The court-appointed receiver of Compass Academy will make a “distribution” of more than a half-million dollars to investors and parents who claimed monetary losses to alleged fraud by the school's founder, Jay Brooks, according to court documents.
More than 40 investors and 11 parents will receive payment from the distribution, according to a plan for claims and administration and distribution of proceeds filed in Richmond County on July 1. The parents who paid tuition deposits into Compass Academy and who submitted claims are being paid in full. The claims in that category ranged from $75 to $1,950, while the total amount of claims is $9,325.
Six claims remain unresolved, and the court-appointed receiver, Columbia attorney Sherri Lydon, decided those claims would be disallowed.
Brooks was arrested in July 2013 and charged with one count of securities fraud, but a grand jury later indicted him on two counts of the charge. One count alleges that Brooks took investment money for a fictional entity called the Charles Howell Trust, but instead converted the funds for his personal use. The other count alleges that Brooks took investments but then diverted the funds for the benefit of Compass Academy.
Brooks was also indicted on one count each of forgery and a violation of the Securities Act by making false or misleading statements to a securities commissioner.
There were two groups of investors who submitted claims, according to the document. One group invested in the Charles Howell Trust; another group “knowingly or unknowingly” invested in Compass Academy.
“The Charles Howell Trust did not actually exist but was a fraudulent scheme carried out by Jonathan Brooks since January 2010,” the document stated. “The money was never invested but simply stolen by Brooks. Those investors who invested in the Charles Howell Trust before January 2012 will not receive any distribution, as there is no evidence that their money went into Compass Academy.”
Because the receiver team determined that Brooks “commingled” monies received from Charles Howell Trust investors after 2012 with monies received from investors who placed money into the school, those Charles Howell Trust investors who placed money with Brooks after January 2012 will share in the distribution, according to the document. Investors who will share in the distribution will be paid according to the “rising tide” methodology, which takes any prior investments into consideration so the distribution leaves as many investors as possible with the same percentage recovery of their total investment.
According to the distribution schedule, individual investors reported between $2,600 and as much as $1.3 million lost to Brooks' alleged schemes. Claimants reported more than $7.7 million lost, of which more than $6.4 million has been confirmed by the receiver team.
Parents reported $9,325 lost but have all since been paid in full.
Distribution payment for each claim will be made from the receiver estate in the form of a check made payable to the claimant. Claimants will have 120 days to cash the checks before they become void.
A hearing on any “timely, but unresolved” objections will be held on Sept. 2. Only unresolved objections properly submitted by Aug. 4 will be heard.
The proof of claim form and distribution plan are posted on Lydon's website: www.lydonlawfirm.com.
A message left at Lydon's office was not returned by press time on Tuesday.
Brooks was released on bond in July 2013 and was allowed to move his family to Texas. He was jailed for violating the terms of his bond by allegedly committing a crime while he was living in Texas, and remains in the Aiken County detention center on a $500,000 bond.
Teddy Kulmala covers the crime and courts beat for the Aiken Standard and has been with the newspaper since August 2012. He is a native of Williston and majored in communication studies at Clemson University.