Blog

Mar 19, 2023

Richer in history than dollars, Cecil County boarding school files for bankruptcy protection to remain open

The newsletters landed regularly in the alumni’s inboxes, cheerfully relaying

The newsletters landed regularly in the alumni's inboxes, cheerfully relaying academic and athletic happenings at the high school.

"Everything is great!" as one West Nottingham Academy alum summed up the chatty missives.

But a much different reality about the Cecil County boarding school — the nation's oldest, founded in 1744 — was unfolding in U.S. District Court in Baltimore.

West Nottingham was actually so financially strapped that it had put itself up for sale several years ago to stay open, according to a lawsuit by a would-be buyer claiming the school reneged on an $8 million deal.

Instead, after a dizzying series of events, the school ended up in the hands of a Toronto-based businessman in February, and then last Wednesday, in bankruptcy court.

Alumni say their first hint of this came in another typically upbeat email, which prompted a flurry of Googling.

"Great News From West Nottingham Academy," said the Feb. 23 message, announcing that a foundation called Casa Laxmi had "assumed the leadership" of the school.

Casa Laxmi planned to turn the academy "into one of the premier boarding schools in the world ... GUARANTEED admission to a U.S. university … prestigious internships … excursions such as skiing in the Alps and camping in the Himalayas; the addition of a waterfront campus ..."

"While sitting in Colora, Maryland?" asked Kathy Lockhart, a 1974 graduate, of the landlocked town that is home to West Nottingham.

The 86-student academy in a largely rural part of Cecil County may be less renowned than the Exeters, Choates and other elite, Dead Poets Society-inspiring boarding schools, but its alumni are as loyal and protective of one another and their alma mater.

"That's the kind of bond you make when you go to a boarding school," said Selma Sayin, a former classmate of Lockhart's. "We were so young, we sort of raised each other."

They’re still stunned that their school, long operated by trustees who generally were alumni, donors or both, now was under the control of outsiders — a global businessman named Kiran Kulkarni and his family's Casa Laxmi foundation.

The previous board of trustees resigned, and Kulkarni, his brother and an associate took their seats. The transaction was characterized not as a sale but a transfer of the school's management and operating expenses.

With few details and almost no public documentation of the transfer, some alumni said it felt as if the school was just handed over for nothing.

"You don't get to just give away the school," said Sayin, who lives in Daytona Beach, Florida.

The previous board president, Rehan Choudhry, defended the decision as necessary, saying the school's revenues and donations had been declining for years, creating an unsustainable situation worsened by the coronavirus pandemic and recession.

"Kiran is going to inject capital when the school was a dry sponge," said Choudhry, a New York-based entrepreneur who graduated from West Nottingham in 1998.

Kulkarni said he planned to invest $2 million in the school to keep it open through the next academic year. But the school filed Wednesday in Baltimore's federal court to reorganize its finances under Chapter 11 — to prevent the money from instead going to creditors, Kulkarni said.

Chapter 11 usually allows the debtor to continue operating while developing a plan to pay creditors off over time.

The school's bankruptcy petition said it has a total of $7.2 million secured and unsecured claims against it. Among the creditors: Casa Laxmi itself, which lent the school $625,000 in February.

The school claimed $2.2 million in assets in the bankruptcy filing, made up mostly of its real estate.

Flags from countries throughout the world hang in the dining room above Dr. Sandra Wirth, current head of school at the sprawling 85-acre campus of West Nottingham Academy -- founded in 1744 in the community of Colora, near Port Deposit and Conowingo in Cecil County -- which faces an uncertain future as it seeks bankruptcy protection. Friday June 2, 2023. (Karl Merton Ferron/Baltimore Sun)

Arriving Friday on the roughly 100-acre campus for graduation weekend, Kulkarni said the bankruptcy would "keep the wolves at bay" while officials focus on educating students.

The bankruptcy, scheduled for a hearing Tuesday, is only the latest financial hit to the school, which is currently richer in history than dollars.

As the petition notes, the school that will celebrate its 280th anniversary in the next academic year numbers among its alumni two signers of the Declaration of Independence and five governors.

West Nottingham's expenses have outstripped its revenues in all but one of 10 recent years, according to the IRS Form 990 returns that are currently available. Its endowment, according to its most recent return, for the fiscal year that ended June 2021, had shrunk to about $664,000, from $4.3 million just several years earlier.

Without his investment, Kulkarni said the school could have gone the way of Oldfields, the 156-year-old all-girls school in Baltimore County that announced in April that it would close.

And in fact, he met Friday with a group from Oldfields, where alumni are scrambling to raise funds to try to keep it open. He hopes some of those students might attend West Nottingham.

Boarding schools with high percentages of international students — West Nottingham's is about 30% — have had to deal with foreign enrollment declining in recent years, falling even more "precipitously" during the pandemic, said Myra McGovern, a vice president with the National Association of Independent Schools.

The number of K-12 students on F-1 visas, which are required to study in the U.S., dropped almost 42% between 2018 and 2021 amid pandemic closures and restrictions, association data show.

"Embassies were shut down, so they weren't doing the interviews required for an F-1 visa," McGovern said. "And the U.S. restricted travel from some countries."

Students from more than 20 countries currently attend West Nottingham, where boarders pay about $64,000 a year, said Sandra Wirth, the head of school. In the 1990s, she decided to decorate the school's dining hall with flags representing the student body's home countries. What started as six flags, Wirth said, now numbers 84.

Kathy Lockhart, a nurse and instructor who graduated in 1974, has criticisms and questions as she stands near the old school at the sprawling 85-acre campus of West Nottingham Academy -- founded in 1744 in the community of Colora, near Port Deposit and Conowingo in Cecil County -- which faces an uncertain future as it seeks bankruptcy protection.Friday June 2, 2023 (Karl Merton Ferron/Baltimore Sun)

How an international businessman came to control a school in a rustic corner of Maryland is a tale full of plot twists and shifting alliances.

Kulkarni, 72, is the CEO of Kyko Global, which is based in Toronto and the Bahamas, and provides a range of financing services, including for litigation. In 2016, after sprawling litigation against a onetime customer that it accused of fraud and racketeering, Kyko was awarded damages of more than $134 million.

"That's the beauty of the U.S. legal system," he said with a chuckle.

Kyko financed a suit filed in January 2022 by TECx Global Education, an Austin, Texas-based foundation, against West Nottingham and two former officials, saying they breached an $8 million contract for TECx to purchase the school.

TECx said in the suit it was approached in 2019 by a consulting firm about whether it would be interested in buying West Nottingham. TECx President Alex Greystoke, who has founded and directed other private schools, said in an interview with The Baltimore Sun that he then visited the campus.

"I fell in love with it," he said. "This is part of American history. Someone has to right this ship."

In December 2020, West Nottingham entered an agreement to sell the school to TECx, according to the suit. But instead, trouble ensued, the suit said. TECx accused then-school officials of providing "false, incomplete, and misleading" information on the school's finances, budget and enrollment.

TECx said in the suit it arranged for a company, North American Capital Markets, to assist in financing its purchase of West Nottingham. But TECx alleged that school officials "collaborated" to have North American Capital or its CEO buy the school instead, according to the suit.

North American Capital did not respond to requests for comment.

With Kyko acting as TECx's "agent and attorney-in-fact," the Texas foundation sued West Nottingham. Greystoke said the plan was for Kyko to remain a financing partner and TECx the operator of West Nottingham after the sale of the school went through.

But there was one more twist: Kulkarni said he came to see the school as not "the adversary." In February, with the school at risk of closing, according to Kulkarni, the school turned its reins over to him.

An upset Greystoke said he still is "digesting" how the school slipped from his grasp — and into that of his partner in the venture.

With the suit still pending, Greystoke noted, Kulkarni is in the position of having funded litigation against a school he now operates.

"So," he said dryly, "Kiran is suing himself."

Kulkarni will not say much about the lawsuit other than that he believes it will be "dropped."

He said that after a long and lucrative business career, he's free to focus on his vision for an international, K-12th grade boarding school where the student body is divided equally between those paying top-dollar tuition and those from impoverished backgrounds.

"It makes no difference if I wake up and go to the office," he said. "This is my retirement."

Kiran Kulkarni, a wealthy Toronto-based businessman with no previous connection to the school, visits the sprawling 85-acre campus of West Nottingham Academy -- founded in 1744 in the community of Colora, near Port Deposit and Conowingo in Cecil County -- which faces an uncertain future as it seeks bankruptcy protection.Friday June 2, 2023. (Karl Merton Ferron/Baltimore Sun)

It's a vision he has tried to realize elsewhere. Kulkarni initially looked into opening a school in the Bahamas but then turned his attentions to the U.S. He and family members created Casa Laxmi to establish an international boarding school and, in 2019, it announced plans for one in the Florida Panhandle, where it purchased a 260-acre site for $7 million, according to news reports.

"Then COVID hit," he said.

Instead, Kulkarni said he learned of West Nottingham and thought, "why are we building when something is already there?

"They needed the funding. We had the funding," he said. "They needed leadership. We had leadership."

While some alumni remain unnerved by the sudden change in control of their school, Bill Spiro, who graduated in 1986, said he believes there was little else the financially strapped school could do to stay open.

"They had to try something," the Havre de Grace resident said.

For Spiro, a marketing and sales director for an insurance company, the school is also home. With parents who were longtime staff members — his father Jim Spiro was a coach — he grew up on campus.

Spiro called it an "everyman's private school," offering second chances for those who didn't thrive elsewhere.

"It's a special place," he said, "and special people."

Choudhry, the former board president, said the heavy reliance on alumni donors is hard at a small, "mid-tier" school like West Nottingham.

"If you’re an elite boarding school in the Northeast, you’re graduating 250, 300 students a year, you have a lot of alumni," he said. "Nottingham has never had that.

"It's not known for bringing in children of the billionaires of the world," he said.

Choudhry said he’d been sounding the alarm of the school's finances to little avail, and suggested an alternate reason for the interest and dismay among some alums.

"All of a sudden someone who looks different and sounds different, suddenly you care," Choudhry said.

Lockhart, a nurse and instructor at Notre Dame of Maryland University, said she didn't care what color Kulkarni was.

"They don't have a track record," she said of Casa Laxmi. "What have they ever produced?"

Alumni have been frustrated by the lack of documentation of the transaction.

"Why is everybody so secretive?" said Sayin, who founded and later sold Selma's Cookies, which counted Disney theme parks among its customers.

The school is currently delinquent in registering with the Maryland secretary of state as a charitable organization, having last filed in 2021. Delinquency is "not an unusual thing," said Michael Schlein, the division administrator for charities and legal services, and they likely received a reminder.

While shocked by the most recent turn of events, some alumni say bankruptcy will bring some needed transparency.

"At least by the involvement of bankruptcy court, appropriate laws will have to be abided by," said Jeanette Cole, a lawyer who along with her late husband, Bill, graduated from West Nottingham.

Cole, who is Lockhart's sister, said that while she accepts that the school might not survive its financial woes, at least it won't just "fall apart" with little explanation.

"If it's over, it's over," Cole said. "Just do it the right way."

Students on the cusp of graduation walk from their dorms to a function nearby at the sprawling 85-acre campus of West Nottingham Academy -- founded in 1744 in the community of Colora, near Port Deposit and Conowingo in Cecil County -- which faces an uncertain future as it seeks bankruptcy protection.Friday June 2, 2023 (Karl Merton Ferron/Baltimore Sun)