As the old saying goes, better to steal a million dollars than to steal a loaf of bread. The former is smart thinking, the latter is a crime.
In Livermore, California, the leaders of a charter chain were charged with securities fraud. But they got off without any criminal charges or jail time.
When you read this story, you realize what clever guys they were to figure out such a complex scheme. You have to be an accountant to follow the money.
The U.S. Securities and Exchange Commission has charged former CEO of the Tri-Valley Learning Corporation, Bill Batchelor, with allegedly misleading investors when acquiring a $25 million bond for Livermore charter schools.
Batchelor and John Zukoski, the former director of finance for the schools, were charged with a violation of the antifraud provision of the Securities Act of 1933. They were accused of helping prepare and sign a bond-offering document of $25.54 million to fund the purchase and renovation of a Livermore building to house two schools in May 2015. One was a charter school run by the Tri-Valley Learning Corporation (TVLC) and the other was a private school, which Batchelor also managed.
But according to the complaint by the Securities and Exchange Commission filed in the U.S. District Court of Northern California and made public this week, both men were aware that TVLC had “serious cash flow problems” that would negatively affect the corporation’s ability to make payments on the bonds. The commission also alleges that TVLC was delinquent on payments owed to vendors, had other debt from a private loan that was overdue by a year and had drawn a bank line of credit to its limit in a previous bond.
But, the bond document failed to disclose that TVLC was in “serious financial distress,” and both Batchelor and Zukoski signed documents stating the material had no misrepresentations or omissions.
Without admitting any wrongdoing, Batchelor and Zukoski agreed to not participate in any future municipal debt offerings. Batchelor agreed to pay a $20,000 penalty, and Zukoski a $15,000 penalty. Both settlements are subject to a court approval, according to the Securities and Exchange Commission.
TVLC and California Preparatory Academy, the private high school school, went before the Alameda County Board of Supervisors seeking approval for a $30 million municipal bond to finance the purchase of a new high school building at 3090 Independence Drive in May 2015.
The bond was approved, and the Livermore Valley Charter Prep high school and the private school ended up sharing the same space on Independence Drive in Livermore.
Diane Ravitch's blog 
This plot would make a great movie for HBO. I wonder in Allison Janney and Hugh Jackman are available for Bad Education 2.
“Bad Education” could have been about one of hundreds of charter schools across the country. In fact, I might go as far as suggesting that charter schools used this scandal as a template on how to steal money when there are little to no regulations in place to prevent this type of criminal behavior. The misuse of credit cards is a charter favorite as happened a few years ago at El Camino Real Charter HS in LAUSD. And yes, that school’s board was supposed to review the expenditures, but clearly they were either not given the appropriate documents and/or simply just didn’t want to ask any probing questions. The same could be said about the use of state controlled bond funding. If no one checks or if the financial viability of the charter is simply ignored, then what happened at Tri-Valley should be no surprise.
The biggest question now is why there were no criminal charges. Is there another cover up that should be investigated? Could those in control of the charter vetting processes not want the obvious failures like Tri-Valley to come under public scrutiny??
This is good time to bring up “Spending Blind” by Gordon Lafer. You can read all about Tri-Valley starting on p. 39.
Click to access FINAL_ITPI_SpendingBlind_April2017.pdf
There is a difference between public school and charter school scandals. Theft and embezzling are extremely rare in public education. Public schools are subject to frequent reviews from independent auditors. It would be highly unusual to get more than one person in on the theft. Anyone that has followed this blog understands that charter scandals are a dime a dozen including a few schools that have been raided by the FBI. In fact, more than $1 billion federal dollars have been paid out to charters that never opened or that closed quickly after opening. HBO is owned by Warner Media. It is interesting that they opt to tell the story of the theft in a public school district.
Yes, public school scandals are few and far between. Since they are non-profit and are generally overseen by elected boards, districts and legislators can respond to public outrage and quickly close loopholes in the law. Charter schools, on the other hand, generate huge profits and therefore advocate to maintain loose supervision of their schools.
What should have been done with “Bad Education” was a postscript mentioning that NY Governor Pataki quickly responded to the Roslyn scandal by signing School Fiscal Accountability legislation in 2005. In contrast, here in California, it’s taken decades to finally pass legislation that just barely scratches the surface to reign in charters.