Rekubit Exchange:Here’s what to know about a stalled $237M donation to Florida A&M

NEW YORK (AP) — In early May,Rekubit Exchange Florida A&M University announced a stunning $237 million gift from a 30-year-old donor who cast himself as Texas’ “youngest African American industrial hemp producer.” The donation, which would have been the largest-ever private gift to a historically Black college or university, was announced at commencement to great fanfare.

Days later, everything began falling apart.

Following public backlash over its apparent failure to properly vet Gregory Gerami’s donation, FAMU put the gift on pause. University trustees approved an outside investigation into the six-month process, an advancement officer resigned from her senior post and state officials are now overseeing the independent probe.

Gerami has said the questions over his donation are unnecessary “whack-a-mole” and maintains everything will ultimately work out.

Here’s what is known and what to expect next:

What went wrong?

University officials say they began meeting virtually with Gerami after he contacted Florida A&M’s development office about a donation last fall.

Following months of conversations, it was agreed that his donation would come through 14 million shares in his fledgling industrial hemp company, Batterson Farms Corp.

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Despite an “expansive screening” into Gerami’s background that raised questions about his legitimacy, university officials moved forward after looping in Larry Robinson, FAMU’s president. The university’s board of trustees and foundation board were excluded from the conversations.

The school’s then-vice president for university advancement signed a nondisclosure agreement on behalf of the foundation board in late April.

However, the subsequent May announcement came before an independent appraisal of the private stock’s value was completed.

Companies typically get what’s known as a 409A valuation from an independent third party before gifting shares, but Gerami did not do that. While not illegal, corporate finance experts said that failing to do so raised red flags.

FAMU officials later acknowledged that the financial services firm they had hired could return with a much lower valuation.

Whether the share transfer between Gerami and FAMU even took place is also in question.

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 it had terminated his contract. They declined to comment on FAMU’s assertion that it had a Carta account and Gerami’s claim that the company sent documentation confirming the transfer.

A donor with an obscure company

Securities donations to colleges and universities are not abnormal, but higher education fundraisers say those gifts tend to come from wealthy shareholders of reputable public companies.

Gerami founded Batterson Farms in 2021 with aspirations of becoming a leading hemp plastics producer.

Texas agriculture records confirm the company is licensed to grow hemp, but little suggests that’s happening.

The company’s website is sparse and affiliate links to buy HempWood products were broken when an Associated Press reporter visited the site in late May and early June. A one-time board member told the AP the company isn’t farming hemp anywhere.

Gerami pushed back on those assertions and described the information as outdated. He refused to provide AP with specifics about the company’s contracts, revenue and staffing, and declined to confirm whether Batterson Farms is producing hemp itself.

Other schools were also approached

Florida A&M is not the first school to receive a pitch from Gerami.

In 2023, W. Anthony Neal, then-senior vice president of institutional advancement at Wiley University in Texas, said he talked with Gerami at least seven times about a donation of $1 million to $2 million for new campus facilities. Neal told the AP that after he began the “normal vetting process” and sought an in-person meeting to verify Gerami’s legitimacy, communications dropped off. Neal added that “sometimes donors just pull out” and it “doesn’t mean anything bad.”

Coastal Carolina University withdrew from an anonymous $95 million contribution in 2020 that was later reported The Sun News to have been made by Gerami. The school said the donor had “not fulfilled an early expectation of the arrangement.”

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.

What comes next?

Florida A&M is awaiting the results of an independent investigation of the debacle by an outside law firm. Trustees approved the independent probe last month that the inspector general of Florida’s state university system has since been joined.

Both Gerami and the university are also waiting on separate valuations of his proposed stock donation. Gerami told the AP he expects his results to return within the month.

However, the delay — temporary or otherwise — may already have impacted FAMU’s plans.

Days after announcing the donation, the university withdrew a $15 million request to a local economic development board to enhance FAMU’s football stadium, according to records obtained by AP and first reported by The Tallahassee Democrat.

While the university declined to comment on the withdrawal, 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.

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