Friday, Jun 14, 2024 6:21 AMUpdated Friday, Jun. 14, 2024 8:43 AM
NEW YORK (AP) — It would have been the largest-ever private gift to a historically Black college or university: $237 million — far beyond the recipient’s endowment. The money was promised by a 30-year-old who had recounted his rise from a childhood in foster care to becoming, as he put it, Texas’ “youngest African American industrial hemp producer.”
And so, the first weekend of May, Florida A&M University celebrated Gregory Gerami’s extraordinary contribution with all the necessary pomp. He spoke at commencement. Regalia-clad administrators posed with a jumbo check. Gerami even assured the audience that “the money is in the bank.”
It wasn't, and it may never be.
Following public backlash over its apparent failure to properly vet Gerami and the donation, FAMU said the gift is now on pause — dashing expectations of increased financial stability for the 137-year-old institution and its 9,000 students. Gerami maintains everything will ultimately work out, but other small universities he approached with proposals for major donations never got any money.
An eye-popping gift from an obscure company
Gerami contacted Florida A&M’s development office about a donation last fall, according to Shawnta Friday-Stroud, then-vice president for university advancement. University officials, including President Larry Robinson and Athletic Director Tiffani-Dawn Sykes, began meeting with him virtually shortly thereafter.
In January, Atlanta's Spelman College publicized a $100 million gift — then considered the single largest donation to any HBCU. FAMU officials say Gerami wanted to surpass that figure. They ultimately agreed it would come through 14 million shares in his fledgling industrial hemp company.
However, the value of the company — and those shares — remains unclear.
Gerami founded Batterson Farms Corp in 2021 with aspirations of becoming a leading hemp plastics producer. While Texas Department of Agriculture records confirm the company is licensed to grow hemp, little else suggests that's happening.
The company's website is sparse. Affiliate links to purchase HempWood products were broken and the shopping cart payment function failed when an Associated Press reporter visited the site in late May and early June. A confusing message to investors also warned of late fees for failing to complete monthly payments on time.
Kimberly Sue Abbott, a founding board member who told the AP that she was incorrectly listed as co-CEO, cast doubt on Gerami’s self-reported value of the shares and said Batterson Farms “is not farming any hemp anywhere that I’m aware of.”
She and Gerami met around 2013 during her time on the Birmingham City Council in Alabama. She felt he needed guidance on how to “do something good with his money.” He has since invited her to partake in various ventures — none of which lasted, she said.
“He never holds to a schedule. The information that he has is always flawed somehow. Technicalities are always an issue,” she said.
Greg Wilson, HempWood's founder, confirmed that Gerami is a customer but said he doesn't buy much. High interest rates have dampened both home sales and interest in remodeling with products like his, Wilson said, making it a bad time for wood-alternative businesses.
Gerami described Abbott's characterizations as “inaccurate” and outdated. Without answering whether or not Batterson Farms is growing hemp, he said his company acts as an intermediary between farmers and consumers. He refused to provide specifics about the company's contracts, revenue and staffing.
He also claimed that a third-party developer created the company's website, which he said was never intended to be a place where people could directly buy flooring.
NDAs, ‘misrepresentations’ and a lack of due diligence?
Florida A&M officials have shared little about their knowledge of Gerami or their vetting process.
Friday-Stroud told FAMU Foundation board members last month that an “expansive screening” into Gerami's background produced the same information that ended up “on social media,” apparently referencing online upset over his previous reported donation attempts and his company's obscurity.
Still, she said, they moved forward after looping in Robinson. Friday-Stroud signed a nondisclosure agreement on behalf of the foundation board on April 26 at Gerami’s request, according to a copy obtained by AP.
They also announced the donation while awaiting a still outstanding independent appraisal of the private stock’s worth, which Gerami said he assessed based on existing but undisclosed sales contracts.
Officials have acknowledged that the appraisal could return with a much lower valuation.
Stock donations and NDAs are not abnormal for university advancement offices. However, according to some higher education fundraisers, such donations usually come from wealthy shareholders of reputable public companies and NDAs should include the entire foundation board.
“You want to make certain those resources are available, always, before you make the announcement,” said W. Anthony Neal, a longtime HBCU fundraiser who dealt with Gerami in the past. “Because you don’t want to come back with egg on your face.”
Companies typically get what’s known as a 409A valuation from an independent third party before gifting shares, said Bob Musumeci, an Indiana University business professor with a background in corporate finance.
Equity ownership, employee numbers, financial projects and other details all factor into the assessment. Outside investments from things like a family trust can also boost a company's worth beyond what sales numbers — and public data, if available — might suggest.
Gerami didn’t break any laws by flouting that norm, Musumeci said, but the fact that the gift wasn't properly assessed before being publicized is questionable.
“I would certainly be cautiously pessimistic about it. But I can’t say whether it is or it isn’t,” he said of the valuation's accuracy.
Both FAMU and Gerami have said the transfer of the stock certificates between their respective accounts took place in April.
A spokesperson for Carta, the equity management company they say completed the exchange, would only confirm that the platform notified Gerami on May 14 that his contract was terminated over “misrepresentations” he'd made. They declined to comment on FAMU's assertion that it had an account with Carta and Gerami's claim that the company sent documentation confirming the transfer.
Small schools with small endowments
Florida A&M is not the first school to receive a pitch from Gerami.
Neal, the HBCU fundraiser, was overseeing a $3.4 million fundraising campaign in 2023 for the 150th anniversary of Wiley University in Marshall, Texas, when Gerami reached out. They discussed funding for new campus facilities in the $1 million to $2 million range, Neal said, and he began the “normal vetting process” as the senior vice president of institutional advancement at the time.
But not a lot of information surfaced. After at least seven conversations, Neal sought a one-on-one meeting to verify Gerami's legitimacy in person. Communications subsequently dropped off.
“Sometimes donors just pull out,” Neal said. “Doesn't mean anything bad.”
However, three years prior, Coastal Carolina University also withdrew from a $95 million contribution made by an anonymous donor because he had “not fulfilled an early expectation of the arrangement,” according to a press release.
While CCU declined to name the anonymous donor in an email to AP, Gerami was identified as the benefactor last spring by The Sun News in Myrtle Beach, South Carolina.
Gerami told AP that he “considered” as many as 15 colleges and universities in recent years as part of a strategy to establish research partnerships that he said would make his company eligible for grants. Though Gerami did not disclose the names of those schools, those documented are all small institutions with scant endowments. He said he eyed institutions that needed funding and had the capacity for hydroponics, a method of growing plants without soil.
A transformative gift gone sideways
The fallout at FAMU is palpable.
The school ended its engagement with Gerami. Friday-Stroud resigned. University trustees — surprised they were left in the dark throughout the six-month process — approved a third-party investigation that state officials have joined.
Speaking May 15 before the trustees, Robinson described the announcement of Gerami’s gift as “premature at best.”
“I saw in this unprecedented gift the potential to serve our students and our athletic programs in ways unimaginable at that time,” Robinson said. “I wanted it to be real and ignored the warning signs along the way.”
Days after announcing the donation, Robinson withdrew a $15 million request to a local economic development board to enhance FAMU’s football stadium, according to records obtained by AP.
While he did not give a reason and the university declined to comment, the gift agreement shows a one-time $24 million allocation of Gerami’s donation for athletics facilities.
Millions annually were also supposed to fund scholarships, the nursing school and a student business incubator over the next decade.
The public embarrassment has worried some HBCU supporters, who hope the outsize negative attention won’t dampen an otherwise resurgent fundraising atmosphere.
“As somebody that wants HBCUs to always succeed, this is really heartbreaking because there was so much excitement,” said Marybeth Gasman, an education researcher at Rutgers University and three-time HBCU board member. “Just real, real excitement for just a transformative gift of this magnitude.”
There was a time when HBCUs might have had to gamble on an unknown miracle donor, but Gasman said that’s less common now. Long overlooked by foundations and underfunded by some states, the schools have courted and gained newfound corporate interest in recent years.
Still, public funding disparities persist. Historically Black land-grant universities in 16 states missed out on $12.6 billion over the past three decades — including $1.9 billion that should have gone to FAMU — according to a 2023 Biden administration analysis.
For his part, Gerami believes the questions over his donation are unnecessary “whack-a-mole.” He admitted the sum of his donation was his own estimate, but said he expects an independent valuation will confirm the shares' worth within the month. He said he also believes FAMU will accept the gift once its independent probe is complete.
“Until a third-party valuation is done, this is all speculation,” Gerami said.
“We want to tread very carefully because we do not want to play games that lead to speculation without actual, factual information,” he added.
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