AIKEN — Whether Aiken’s Compass Academy opens its doors to students this fall could be decided by a court-appointed receiver, if the South Carolina Attorney General’s Office has its way.
The attorney general is seeking to place a receivership over the businesses of Jonathan and Tracy Brooks in order to protect investors in the private school under construction on Toolebeck Road, east of Aiken.
Stan Jackson, the attorney for the couple, confirmed Friday that a consent order and receivership had been proposed by Assistant Attorney General Tracy Meyers. Such action would be a way to lift a temporary restraining order filed in the 5th District of South Carolina Court of Common Pleas, which freezes the use of Security Federal bank accounts belonging to Jonathan W. Brooks, J. Brooks Financial Inc., Brooks Real Estate Holdings and Compass Academy.
That order is set to be extended Monday unless the Brookses agree to the receivership, Meyers said Friday. She said a court-appointed receiver would serve the best interests of the investors, which could mean continuing construction of the school or liquidating the assets.
Jackson said he is seeking a solution that will ensure the K-12 school will be completed and open for students in August as planned. He’s concerned a receiver will not want to do that. His clients could request a public hearing and seek a compromise in the form of a decision by a judge.
Meyers said her office is only concerned with enforcing securities regulations and protecting investors.
“It’s not about the school, it is about the securities,” she said. “It is about the money – how it was raised, what people were told and how it was spent.”
According to a March 5 complaint filed by Meyers, Jonathan Brooks is accused of violating securities regulations, including selling unregistered securities, committing fraud and making false and misleading statements. The complaint seeks to place Brooks’ assets, including those of Compass Academy in the control of a receiver, to disgorge all “ill-gotten gains” and impose civil penalties of $10,000 per violation of the state securities act.
Brooks’ state registrations as a financial adviser and broker-agent also have been suspended. The complaints do not accuse Brooks of criminal wrongdoing, but the matter has been referred to the attorney general’s criminal division.
In addition to the securities complaint, the couple is facing two lawsuits filed in recent weeks related to their involvement with Compass Academy.
The first, filed Feb. 25 by Caniglia Management Group and Thomas and Joshua Caniglia, alleges breach of contract. According to the suit, the Caniglias were hired by Jonathan and Tracy Brooks to assist with selecting property for Compass Academy, negotiating with the architect, help with zoning, permits and utilities issues and to act as a liaison between “contractors, builders and architects and city, county and state officials,” among other duties.
The Caniglias were supposed to be paid a fee equal to 5 percent of the project’s total cost, or $350,000 in increments set in the contract, the lawsuit said. The lawsuit alleges they were paid $17,000 and then told in June their “services were no longer needed because the Texas investors had refused to permit any further payments.”
The Brookses have not yet filed a response to the lawsuit. Jackson said he was not representing them in the matter, nor in another lawsuit filed March 8.
That suit, filed by Aiken County resident Sandra Fadeley, alleges Jonathan Brooks or another person forged Fadeley’s name on financial documents, sold stocks without her knowledge or consent and transferred more than $470,000 of those funds to the Compass Academy account at Security Federal bank.
Fadelely is seeking class action status for the case, a jury trial and unspecified damages.
Neither Jonathan nor Tracy Brooks have commented publicly about the situation since the attorney general’s actions were reported this month.
They did post a statement last week on the Compass Academy Web site, which denied all wrongdoing.
The statement, which has since been removed, said, “No lenders have complained about their funds. All of this will pass in time. The future will prove us right. We did nothing wrong and time will give evidence to this.”