Federal trustee: Operation REACH has filed misleading documents in bankruptcy court

Embattled education nonprofit Operation REACH has been able to keep its properties after filing for bankruptcy protection in October, but a federal trustee has asked a judge to dismiss the case or convert it to Chapter 7, which would force the nonprofit to sell the buildings to pay its debts.

In a motion filed last month, a federal trustee contends that Operation REACH “has grossly mismanaged the estate by not complying with the Code’s requirements of disclosure, transparency, and candor.”

A hearing on the matter is scheduled Tuesday. (Update, Feb. 17: The hearing was rescheduled for Feb. 25 after Operation REACH submitted some of the requested financial documents the night before the hearing.)

Operation REACH, once a regional tutoring and mentoring organization that served as many as 10,000 students, drew the ire of the federal government in 2012 when it couldn’t properly account for nearly $900,000 in grants.

A look at the organization’s books showed thousands of dollars spent on vacations, high-priced restaurants and retailers. Former employees laid the blame on the group’s CEO, Kyshun Webster, saying that while he was spending money freely, they were struggling to provide basic supplies for their students.

Webster has disputed these claims, maintaining that he was not the only one with access to the company’s finances.

The nonprofit has all but disintegrated. J.P. Morgan Chase initiated foreclosure proceedings on its Josephine Street headquarters last February, which could have spurred a seizure and public auction. That was put on hold after Operation REACH filed for Chapter 11 bankruptcy protection in October.

During the proceedings, Operation REACH has been able to keep that property and another building on South Dupre Street.

Its largest debts are for those properties: $50,000 on its Josephine Street headquarters, valued at $589,900, and $20,000 for South Dupre, which is worth $100,000, according to court documents.

Both mortgages are with Chase.

In total, Operation REACH owes $131,000 to nearly 20 companies, government agencies or individuals.

In September, Operation REACH asked Talbot Realty to help it sell the Josephine Street building for $1.5 million. As of Tuesday, the city assessor’s website still lists Operation REACH as the owner.

When Operation REACH filed for bankruptcy protection, the court asked for financial records, which Webster was slow to provide. When he did submit them, they were inconsistent and inaccurate, according to the federal trustee.

Among the problems: Operation REACH filed a document stating that two Capital One bank accounts had about $189,000 in them. Shortly after, the nonprofit filed another document saying the accounts were empty.

Neither Webster nor Operation REACH’s attorney, Edwin Shorty Jr., immediately responded to a request for comment Monday.

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