Settlement finally in sight for Kathy Cox’s game show million; schools and creditors will split the prize

Under a settlement, half of the million dollars that Kathy Cox won on a game show will go to education. The other half will go to creditors.

Under a settlement, half of the million dollars that Kathy Cox won on a game show will go to education. The other half will go to creditors.

I am sure former state school chief Kathy Cox is relieved to have this settled, but I wish all her winnings from becoming the first grand prize winner on the game show “Are You Smarter than a 5TH Grader?” could have gone to education, as she wanted.

Instead, the three schools Cox designated will get half of her million dollar first prize, and her husband’s creditors will get the other.

Three months after Cox  won the show in 2008, builder John  Cox, filed for Chapter 7 bankruptcy protection, a victim of the housing market collapse. The state Board of Education argued that the superintendent would not have been invited to the program other than in a position of playing for a charitable interest and the the money should go to the schools.

According to the AJC:

Three schools for blind and deaf children will receive half of the $1 million won on a TV show by former state schools Superintendent Kathy Cox, under a recently proposed court settlement.

A legal tug-of-war over the prize winnings has been going on for more than a year in the Chapter 7 bankruptcy case filed by Cox and her husband, John Cox, a home builder.

In September 2008, Cox appeared on the game show, “Are You Smarter than a 5th Grader?” and aced it, winning the $1 million prize. Cox had said if she won, she would give her winnings to the Georgia Academy for the Blind in Macon, the Georgia School for the Deaf in Cave Spring and the Atlanta Area School for the Deaf in Clarkston.

All three schools, while state-run, do not rely on local funding. Cox said she wanted the money to help build nest eggs for scholarships.

Two months after the game show appearance, the Coxes filed for bankruptcy protection, citing more than $3.5 million in liabilities and less than $650,000 in assets. Last year, Gary W. Brown, the Chapter 7 trustee, filed suit seeking to claim the $1 million for the Coxes’ creditors.

Since February, the money has been deposited into the registry of the U.S. Bankruptcy Court in an interest-bearing account. Under the proposed settlement, the interest earned from the winnings also would be split in half.

The proposed settlement must ultimately be approved by U.S. Bankruptcy Judge W. Homer Drake in Newnan. All parties and creditors in the case had to file a response to the court by today if they had an objection.

45 comments Add your comment

Martina

September 29th, 2010
4:59 pm

A list of the creditors should be published. They should be ashamed to take money from these children!! The debt is obviously her husband’s, not hers and the money was designated for charity from the beginning. I would love the know the businesses so I can contact them.

look closer

September 29th, 2010
7:00 pm

If Kathy Cox were truly smarter than a 5th grader, she would have made appropriate arrangements to avoid this mess in the first place. Prior to appearing on the show, she could have easily arranged for the network to make a direct donation to the schools so that she never took possession of any money and the creditors would have had no claim on it.

ChristieS.

September 29th, 2010
7:13 pm

I agree with Martina. It’s a matter of ethics for me. Do the creditors have the legal right to half the money? Well, somebody in authority said they did. But is taking the money out of the hands of these deaf and/or blind students the ethical thing to do? Not in my opinion. That just stinks.

john konop

September 29th, 2010
8:15 pm

Should Kathy Cox get a tax write-off for donating the money?

Shannon

September 29th, 2010
8:20 pm

I agree with “look closer.” Cox knew she was in financial trouble, and it would’ve been easy for her to set up proper arrangements with the show.

Bottom line is that you have to pay your bills before you can donate to charity, even if you do so on national television. There’s nothing wrong with those businesses seeking to take the assets of someone who filed bankruptcy rather than paying her bills.

Bankruptcy protection is there for a reason. The reason is not to let millionaires give $$ to charity while claiming poverty. Sad as this situation is, it’s Cox’s fault for putting the $$ in her name.

Atlanta mom

September 29th, 2010
8:35 pm

Kathy would have to declare the million dollars as income on her tax return before she could take a tax write off for donating the money

PappyHappy

September 29th, 2010
9:59 pm

Disappointed in Ms. Cox. She just seemed incapable of getting the job done in improving the plight of public schools in Georgia. Where was she on the Clayton County debacle? The Governor had to lead that effort with some specific State School Board members. There were signs that APS was in trouble going back to the autistic child being abused a couple of years ago. Surely she knew that APS had a problem, and if she didn’t WHY DIDN’T SHE? Warren County was still another system that the Governor had to fire the board to preclude their losing their accreditation. Did Cox no nothing about that either? I was shocked to see her name on the primary ballots — AFTER SHE HAD LEFT TOWN! She sure had an undistinguished term in the Superintendent’s chair, and some of our lack of jobs now may be due in part to her LACK OF VISION AND ACTION!

Billy Bob

September 29th, 2010
10:28 pm

I thought Georgia might be taking a small step forward on Education when this fat, blob cheerleader Kathy Cox left. I thought we might have a chance to repair her damage and soon be rid of Sonny and his meddling in Education. Now, it looks like Sonny wants to leave us with this Race to the Top mess….staffed by his highly paid kiss-ass goofs. Maybe the next Governor – Republican or Democrat – will have the good sense to clean house and start over with new people who think rather than just nod yes!

td

September 29th, 2010
11:46 pm

Maureen, Is there a way that the AJC could list the names of the creditors that received this money? I think if they id and the people started calling then these companies would have to come up with contributions to the schools. This is a chance for the paper to make a real difference for education.

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RobertNAtl

September 30th, 2010
5:35 am

1. The creditors provided goods/services they did not get paid for. The money they lost may have put them out of business and cost people their jobs and livelihood. To paint them as greedy rich people who didn’t really need the money is absurd.

2. The three schools who are the beneficiaries of Kathy Cox’ false charity shouldn’t be relying on charity anyway. The state ought to be funding them adequately, including “nest eggs for scholarships” if that is so important, with tax money from all of us.

john konop

September 30th, 2010
7:09 am

Atlanta mom,

Kathy Cox is making over 250 thousand dollars a year in her new job as a lobbyist. And you do not need to make over a million dollars a year to get tax write-offs for charitable donations.

catlady

September 30th, 2010
7:10 am

I am afraid I agree with Robertnatl. If your business had sold the Cox business $400,000 in materials and driven you out of business, and you could get $20,000 of that back, wouldn’t you wan to?

However, I DON”T think she would have been invited if she had just been a frumpy schoolteacher.

john konop

September 30th, 2010
7:12 am

Shannon ,

Good points, also if you are going bankrupt and know you have a high paying job this could be used as a way to keep some of the money via the tax code.

lionel

September 30th, 2010
8:40 am

mr. konop’s dislike of ms. cox is a very well known fact, but i wonder if his personal feeling is blinding him to the fact atlanta mom raised. i think atlanta mom simply said if that 1 million dollars were not declared cox’s income, there is no money her own that cox can declare that she donated. it has nothing to do with how much money cox is making.

on the other hand, it’s hard to believe a judge can say that the creditors can have a half of that money if that money wasn’t, even just on the record, considered as belonging to the cox’. so i suppose she can claim charitable contribution, and i don’t think anything wrong with that because if the money is considered as her income, she probably owes taxes on that money, too.

john konop

September 30th, 2010
8:48 am

Lionel,

First I have no personal dislike of Kathy Cox only her performance in her job. Second the deduction would be $500,000 dollars not 1 million since 50% went to the creditors. Third we have no idea if Kathy Cox got a signing bonus….. on top of her $250,000 dollar salary. Lobbyists do have great deals! Finally I am no accountant but she may be able to roll it forward.

john konop

September 30th, 2010
8:56 am

Lionel,

Once again I am not an accountant but it would seem she would have losses from the family failed businesses that would wipe-out a good deal of the income taxes for years. But known of us know the exact details but we should not assume one way or another that this was done for the right or wrong reasons. Kathy Cox could voluntary release her tax returns during the time period and the future to get a better prospective of her real motives.

…..if the money is considered as her income, she probably owes taxes on that money, too…..

Maureen Downey

September 30th, 2010
9:10 am

@Td, I will check, but I believe the creditors include some banks.

mystery poster

September 30th, 2010
9:12 am

Does anyone else think that Cox winning the million dollar prize smelled like a fix?

I mean, really. No one wins the prize and then the first one who does says they’re going to donate it to schools for the blind and deaf? Come on.

john konop

September 30th, 2010
9:32 am

sorry

…But none of us know…..

Maureen Downey

September 30th, 2010
9:33 am

mystery poster, I think she won the prize fair and square. She taught social studies and is an Emory grad. Kathy Cox is a smart woman. And I think there have been winners since. I am not sure if you ever saw the show but the celebrity guests are often not as bright or well educated as Cox.
She was probably one of the best educated guests I ever saw on the show.
Maureen

john konop

September 30th, 2010
9:36 am

look closer ,

You are right, that is the reason I am suspicious from what I read Kathy Cox originally wanted to set up a charitable trust which would have given her the right to pay herself and or family members without paying creditors.

john konop

September 30th, 2010
9:38 am

Enter your comments hereMaureen Downey,

I guess math was her weak subject!

lionel

September 30th, 2010
11:35 am

what atlanta mom said was whether or not kathy cox can claim charitable contribution all depends on her winning (whether you consider that to be $1 million or $0.5 million) was considered as her income. if it was, then it is perfectly fair for her to claim the donation on her tax return. if it is not, then she can’t. isn’t this just a common sense? i thought you run a business – you can’t claim business expenses for spending someone else’s money, can you? or do you do that regularly for your business?

john konop

September 30th, 2010
11:52 am

Lionel,

That does bring up an interesting point, what if Kathy Cox used her own credit card and got reimbursed for the travel and never paid the credit card company? My point is simple none of us will know the truth unless Kathy Cox release her tax returns for the time periods that this transaction affects.

As far as your nasty accusation I will just consider the source. Now you even insult my CFO to protect Kathy Cox.

….i thought you run a business – you can’t claim business expenses for spending someone else’s money, can you? or do you do that regularly for your business?…..

Atlanta mom

September 30th, 2010
11:47 pm

Goodness gracious, I haven’t been back to this blog since I first posted, but thank you lionel, you understand tax law and Mr. konop is out of his field of expertise.

lionel

September 30th, 2010
11:51 pm

john konop,

if kathy cox did what you insinuating she did, then she would be certainly guilty. you just want to throw mud at her simply because you didn’t like her policy. you really make me wonder how you run your business.

Atlanta mom

September 30th, 2010
11:54 pm

And let us not forget, the courts could have (and easily justified) all the money going to the creditors. Sorry folks, that just the way the law works. So, the fact that the schools got 50%–that’s a bonus that everyonoe involved with the schools should simply say thank you. As should Kathy.

smh

October 1st, 2010
6:48 am

Regardless of tax issues or feelings about Cathy Cox I am interested in seeing a list of the creditor’s names. I watched the episode of the show. She clearly wanted the money to go the school(s). I think it stinks that creditors are fighting over these funds.

john konop

October 1st, 2010
7:32 am

It is fine to give away YOUR OWN MONEY, but to use other people’s money without their permission to give away money is wrong!

If you lent money to a person who went to Vegas and won money and they stiffed you for the loan how would you feel if they gave part of the money they owed you to a charity without your permission?

lionel

October 1st, 2010
8:49 am

so john, you would rather have kathy cox used all $1 million to pay the creditors of her husband’s failed business. is that your point? as far as i know, i don’t think kathy cox used the money her husband’s business borrowed to be in this game show – i imagine the tv network paid for her trip, too. does that matter?

john konop

October 1st, 2010
9:51 am

Lionel,

If someone owed you money went on a trip and won cash and gave it to charity do you think that is right or wrong if it is right why? Kathy and her husband have been living off creditors money or they would have had the money to pay them back.

The 1 million dollars could have been used to pay the bills she owed. Is it fair to the people who did not get paid and probably lost their job? What if I made a donation in your name and forced you to honor the donation would that be fair? What if the donation I put in your name forced you to file bankruptcy, not pay you kids tuition at school……..?

john konop

October 1st, 2010
9:59 am

Anyone who knows me would tell you that my view on this issue has nothing to do with Kathy Cox. I have been very public about being a fiscal conservative. Maureen knows from my posting on her website that on this issue I have been very consistent form school funding, pensions….. In fact when I ran for office, no one can deny that this was not a key cornerstone of my campaign ie warning about fiscally irresponsible behavior creating a major down-turn during the height of our economy, the AJC even called me “chicken little” for my warnings back than.

LLL

October 1st, 2010
11:43 am

Mr. Konop,

It is hard to believe that your view of Kathy Cox “has nothing to do” with your opinion in this matter.

But, legally speaking (though I am not a lawyer), it seems like it all depends on how her husband’s job was structured. When you establish a company, you do it in part to separate it from your own personal properties, don’t you? Do you consider your own homes, cars, and other possessions belong to the company in such a way that, heaven forbit, ifyour company goes under they should all be used to pay off your creditors?

john konop

October 1st, 2010
11:57 am

LLL,

I thought for one it was a personal bankruptcy since their home was listed. Also if they co-mingled funds ie credit cards, usage of cars, homes…….which is fairly common in small businesses it is not that simple. Once again I am not a lawyer.

….In the paperwork filed on Monday the couple listed $3.5 million in liabilities and $649,728 in assets. Their $450,000 home in Peachtree City has two mortgages on it………

http://www.wsbtv.com/news/18040446/detail.html

john konop

October 1st, 2010
11:59 am

BTW WIKI calls it personal.

….Personal bankruptcy…..

http://en.wikipedia.org/wiki/Kathy_Cox

LLL

October 1st, 2010
12:22 pm

Wow, they have a wiki page on Kathy Cox? I wonder if they have a page on me. I couldn’t find Mr. Konop there, unfortunately.

Anyway, according to the WSB link, she won $1 million before the Cox’ declared for bankrupcy. So, why can a creditor (or creditors) go back to that money? I mean, can they go back to another vendor who got paid by the Cox’ and use that money to pay off the liability? It seems really strange to me.

Cissy

October 1st, 2010
12:31 pm

Martina, Amen! But the creditors’ names are already public records in the Bankruptcy Court. Someone should publish them. Ms. Downey?

I understand that the Coxes were living on creditors’ money. But I also do not think that Ms. Cox ever intended to make that prize money hers; and I think she could make a good case that she was always playing for charity, not for her personal gain. It seems to me that the creditors were grasping here for money to which they really were not entitled.

I am guessing the Coxes agreed to a settlement because it was cheaper than litigating the matter in bankruptcy court. But I would like to know which businesses insisted on grabbing money that had been earmarked for three schools that serve kids who really need help and their families. I’m betting the creditors could better afford to write off the loss than the schools can afford to lose the money.

john konop

October 1st, 2010
2:42 pm

Cissy,

What you saying is if you lent money to someone and they went to Vegas and won money and did not pay you it is ok because they gave the money to charity?

I am guessing if it was YOUR money you would have a different attitude. Can I donate your money to any charity I want and send you the bill without your knowledge of what charity until you pay it? If so please give us your name and address so we can help people today! And if you do not pay can we have the AJC publish your name and write a nasty article about you did not pay the bill to a charity leaving out the point you never agreed to give away the money?

Was it?

October 1st, 2010
3:28 pm

@ John,

But did Kathy Cox use the money her husband’s business borrowed to go to participate in the game show? If her intention was to participate in the game show as the state superintendent and designate whatever the winning to the selected schools, then her husband’s business has no say in that money. Just as your creditor will have no say in the money your wife makes. Isn’t that reasonable?

john konop

October 1st, 2010
4:34 pm

Was it,

It was listed as a personal bankruptcy on WIKI and news organization even listed her house.

….But did Kathy Cox use the money her husband’s business borrowed to go to participate in the game show?…..

Did she use a personal credit card on this trip? Did she take a personal day or was this official state business? If it was official state business is this the best use of state money? Why did the papers report she was opening a charitable trust controlled by her if she was just giving the money away? Should Kathy of spent any personal money on this trip knowing they were stiffing close to 3miilon dollars worth of creditor?…. We have no idea of any of this but Kathy could straighten it all out by telling everyone. And once again it appears it was a personal bankruptcy.

….If her intention was to participate in the game show as the state superintendent and designate whatever the winning to the selected schools, then her husband’s business has no say in that money….

Not true it depends what was in contacts and or loan documents with the creditors. Once again if you loan money to a couple they are both responsible. And if it was your loan to Kathy Cox and her husband I would bet you would have a different view. If not would you let anyone borrow money from you give it to a charity of their choice without your knowledge or permission and not pay it back?

…..Just as your creditor will have no say in the money your wife makes. Isn’t that reasonable?….

john konop

October 1st, 2010
4:42 pm

It appears the difference between us this debate is a simple concept of personal responsibility. I do understand that people get into fincial trouble and file bankruptcy. On this part I do feel bad for Kathy Cox and her family. BUT, giving away money to a charity when you are around 3 million dollars upside down and letting people scream at the creditors like they are the bad guys for wanting their money seems rather bizarre!

All of you who support this behavior avoid the point how you would react if that was your money on the table.

lionel

October 1st, 2010
5:17 pm

kathy cox has not asked me to scream at the creditors, nor have i ever met her.

i just feel your argument to be insincere and illogical. you are saying that if you own anyone money, you should never do any charity work instead you should be focusing your time, 24 hours a day, on making money to re-pay the creditors.

whether kathy cox was on the official state time or on her own personal time, i have no idea, but i imagine if you really want, you can probably find out. you might be able to find out from the network whether or not they paid kathy cox’s travel. we have seen tv network give scholarship money to universities on behalf of an athlete who performed well in the game being televised. should the money be used to re-pay any debt the student athlete might have first? was it ever his money? was $1 million ever kathy cox’s money?

john konop

October 1st, 2010
5:36 pm

NO, what I am saying is if you give away money with no ability to pay back your creditors that is wrong! Once again we disagree on personal responsibility.

…you are saying that if you own anyone money, you should never do any charity work instead you should be focusing your time, 24 hours a day, on making money to re-pay the creditors…..

It seems the court felt it was not as clean as you propose or they would not of given the money to the creditors.

….we have seen tv network give scholarship money to universities on behalf of an athlete who performed well in the game being televised. should the money be used to re-pay any debt the student athlete might have first? was it ever his money? was $1 million ever kathy cox’s money?……

little me

October 3rd, 2010
12:56 pm

I am not an attorney, but it really doesn’t matter who got the money – whether it was Mrs. Cox or her husband. They are married and the money is considered to be marital property… meaning that assets and liabilities are jointly shared.