Averett University’s dispute with its former investment firm will be addressed in arbitration, a federal judge ordered Wednesday.
The private university in Danville sued investing firm Global Strategic Investment Solutions and the school’s former chief financial officer in March. The suit claimed that the two colluded to hide budget deficits and drain Averett’s endowment to cover the university’s shortfall.
GSIS responded to the lawsuit in June, requesting either that it be dismissed or that the court force Averett to arbitration according to the parties’ contract.
The order issued Wednesday by U.S. District Judge Thomas Cullen specified that the parties must notify the court within two weeks of completing arbitration; at that point, the court will evaluate “any remaining disputes.”
Arbitration is a process where a neutral third party hears both sides of a disagreement and makes a binding decision to resolve it. The arbitration agreement in the contract between Averett and GSIS required that any dispute be resolved via arbitration.
“In this case, Averett brings many claims against GSIS and the individual GSIS Defendants, all of which clearly, and often by the complaint’s own admission, relate to and rely on the [advisory investment contract],” Culllen wrote in a memorandum opinion accompanying the order.
Cullen noted that, along with GSIS as a company, both GSIS’s named defendants and former Averett CFO Donald Aungst also have a right to enforce the contract’s arbitration agreement.
Aungst had filed a motion in July to dismiss the claims against him.
“We believe this is a good first step for ultimately vindicating Mr. Aungst, who has a long history of service in higher education and is unjustly being used as a scapegoat for Averett’s financial hardship,” said Aungst’s attorney, Francisco Mundaca, by email.
“We are pleased with the Court’s prompt and well-reasoned decision to compel Averett University to honor the express terms of an arbitration clause found within the parties’ governing investment advisory contract,” Curt Thompson, one of five defendants named from GSIS, said by email Wednesday. “GSIS continues to vehemently deny the allegations brought by Averett and now looks forward to vindicating itself before an independent arbitration panel.”
Averett University spokesperson Cassie Jones said late Wednesday, “we choose not to comment on pending litigation.”
The school had claimed in opposition to arbitration that the process would be too expensive.
“Averett’s financial distress is very real. It cannot afford a costly arbitration process,” the university said in its June response to the motion to compel arbitration. “Funds that could be directed to paying down Averett’s accounts payable or to keep staff and faculty employed should not go toward expensive hourly rates charged by one or more arbitrators.”
“While the court is sympathetic to Averett’s financial predicament, its speculative fears are not enough,” Cullen wrote in his opinion.
Averett University had net assets of about $36 million as of June 2024, according to a draft audit that reflected a decrease of about $9 million from a year prior. Just $1.3 million sat in its endowment’s unrestricted fund.
Averett is on its third president since revealing its financial crisis in late spring 2024. Along with instituting temporary furlough days for employees and cutting academic programs with low enrollment, it put its equestrian center and president’s house on the market and raised nearly $10 million from donors.
The university is waiting on a decision by bondholders on whether to waive recent violations of its bond covenants.
Averett owes about $13 million in municipal bonds. Averett is current on its payments but is in default for failing to meet required measurements showing its ability to repay its bonds.
Being out of compliance with its bond terms could damage the university’s standing with its accreditor, according to a letter from Averett to the bond trustees in late June. The Danville Register & Bee first reported on the details of that letter.
In a call with bondholders on July 7 to make its case for waiving its bond covenant violations, Averett presented a budget update showing financial improvements made in fiscal 2025 and noted that “Averett is in discussions with a third party regarding a potential transaction that will provide additional liquidity to the School on an expedited basis,” according to slides uploaded to the website of the Municipal Securities Rulemaking Board, which enforces regulations on municipal bonds.
The presentation also showed a fall 2025 enrollment estimate of about 1,350 — about 100 students fewer than the year prior.
Update, August 7, 9:50 a.m.: This story was updated to include a response from Averett University.