The Bill & Melinda Gates Foundation awarded a just under $500,000 grant to ConnectEDU back in July 2013 to develop an interactive program to improve literacy under the Common Core educational standards that many states use today.
However, the Gates Foundation grant to Connect EDU came with very specific conditions, including a commitment to only use the funds to develop the new technology as well as a timeline requiring the completion of benchmarks for the project. The grant, which was paid out to the company in two separate installments, and was set to be wrapped up and the interactive learning project delivered by the end of this year.
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ConnectEDU was one of 30+ organizations to receive an award as part of the Gates Foundation’s Literacy Courseware Challenge. The program was designed to support the creation of a broad range of digital literacy tools to help students in grades 4-8.
Connect EDU bankruptcy
Connect EDU’s contribution to the Literacy Courseware challenge, however, was derailed earlier this year when ConnectEDU filed for Chapter 11 bankruptcy protection (claiming an estimated $33.7 million in liabilities and $17.7 million in assets). This left the project in limbo, and the foundation has been trying to retrieve the remaining funds from the grant outside of the bankruptcy.
Gates Foundation legal steps
Since the bankruptcy announcement, the Gates Foundation has taken a number of steps to ensure that the grant money is kept in a separate account and to have any unused portion returned to the organization, Furthermore, according to a filing in the U.S. Bankruptcy Court in New York, multiple requests for information from ConnectEDU’s counsel at Lowenstein Sandler by the foundation have gone unanswered.
Lowenstein Sandler had not responded to requests for comment as of Wednesday afternoon.
The Gates Foundation has now taken the step of requesting the court to direct ConnectEDU to respond to its questions and remit relevant documents by Sept. 12. The foundation says it needs more information to determine the size of its bankruptcy claim, and is “in danger of non-compliance” with IRS tax reporting requirements.