DAVID — The hollow is deep-green and tranquil where the David School sits near an old coal town in the hills of Floyd County, but uncertainty surrounds the school.
A transplanted New Yorker, struck by the poverty in Appalachia, founded the high school in the early 1970s as an alternative for students at risk of dropping out of public schools.
The school has nearly always wanted for money, but there are fears its financial condition has hit rock bottom.
Contributions have dwindled in recent years. Paychecks were late recently, and the school dropped its lunch program.
Supporters are concerned the school has no functioning board, and the Kentucky Attorney General's Office is seeking information on the school's finances and on payments to its founder and longtime director, Daniel J. Greene.
Greene may have used his position to "unlawfully divert, convert or otherwise misappropriate charitable assets of The David School for his own use..." the Attorney General's Office said in a court document in mid-April.
Greene, who will be 62 this month, told the Herald-Leader he has never wrongly taken money from the school.
Greene said he is trying to arrange a meeting with the Attorney General's Office this week to resolve the questions.
Others doubt the issue will be settled so soon, and there are concerns whether the school, after nearly 40 years, will open next fall.
"The biggest concern of the kids is whether their school is going to make it through this," said Diantha Daniels, the principal. "Several have said, 'If the David School is not here, I'm going to drop out.' "
Brooklyn to Appalachia
Greene, a native of Brooklyn, N.Y., told an interviewer in 1989 that he came to Eastern Kentucky "on a lark" as a college freshman in 1968 to "do an Appalachia tour."
The Appalachian coal economy had bottomed out years before, deepening poverty in the region that caught the nation's attention in the 1960s.
Many idealistic young people came as volunteers in the 1960s and 70s to work in anti-poverty and literacy programs.
"I was so touched by the blatant poverty and lack of employment" on his first visit, Greene said in the 1989 interview. "But I was also very impressed by the youth of the area who really wanted a good education."
He said in another interview that he felt "called to come back and really make a difference."
What started as a lark for Greene became a life. He returned after college, and in 1973 helped incorporate the David School.
A coal company, Princess Elkhorn, had built the town of David — named for a company official — decades before. The town had a theater, swimming pool and other amenities, said Jackie Howard, who grew up there.
"It was a thriving, booming little community back then," said Howard.
The company pulled out in the early 1970s, however, and sold the town, he said.
Greene helped start the school in the old commissary building on a shoestring and a prayer, he said.
The school has had preschool and adult education programs at times, but the core mission was, and is, to revive the high-school careers of students who had dropped out, or were in danger of quitting school.
Through the years, students have come to the David School because they didn't fit in at larger public schools, or were bullied, or had gotten behind academically and fallen through the cracks. Some were dealing with difficult home situations. Most have been poor.
The school charges $150 a semester for students to attend. Daniels said she's gotten payment in rolls of quarters.
She said the school's cost for each student annually is $5,000 to $6,000. The school depends on donations and grants to operate.
Most of the staffers are volunteers or receive only a modest stipend of a few hundred dollars a month. They see their work at the school as a mission, Daniels said.
They work closely with students on academics, but also on life skills, and students help with jobs at the school such as taking care of the grounds.
The students get attention and support that there wouldn't be time to give them in public school, said Daniels.
"We really get to know the kids," she said.
Student Amber Allen, 18, said she is shy and didn't like larger high schools she attended in Lexington and Floyd County, where she lives with her father.
She's finishing her senior year at the David School. She and Damon Hopkins will be the school's two graduates this month, following four who finished at mid-year.
Allen plans to go to college to get a psychology degree.
"One-on-one is really awesome here," she said last week.
Daniels said the David School has had 75 students a year at times within the last decade, but enrollment has dwindled. There are about 30 enrolled now, she said.
Hundreds of young people who would have dropped out otherwise have gotten their diplomas at the David School, supporters said.
"It's a school that has turned around many lives," thanks to dedicated teachers, said Johnnie Ross, a priest at St. Raphael Episcopal Church in Lexington, who was on the school's board for several years.
Supporters of the school said the charismatic Greene deserves great credit for starting the school, for raising money and keeping it going, and for pushing for funding to build the log-and-stone structure the school moved into in the mid-1990s.
"He was a local hero," said John Rosenberg, a retired legal-aid lawyer whose daughter finished high school at the David School after struggling in public school.
'Thousand points of light'
The school and Greene received widespread recognition. Greene received several awards, including the Reader's Digest American Hero in Education Award; the school was cited as a model for alternative education and was named one of former President George H.W. Bush's "thousand points of light," which recognized extraordinary community service.
Some former friends and school-board members have fallen out with Greene over money, however.
Greene said he worked for little money his first two decades at the school. He said in a 1989 interview that he made $1,200 a month, after 15 years of running the school for $600 a month.
By 2003, however, he was making $50,000 a year and his wife, Ann, also was working at the school. The couple has five children.
Ross said he became concerned about some financial issues around that time, including that the school wasn't seeing much return from Greene's fund-raising work.
Ross said Greene might have gotten tired.
In 2005, Greene moved to Texas, where his wife has family.
The board bought his house for $157,000 in November 2005. It was assessed for tax purposes at $78,000 at the time, according to tax records in Floyd County.
The school also paid Greene $104,647 in deferred compensation, according to its tax return covering July 2006 to June 2007 — a year in which expenses outstripped revenue by more than $300,000.
And Greene stayed on board as development director after moving to Texas, making $57,067 in the 2007-08 and 2008-09 fiscal years, according to tax returns.
The school also paid his insurance, the returns indicate.
The school's 2009-10 tax return is not publicly available, and it hasn't filed a 2010-11 return.
Greene said appraisals showed his house was worth what the board paid for it, and that the purchase was a good deal for the school because volunteers have been able to stay there.
And Greene said the board approved more for him in deferred compensation, but that he's taken none since the $104,000 payment because the school couldn't afford it.
Greene said he received $28,000 in salary last year, and has largely volunteered this year, passing up paychecks so others could be paid.
"I have not ever taken anything from the school that could be construed any way inappropriate," Greene said last week.
The Attorney General's Office said there is reason to believe Greene paid himself twice in two different pay periods, in addition to other concerns.
Greene said he did not get extra checks.
The Attorney General's Office, which can act to protect the assets of non-profits, has asked for a range of financial information on the school and Greene, going back a decade in some cases.
The office also has asked for information on the board.
Joe McGreal, an Iowa man Greene listed as a board member in an August 2011 report, told the Herald-Leader he left the panel in 2010.
State authorities aren't the only ones who have been concerned about the school's financial dealings.
Ross said the compensation package for Greene caused division on the board. Ross and some other members did not think Greene's house was worth $157,000, for instance.
However, Ross said Greene has traditionally controlled the board, and he and others were in the minority.
Ross said he thinks Greene, perhaps looking to retire and with children nearing college age, arranged a "calculated cashing out" as he left Kentucky.
"I don't think his motives are as true now as perhaps they were when he started," Ross said.
Ned Pillersdorf, a Prestonsburg attorney who has long supported the school financially and otherwise, said it appears Greene has done little fund-raising in recent years.
"I think he has clearly mismanaged the school to the point where it's withering away," said Pillersdorf, who said he and Greene were once close.
Cash contributions to the school have dwindled in recent years, from nearly $500,000 in the 2004-05 fiscal year to $138,897 in 2008-09, tax returns show.
The school has sold assets to make money.
Greene said all charities have had a hard time raising money in recent years, but that he is working to boost donations to the school.
Pillersdorf said the Attorney General's Office has asked him to help set up a new board.
Pillersdorf said there is such great affection for the school — and such a great need for it — that he thinks supporters can raise the money to keep it afloat.
"The overwhelming sentiment is we want the school to continue," he said.
But Greene will have to go for that to happen, Pillersdorf said.
"Whether he's guilty or innocent, he can no longer have anything to do with the school," Pillersdorf said.
Greene said he would love to retire. He wanted to several years ago, but the board chair, Sister Emma Kriz, asked him to stay on, he said.
"Maybe with the David School, I've got my arms around it too long," he said. "I just want to see the school serve children."
Bill Estep: (606) 678-4655.Twitter: @billestep1