New court documents surfaced in the investigation of financial fraud at a D.C. Charter school, suggesting widespread corruption.

Emma Brown of the Washington Post writes:

“A senior official at the D.C. Public Charter School Board allegedly received $150,000 to help the former managers of Options Public Charter School evade oversight and take millions of taxpayer dollars for themselves, according to a new court document.“Jeremy L. Williams was the chief financial officer at the D.C. Public Charter School Board, responsible for monitoring the business practices of the city’s fast-growing charter schools. But at the same time he was entrusted with rooting out financial wrongdoing, he also allegedly joined in, according to the document.

“The document, an amended complaint that D.C. government lawyers filed as part of a lawsuit that began in October, expands onallegations that Options leaders diverted more than $3 million from the Northeast Washington school for at-risk teens to companies they founded. In the court papers, D.C. authorities describe a contracting scheme more elaborate than previously believed, including the alleged payments to Williams, extensive markups of services to generate personal profit, and bringing additional taxpayer dollars to Options to enrich themselves, money meant to help the city’s neediest students.The court papers also levy new allegations against WUSA (Channel 9) news personalityJ.C. Hayward, who authorities allege had an ownership stake in one of the companies and was paid $8,500 to attend company board meetings.

The attorney for those accused of wrongdoing said there was nothing unusual in the arrangements, that they were found in other charters as well:

An attorney for the third manager, former clinical director David Cranford, said that nothing about the business arrangements between Options and the two companies was illegal or inappropriate — or even all that unusual.

“These related-party transactions between for-profit management companies and the nonprofit public charter schools are not only appropriate and lawful, but the same arrangements exist with several other public charter schools,” A. Scott Bolden said. “It seems to me that the government has quite a burden on its hands in proving these claims against my client.”

The defendants are accused of setting up a shell for-profit company called Exceptional Educational Services, (EES) through which they contracted for services:

After the Options managers gained ownership of EES, the company began providing the school’s bus transportation for the 2012-13 school year. But instead of running buses itself, EES hired a subcontractor — Deadwyler Transportation, the same company that had bused Options students the year before.

Deadwyler charged about $31,000 per month. But EES charged Options a 77 percent markup, court papers allege — $45,000 per month plus a $100,000 “ridership bonus” in the middle of the year.

Options and EES also signed a supplemental agreement that raised the payments to EES because of the school’s arrangement for increased Medicaid reimbursements for bus transportation. Those reimbursements are now the subject of a federal investigation, according to people familiar with the investigation.

In all, EES received $974,850 from Options for bus transportation, according to court documents. The company paid Deadwyler $309,200 to run the buses, and it paid Montgomery, Dalton and Cranford hundreds of thousands of dollars on top of the full-time salaries and bonuses they were already receiving for working at the charter school.

Montgomery allegedly received $235,000 from EES in addition to the $425,000 from Options during the 2012-13 school year; Cranford allegedly received $82,893 from EES; and Dalton allegedly received $162,522.

And the sums of money involved are substantial:

In the middle of the 2012-13 school year, Options projected that its revenue would increase by $2.8 million because of an increase in the number of special education students with the most intensive needs, who also bring with them far more city money.

Soon after that projection, the school signed a management contract with EEMC estimated at the time to be worth $2.8 million. The “true purpose” of the contract was to funnel Options money to the managers through EEMC, the amended complaint alleges.

Options made a $500,000 prepayment under that contract in February 2013 and a second prepayment in August worth $954,000. It’s not clear what Options received in exchange for the money; the payments were allegedly made before the school received any documentation of services provided.

The large payments allegedly allowed EEMC to pay Montgomery $212,000 (on top of the $660,000 she received from EES and Options), while Cranford received an additional $131,706 and Dalton $94,884.

Some of the EES and EEMC money allegedly went to Williams, a longtime charter board official. Williams allegedly joined the finance committee of the Options board in February 2013 and in March began serving as a business adviser to EEMC.

The Washington D.C. schools are approaching a 50-50 split between charter schools and public schools. The charters have had no bigger booster than the Washington Post editorial page. Let’s see how the editorialists react to this massive scandal, in which the chief financial officer of the D.C. charter school board is accused of helping to loot funds intended for the city’s neediest students. Oh, yes, and the new owner of the Washington Post, Jeff Bezos of amazon.com, is a huge supporter of charter schools. What will they say?