Eastern Gateway Can’t Sell or Transfer Property

COLUMBUS, Ohio – Eastern Gateway Community College may not sell, transfer, move or encumber its Steubenville property until further court order.

That’s the ruling posted Tuesday by Chief Judge Algenon L. Marbley of the federal Southern District of Ohio, and it could delay Youngstown State University’s plans to open a Steubenville campus.       

Student Resource Center sued Eastern Gateway in 2022 after the college ended its agreement with the company. SRC is the company with which Eastern Gateway contracted for its free college benefit program. That program enabled union members from across the country to attend classes and earn degrees at no cost to them. Most took classes virtually.

Eastern Gateway stopped enrollment after spring semester and will dissolve this fall. The college had announced last May its plan to sell its Pugliese Center to Steubenville City Schools. 

The other building on campus was deeded to the college in the 1960s by Jefferson County commissioners with a clause that it would revert to the county if the building ceased use for educational purposes.

In June, SRC filed a motion for prejudgment attachment in its case against the college to prevent the college from liquidating or dissipating its assets.

SRC contends it has suffered more than $50 million in damages in unreimbursed operating expenses, withheld profits and other damages.

SRC’s June motion contended the sale of the Pugliese Center to Steubenville schools and Eastern Gateway’s plans to use the money for operating expenses would place the property “beyond the reach of SRC, should SRC obtain a judgment against EGCC in this action for the recovery of money …”

Regarding the other campus building, the motion refers to the reverter clause “that may dispose of the property in a way long intended to shield it from creditors.”

Eastern Gateway had argued in its motion that it was $29 million in debt and that it planned to use the proceeds from the Pugliese Center property sale to pay its creditors and that it was not placing it beyond the reach of creditors.

The judge agreed with the company.

“Selling the Pugliese Center and telling SRC to ‘secure a place in line’ behind other creditors would place the property beyond the reach of SRC” in the case, Marbley wrote.

His ruling says Eastern Gateway “shall not transfer, move, sell or encumber the Pugliese Center, located at 110 John Scott Highway, in Steubenville, Ohio, or the Steubenville campus property, located at 4000 Sunset Blvd., in Steubenville, Ohio, until further order of the court.”

Jefferson County commissioners have intervened in the case.

Commissioner Eric Timmons didn’t know of the ruling until contacted by The Business Journal.

“I think it’s just wait and see right now,” he said.

YSU hoped to be able to lease the campus classroom building from Jefferson County for a YSU Steubenville campus.

“Our plan is we would like to use that facility right there and continue providing what we believe is going to be a significant step up in quality of education for the entire region,” YSU President Bill Johnson said in an interview earlier this month.

But he said there are legal and regulatory challenges that complicate the situation.

YSU established more than 60 associate and certificate programs starting this fall to serve former Eastern Gateway students both at YSU’s main campus and online. A Steubenville campus would come later.

Eastern Gateway has been struggling for the past few years, stemming from its free college program. 

The U.S. Department of Education in 2022 placed the college under Heightened Cash Monitoring 2, meaning the college had to use its own resources to credit student accounts and wait for federal student aid reimbursements from the federal department. 

Later that year, USDOE ordered Eastern Gateway to end the free college program, saying students who received Pell grants were paying more than those who didn’t. It prohibited Eastern Gateway from dispersing Pell Grant funds, which accounted for about 74.5% of the college’s overall revenue.

The college sued the federal agency, saying USDOE’s actions threatened Eastern Gateway’s continued operation as a community college.

The two sides reached a settlement in August 2023, and the free college program ended.

Enrollment, which had swelled to about 40,000 students under the free college program, plummeted after the program ended.

Copyright 2024 The Business Journal, Youngstown, Ohio.