reviewed documents about the historic donation at The Sun News’ request. “Nothing about this smells good.”
Texas resident Gregory Gerami presented a giant check May 4 to FAMU during its graduation ceremony after he served as a commencement speaker. Gerami claimed the money was in the bank, but it was later revealed to be privately-held stocks in Gerami’s company believed to be valued at more than $237 million. Just how that valuation was made is unclear.
Public skepticism about the gift was quick and loud with limited public information available about the 30-year-old CEO of a Texas hemp farming company, who had no prior connection to the Florida school. The Sun News had previously identified Gerami as an anonymous donor to Coastal Carolina University who pledged $95 million that never materialized.
FAMU officials reassured the public the day after the donation announcement that it had “done its due diligence when it comes to this matter.” But university officials have since acknowledged the stocks could be worthless, and they never reached out to CCU as part of the vetting process. Florida A&M’s president “put a pause” on processing the gift last week, and social media posts celebrating the donation have been deleted from its pages.
FAMU Board Chairwoman Kristin Harper released a statement Friday that she shares the concerns that have been raised about the validity of the gift and the adequacy of administrators’ due diligence process.
An email and voicemail left Tuesday for a FAMU spokesperson seeking comment were not immediately returned.
Proper protocols for accepting major gifts not followed
Aaron Conley, a higher education fundraising expert based in Dallas, Texas, said Gerami’s young age and lack of history with the university made him an unusual donor, particularly given the size of the donation.
Conley, the founder of educational philanthropy consulting firm Academic Advancement Partners and co-author of the book “Fundraising Principles for Faculty and Academic Leaders,” reviewed details available about the FAMU situation at the request of The Sun News.
A best practice for accepting any large non-cash gift includes a thorough review by a university board’s audit committee, which may seek outside expertise to determine whether to accept such a donation and how to value it, Conley said.
Conley was stunned to learn that, not only was the gift not reviewed by an audit committee, FAMU administrators did not inform the board of trustees until after the donation was publicly announced.
“At the very least, there’s got to be communication between any institution president and the chair of the board ... for a gift like this,” he said. “The governing board has a fiduciary responsibility for the institution, and it’s pretty straightforward.”
Shawnta Friday-Stroud, the university’s vice president for university advancement and executive director of the FAMU Foundation, told foundation board members last week during an emergency meeting that a nondisclosure agreement Gerami requested prevented them from telling board members ahead of time.
Conley said it’s understandable that people within universities get excited about transformational gifts and want to rush to make an announcement before ensuring funds are legitimate. But that’s why set processes need to be in place that include a review by a governing board.
How should stocks in hemp company be valued?
University officials revealed during last week’s meeting that the privately held stocks transferred to FAMU are in Batterson Farms Corp, the hydroponic hemp farming company Gerami founded in 2021.
Friday-Stroud said the bank Gerami was using sent the school financial statements valuing the stocks at $15.85 per share. The Isaac Batterson Family 7th Trust, with Gerami as its representative, transferred 14 million shares to the university foundation, according to the gift agreement.
Rich Lyman, a certified valuation analyst based in Charlotte, North Carolina told The Sun News that even if the valuation of the stocks was correct, it doesn’t mean the university could sell them for that price.
“It’s very difficult (to sell private stocks), and there’s usually a discount involved where the market is so thin for shares like that, you can take a marketability discount,” he said, suggesting a buyer may only purchase them for a discount of 20 to 40% of its value.
Lyman and C. Zachary Meyers, a certified valuation analyst, both said they’d expect Gerami and his company would report this donation to receive a large charitable contribution tax deduction.
In order to actually receive that deduction, per Internal Revenue Service regulations, the donor must obtain a qualified appraisal of those stocks by a qualified appraiser, they said.
Gerami told The Sun News Tuesday that his company was in the process of hiring a qualified appraiser, and he expected a qualified appraisal to be completed within 60 days.
Meyers said that appraisal wouldn’t necessarily need to be done prior to the donation taking place, but it would need to be completed quickly afterwards because the IRS doesn’t allow tax deductions for gifts made years earlier.
Lyman told The Sun News that a full valuation of a company worth hundreds of millions of dollars would likely cost $30,000 to $50,000.
Meyers said if he were conducting the valuation, he’d want at least three years of audited financial statements, proof of stock certificates, interviews with management and an intensive on-site visit to the company’s facilities.
Gerami told The Sun News Monday that no one from FAMU ever visited any of his hemp farming sites.
“I don’t think there would be a reason why they would have to visit any of our sites,” he said.
Batterson Farms Corp has been licensed as a hemp grower in Texas since Dec. 2022, and The Sun News recently confirmed with the Texas Department of Agriculture that the company received a permit to grow hemp in March. That lot crop permit, which expires in September, is for a roughly 1-acre plot of land in Paradise, Texas that Gerami said his company hasn’t grown any hemp on yet.
Gerami said most of Batterson Farms’ business comes from acting as a “hemp middle man,” earning money by connecting hemp buyers with farmers. He hasn’t yet provided any documentation to The Sun News to prove these contracts exist.
Lyman said his advice to FAMU would be to spend the money to get a qualified appraisal to determine the actual market for these stocks before they count on spending the money.
“That’s the key, how do you convert it into cash?,” he said. “Everybody says something is worth something until you’ve got to turn it into cash.”
This story was originally published May 14, 2024 at 3:16 PM with the headline "Experts weigh in on failed CCU donor’s dubious $237M gift to FL college. What went wrong?."
