Scholars Preston C. Green III, Bruce D. Baker, and Joseph Oluwole investigate whether the charter industry is repeating the errors of Enron.
Their peer-reviewed article appears in the Indiana Law Journal.
Here is the abstract:
“In 2001, Enron rocked the financial world by declaring bankruptcy due to the effects of an accounting scandal. Special purpose entities (SPEs) were instrumental to Enron’s demise. Enron parked assets in the SPEs to improve its credit rating.
“Enron violated accounting principles by not revealing that its SPE partnerships were related-party transactions. Andrew Fastow, who was Enron’s CFO, made millions of dollars by managing the SPEs. He also used these illegal proceeds to invest in other ventures. Enron’s gatekeepers failed to protect against this accounting fraud.
“Related-party transactions are now posing a threat to the charter school sector. Similar to Fastow, individuals are using their control over charter schools and their affiliates to obtain unreasonable management fees and funnel public funds into other business ventures.
“In this article, we discuss how some charter school officials have engaged in Enron-like related-party transactions. We also identify several measures that can be taken to strengthen the ability of charter school gatekeepers to protect against this danger.
“This article is divided into four parts. Part I describes how Fastow used his management of Enron and the SPEs to obtain illegal profits. Part II discusses why financial sector gatekeepers failed to stop these related-party transactions. Part III shows how charter school officials are benefitting from their control over charter schools and their affiliates in a manner similar to Fastow. Part IV analyzes pertinent statutory and regulatory provisions to identify steps that can be taken to increase the gatekeepers’ ability to protect against harmful related-party transactions.”
Diane Ravitch's blog 
I’d say they are the New Slavings And Learn … but I’d be lying about the Learn …
“Similar to Fastow, individuals are using their control over charter schools and their affiliates to obtain unreasonable management fees and funnel public funds into other business ventures.”
I’ve never understood this part of charter school laws. Isn’t it crucial to see not just where the funding comes from but where it GOES? One can’t spin off a related business with funding to public schools. Why should it be permitted with charter funding?
It has always felt apparent to me that the reason we have such national charter-school/choice enthusiasm is ONLY because there are so many ways to short-term profiteer from gaming the system.
CROSS POSTED AT OPED , https://www.opednews.com/Quicklink/Scholars-Ask-Are-Charter-in-Best_Web_OpEds-Charter-School-Failure_Charter-Schools_Danger_Diane-Ravitch-170315-556.html#comment650106
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I put CHARTER SCHOOL FRAUD, IN THE SEARCH FIELD AT THE RAVITCH BLOG. i you prefer real FACTS, CHECK IT OUT.
https://dianeravitch.net/?s=CHARTER+SCHOOL+FRAUD
MORE LIKE THIS BELOW:
Arthur Camins: The Problem with Charters is not Just Waste, Fraud, and Abuse
https://dianeravitch.net/2016/01/02/arthur-camins-the-problem-with-charters-is-not-just-waste-fraud-and-abuse/
If your friends or family ask you to explain what is the matter with charter schools, here is a succinct summary. Arthur Camins writes:The problem with publicly-funded charter schools goes far beyond the lack of oversight, transparency, and accountability. Most fundamentally, they are an assault on democracy. Individual choice is no substitute for democratic governance.
http://www.huffingtonpost.com/arthur-camins/individual-choice-is-no-s_b_12084020.html?
In addition, they drain limited resources from remaining public schools, exacerbate racial and socio-economic isolation, and undermine public investment in socially responsible solutions for all in favor of “saving” a select few.
The national voucher marketing campaign is heating up:
“Nearly 35,000 Hoosier students today can boast direct access to the private school of theirs and their parent’s choice as a result of this program. And while that number is dwarfed by the nearly 1.05 million Hoosier students in a public school…..”
The 1.05 million students in public schools were utterly and completely ignored by both Mitch Daniels and Mike Pence, but who cares about them? Their schools are unfashionable. Useful only as data collection sites.
The sameness of these pieces is amusing. The authors seem to recognize they have to throw out a cursory mention of “improving public schools” so it’s crammed into the last paragraph. “oh, and also public schools should also be great, like these private schools I’m promoting”.
DeVos does the same thing. She’s generously willing to allow public schools to serve as disfavored default schools to back up the “choice” schools.
http://www.indy.education/blog/2017/3/14/oaks-academy-vouchers-may-not-be-a-panacea-but-they-are-really-working-for-some-families
I remember Bush, THE DISASTER, boasting that he would run the country like a business. He forgot to add that he would indeed run the country like Ken Lay (his buddy) ran ENRON……… into the ground and oblivion. Many of the employees of ENRON lost all their savings and ENRON-related investments. Later these same faithful employees would be mocked and ridiculed for not having the foresight to see their employer going bankrupt due to fraud, malfeasance and outright criminality. They would be mocked because they believed the lies of Lay and Skilling. Hey, just like Bush ran the USA. Well, at least ENRON didn’t get us involved in 2 wars and 2 occupations, all unnecessary and avoidable.
YES
Enron did not “make errors:” it was instead a fraudulent, criminogenic entity; hopefully, one day the public at large will find out that charters and so-called education reform are much the same.
As bank fraud expert William Black has noted, the economics profession has a taboo against acknowledging fraud or even saying the word.
To most economists fraudulent criminogenic business entities simply do not — indeed CANNOt exist.
http://neweconomicperspectives.org/2013/10/economics-science-economists-scientists.html
This is what we get when we have a government of, by and for corporations, and not the people. Many corporations lie, cheat and steal and are rarely held accountable for their misdeeds. Our 2008 meltdown should have resulted in prosecutions and greater regulation. Yet, here we are again. Greed is good, and it is even better when corporate vandals can use public money to underwrite private profit. They know the free market fiends won’t look for corruption, dare regulate or hold them responsible for their reckless behavior. That burden is on private whistleblowers.
“I have found a flaw”
The fundamental “flaw”
That Alan Greenspan found:
In regulation maw
The shysters will abound
When will people GET that education is not FOR PROFIT!
Good to see this made available to readers of your blog. The legal documentation is amazing.
It has been widely discussed in past that the “new Enron” frontier was public education because there was so much profit to be made from curriculum mandates and the whole testing industry… so this article is neither new nor shocking. But perhaps given that so much time has passed and charters nation-wide are “over-breeding” everywhere like an overpopulation of rabbits… perhaps there will finally be a smoking gun… an “education Maidoff” who will bring the “corporate reformers to a complete halt”???? How long can misdeeds and illegalities be tolerated? In the age of DeVos, however, there will be “a lot more bunnies invading the garden” before this happens.
The Office of Inspector General of the U.S. Department of Education has issued a report that, because of their lack of accountability to the public, charter schools pose a risk to the Department of Education’s goals. The report finds that “Charter schools and their management organizations pose a potential risk to federal funds even as they threaten to fall short of meeting the goals” because of financial fraud and the artful skimming of tax money into private pockets.
And the Washington State Supreme Court, the New York State Supreme Court, and the National Labor Relations Board have ruled that charter schools are not public schools at all because they aren’t accountable to the public since they aren’t governed by publicly-elected boards and aren’t subdivisions of public government entities, in spite of the fact that some state laws enabling charter schools say they are government subdivisions. That’s common sense to any taxpayer: Charter schools are clearly private schools, owned and operated by private entities. Nevertheless, they get public tax money but have virtually no public record accountability of what they do with the tax money they divert from genuine public schools.
Even the staunchly pro-charter school Los Angeles Times (which acknowledges that its favorable reporting on charter schools is paid for by a billionaire charter school advocate) complained in an editorial that “the only serious scrutiny that charter operators typically get is when they are issued their right to operate, and then five years later when they apply for renewal.” Without needed oversight of what charter schools are actually doing with the public’s tax dollars, hundreds of millions of tax dollars that are intended to be spent on educating the public’s children is being siphoned away into private pockets and to the bottom lines of hedge funds.
There are many tactics used by many charter school operators to reap profit from their schools, even the so-called “non-profits”, such as private charter school boards paying exorbitant sums to lease building space for their school in buildings that are owned by corporations that are in turn owned or controlled by the charter school board members or are REIT investments that are part of a hedge fund’s portfolio. There are many other avenues of making a hidden profit from operating private charter schools.
In addition to the siphoning away of money from needy schools, reports from the NAACP and ACLU have revealed facts about just how charter schools are resegregating our nation’s schools, as well as discriminating racially and socioeconomically against American children of color; and, very detailed nationwide research by The Center for Civil Rights Remedies at UCLA shows in clear terms that private charter schools suspend extraordinary numbers of black students. Based on these and other findings of racial discrimination in charter schools, the NAACP Board of Directors has passed a resolution calling for a moratorium on charter school expansion and for the strengthening of oversight in governance and practice.
Therefore, in order to assure that tax dollars are being spent wisely and that there is no racism in charter schools, charter schools should minimally (1) be required by law to be governed by school boards elected by the voters so that the charter schools are accountable to the public; (2) be a subdivision of a publicly-elected governmental body; (3) be required to file the same detailed public-domain audited annual financial reports under penalty of perjury that genuine public schools file; and, (4) be required to operate so that anything a charter school buys with the public’s money should be the public’s property.
Those aren’t unreasonable requirements. In fact, they are common sense to anyone taxpayers and to anyone who seeks to assure that America’s children — especially her neediest children — are optimally benefiting from public tax dollars intended for their education.
Some of you might find it useful to listen to these parents & students describe why Metro Deaf Charter in St Paul, Mn.is a good place for them:
“Enron violated accounting principles by not revealing that its SPE partnerships were related-party transactions.”
Trump’s SPE is his family. The beauty of being president is that the Orange Agent reveals his parking of his assets in his family’s backyard and gets away with it.