Bruce Baker taught for many years at Rutgers University in New Jersey. He now teaches education policy at the University of Miami. He will have many opportunities to observe and document edu-grifting in Florida.

In this post, he identities the five biggest charter scandals and explains how they worked. Much of what you will read was called “legal graft” by past pundits. In other words, the charter operators collect millions in public funds while providing a dubious education, and they get away scot-free.

In other words, take the money and run. No consequences.

He writes:

Five cases, four mechanisms, one ranking: this post lines up the biggest fraud prosecutions, the biggest company-store combination, and the biggest sweeps contract in the charter sector’s history against the single largest real-estate deal any operator has ever built, and asks which one moved the most money. The answer isn’t the one with an indictment attached.

In The Grift Model I group the ways charter operators route public money into private hands into four repeating types: enrollment inflation (getting paid for students who aren’t really being educated — phantom seats, unverifiable attendance, ghost enrollees); related-party transactions (a school’s own board or executives sitting on both sides of a contract); the company store (a captive vendor a school is required to buy from — curriculum, credentials, back-office services — that happens to be owned by the people running the school); and real estate (buying, or arranging for a related party to buy, the very buildings public dollars already financed, then leasing them back at a markup).

What I hadn’t done before is put the five biggest documented cases — regardless of category — on the same page and rank them by dollar figure. A caveat before I do: these numbers come from different kinds of documents (a criminal restitution order isn’t the same instrument as a municipal bond prospectus), cover different time spans, and in a couple of cases reflect an auditor’s or a prosecutor’s counting choice as much as anyone’s. I’m ranking them anyway, because the comparison itself is the point — and because the single largest number on this list isn’t attached to anyone’s indictment.

Here they are, five to one.

5. White Hat Management, Ohio: about $100 million over a decade

White Hat’s “sweeps” contracts with ten Hope Academy and Life Skills Center campuses in Cleveland and Akron routed roughly 95 percent of each school’s state funding to the management company, which then handled teacher salaries, facilities, and operations with minimal board oversight — company-store logic applied to an entire school’s back office rather than one vendor line. Over a decade that added up to something like $100 million. When several of the nonprofit boards tried to switch management companies, White Hat argued the computers, furniture, and classroom equipment it had bought with that money belonged to White Hat, not the schools — meaning the boards would have to buy back the property their own public funding had already paid for once.

In 2015, a divided Ohio Supreme Court sided with White Hat, 4–3, upholding the buy-back scheme as an enforceable contract term. Justice Paul Pfeifer’s dissent put it about as plainly as a judicial opinion gets: “the contracts require that after the public pays to buy those materials for a public use, the public must then pay the companies if it wants to retain ownership of the materials.” Justice William O’Neill called it, in a dissent The Progressive covered in full, “a fraudulent conversion of public funds into personal profit.” Neither dissent changed the outcome. Nobody broke a law here — a state’s highest court looked at the arithmetic and, on the merits, said it was fine. (Court News Ohio’s case summary has the full procedural history.)

4. ECOT, Ohio: $117 million ordered repaid

Electronic Classroom of Tomorrow was, at its peak, Ohio’s largest online charter school. Ohio funds schools on a formula built around enrollment and documented hours of learning activity — a formula that works fine when “attendance” means a body in a classroom, and considerably less well when it means a login timestamp nobody is verifying. A state audit covering fiscal years 2016 through 2018 found ECOT couldn’t substantiate the participation hours behind a large share of the funding it had claimed. The Ohio Auditor of State’s officeultimately found the school owed $106.6 million to the Ohio Department of Education, plus additional findings against ECOT-affiliated management entities, for a combined total just over $117 million. ECOT shut down in January 2018 rather than pay it back; Ideastream’s coverage of the final audit and the Dayton Daily News both note the state has spent the years since trying to collect. A related judgment against affiliated entities separately reached $161.6 million. It remains the largest attendance-fraud clawback in the sector’s history: virtual schools, virtual kids, real dollars.

3. Chester Community Charter School / CSMI, Pennsylvania: roughly $122 million combined

This is the case I use to show what happens when the company store, related-party real estate, and plain self-dealing all show up in a single school under a single owner. Chester Community Charter, Pennsylvania’s largest brick-and-mortar charter, is managed by CSMI, a company controlled by Vahan Gureghian. A 2009 Philadelphia Inquirer public-records fightestablished that CSMI had been paid roughly $60.6 million in management fees since 1999. In 2010, Gureghian sold the school’s buildings — which he owned personally — to a newly created nonprofit, for the specific and sole purpose of leasing them back to the school, for $50.7 million, financed through municipal bonds and requiring roughly $4 million a year in lease payments; Pennsylvania’s Auditor General found the school had also improperly claimed $1.27 million in state lease reimbursements on buildings the program’s own rules made ineligible, because the “related parties” on both sides of the lease were, functionally, the same person before and after the sale. Then, in 2016, a federal Office of Inspector General audit found that the school’s CEO — Gureghian himself — had written checks to himself totaling $11 million without board approval. Add the pieces up and you get a single owner, across roughly fifteen years, sitting on every side of upward of $122 million in transactions with the school he ran. No criminal charges resulted from any of it.

2. The A3 charter network, California: $400 million generated, about $80 million allegedly diverted

Between 2015 and 2019, Sean McManus and Jason Schrock used a network of 19 online charter schools, partnerships with struggling private schools, and summer athletic programs to enroll thousands of students who, per prosecutors, never took a class. The scheme generated roughly $400 million in California public education funding; investigators alleged about $80 million of it was funneled into companies the two men controlled. Voice of San Diego’s account calls it, by the state’s own description, one of the largest charter-school fraud cases in the country’s history — and yet neither man served a day in prison. McManus, an Australian citizen, was sentenced to four years but served it under house arrest with an ankle monitor in Australia; Schrock’s ankle-monitor time was credited against his sentence. Nine other defendants pleaded to reduced or misdemeanor charges. Both men paid roughly $19 million each in fines and restitution, and the California State Controller’s office says the state has recovered more than $240 million overall — real money back, on a fraud whose architects never spent a night in a cell.

1. National Heritage Academies, Michigan and six other states: $853.6 million

In 2021, National Heritage Academies — the country’s third-largest for-profit charter operator, with more than 90 schools — arranged to sell 69 of its campuses across seven states to Campus Partners 1, a nonprofit newly created for the transaction, with no operating history and, at the time reporters looked, no registration on file with Michigan’s attorney general. NHA’s owner, J.C. Huizenga, controls both the seller’s side (through Charter Development Co., which retained the facility-maintenance and ground-lease contracts) and, through his general counsel installed as the new nonprofit’s president, effectively the buyer’s side as well. The purchase was financed through $853.6 million in tax-exempt municipal bonds, issued by an industrial development authority in La Paz County, Arizona — a jurisdiction with no obvious relationship to any of the seven states where the schools actually sit. The schools then signed 30-year leases back to the very entities that had just “sold” them. Network for Public Education’s account and NCSPE’s coverage at Teachers College, Columbia University both flag the same detail: nothing about this required hiding anything, and no one has been indicted. Local commissions in Michigan raised transparency objections and briefly slowed a few approvals, but the deal closed.

It is, by a wide margin, the largest single dollar figure on this list — more than double the other four cases combined — and it’s the cleanest illustration in the sector of this project’s core argument: the extraction that scales isn’t the kind that needs a prosecutor. It’s the kind a bond market is happy to underwrite.

Open the link to see his comparisons of these five top educators-grifts.