The history of CEDU is largely the history of the development of parent-choice, private-pay residential programs. It pioneered a sophisticated concept of education that became known as CEDU Education by the 1980s. By the 1990s, the CEDU philosophy of education had influenced virtually all of the schools and programs in the network of emotional growth/therapeutic residential schools and programs. This was because as the years passed, it was widely studied and imitated, or students and staff influenced other schools and programs with the CEDU experience when they left to work elsewhere, or by establishing their own schools or services for struggling teens. The network of ex-CEDU employees had an emotional attachment to CEDU which, for most of us, was the first place we experienced that truly helped children. Even years after leaving, we still thought of it as "our school."
During the past several years, we all watched helplessly as the Brown Schools made management decision after management decision that was inconsistent with the CEDU philosophy of education as we knew it and was inconsistent with what was effective in helping these struggling teens. We knew it was sick, but hoped they would survive. Despite our concerns, the precipitous decision to close its doors and file liquidation bankruptcy with no notice was still a shock.
Still, there is optimism that out of the ashes of the CEDU devastation, new schools will rise like the Phoenix to embody the best of CEDU, but without the albatross of past Brown Schools/ CEDU decisions.
Since there is so much interest, the following is a brief chronology of events leading to the bankruptcy of CEDU and the resultant process of CEDU staff and students going through this total disruption of their lives, as reported in the press. Links to the stories this chronology is based on can be found online at www.strugglingteens.com/news/cedu-index.html.
Though it is not commonly known, the Austin Business Journal of 1997 reported that prior to the Brown Schools 1998 purchase of CEDU, Brown declared Chapter 11 bankruptcy twice during that decade, with the last time occurring just two years before they bought CEDU.
In a run-up to the precipitous closing, on February 10, 2005, Bob Naples, then CEO and President of CEDU Education, announced that Rocky Mountain Academy in Naples, ID, was closing down due to the "resignations of trained staff and a very low student population." Just over a month later on March 25, 2005, Fenton "Pete" Talbott, the new CEO and President of CEDU Education since March 21, 2005, issued the announcement that the remaining CEDU/ Brown Schools had filed a Chapter 7 bankruptcy in Delaware, which displaced hundreds of at-risk youth whose families were forced to either find immediate new placements or take their child home. Talbott had been the operating director with McCown De Leeuw and Company, a private equity firm that financed the Brown Schools just prior to becoming the CEO of CEDU. In the March 25, 2005 press release announcing the closures, Talbott said "the Company has become financially insolvent and has run out of options for keeping the emotional growth education system viable."
The ripple effect of the CEDU closures devastated the North Idaho communities where the schools were located. The April unemployment rate in Boundary County where many of the schools were located is anticipated to reach 12.7 percent, almost double the February average. The abrupt closures created a financial hardship for many parents who paid a year in advance to receive discounts, as well as those who were paying tuition a month in advance.
A story in the Bonner County Daily Bee reported that bankruptcy trustee George Miller said that due to the Chapter 7 filing status of the bankruptcy, it is unlikely that parents would receive refunds of those monies. The article also mentioned that Miller was not sure if the employees would receive their back pay for three weeks of unpaid work prior to the closure. A story in the Spokesman Review, headquartered in Spokane, WA, alleged that over $75,000 in employee contributions to the company 401k Plan did not make it into the 401k accounts prior to the bankruptcy petition. The employee 401k account is frozen pending an investigation. The Spokesman further reported that just two days after the closures, in a "too little and too late" action, the bankruptcy court approved a Teachers Insurance and Annuity Association of America (TIAA) $1.5 million emergency loan allowing the schools to continue operations until April 22, 2005. The TIAA was the other major investor in Brown Schools/CEDU. However, the children and staff were already gone and without them, there were no schools anymore with perhaps two exceptions, King George School in Vermont and Milestones in Coeur d'Alene, ID.
A story in the Caledonian-Record in Northern Vermont reported that of the seven CEDU schools, one stayed open despite the administrative directive to shut the doors. King George in Sutton, VT, stayed open after Dr. Karen Fitzhugh began working with parents to raise money to pay bills and staff salaries. Two days later, the bankruptcy court authorized the TIAA funding and approved King George to continue operations until a buyer is found. A publication in Lake Arrowhead, CA, the Crestline Courier, said that several families of former students at CEDU High School banded together to hire four former CEDU employees and provide the final two emotional growth workshops their children need to successfully graduate from the program.
Brown Schools Inc., also operated juvenile offender programs in Harrison County Texas, with about 600 students in six detention facilities and two state mandated programs for an additional 600 youth expelled by local school districts, which are continuing with county support, according to a story in the Houston Chronicle.
In mid-April, RuralNorthwest.com, published by Woodbury Reports, reported that former CEDU Education/ Brown School employees filed a lawsuit alleging that McCown, De Leeuw & Co. violated a federal rule that prohibits employers of 100 or more people from ordering a simultaneous mass layoff without a 60-day notice. However, a Bonner County Daily Bee story said that bankruptcy trustee George Miller, doubts the validity of the suit because it was not filed in Delaware. The attorneys representing the staff initiating the action assert this lawsuit is completely independent of the bankruptcy proceedings and thus is valid.
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