Search results for: "charter school fraud"

 

Anna Phillips of the Los Angeles Times has written a powerful expose of California’s “Wild West” charter industry. This is the first of three articles.

The article is titled:

“How a couple worked charter school regulations to make millions”

The article begins:

“The warning signs appeared soon after Denise Kawamoto accepted a job at Today’s Fresh Start Charter School in South Los Angeles.

“Though she was fresh out of college, she was pretty sure it wasn’t normal for the school to churn so quickly through teachers or to mount surveillance cameras in each classroom. Old computers were lying around, but the campus had no internet access. Pay was low and supplies scarce — she wasn’t given books for her students.

“She struggled to reconcile the school’s conditions with what little she knew about its wealthy founders, Clark and Jeanette Parker of Beverly Hills.

When Kawamoto saw their late-model Mercedes-Benz outside the school, she would think: “Look at your school, then look at what you drive.”

“That didn’t sit well with us teachers,” she said.

“The Parkers have cast themselves as selfless philanthropists, telling the California Board of Education that they have “devoted all of our lives to the education of other people’s children, committed many millions of our own dollars directly to that particular purpose, with no gain directly to us.”

“But the couple have, in fact, made millions from their charter schools. Financial records show the Parkers’ schools have paid more than $800,000 annually to rent buildings the couple own. The charters have contracted out services to the Parkers’ nonprofits and companies and paid Clark Parker generous consulting fees, all with taxpayer money, a Times investigation found.

”Presented with The Times’ findings, the Parkers did not respond to multiple requests for comment.

“How the Parkers have stayed in business, surviving years of allegations of financial and academic wrongdoing, illustrates glaring flaws in the way California oversees its growing number of charter schools.

“Many of the people responsible for regulating the couple’s schools, including school board members and state elected officials, had accepted thousands of dollars from the Parkers in campaign contributions.

“Like other charter operators who have run into trouble, the Parkers were able to appeal to the state Board of Education when they faced the threat of being shut down; the panel is known for overturning local regulators’ decisions. A Times analysis of the state board’s decisions has found that, over the last five years, it has sided with charters over local school districts or county offices of education in about 70% of appeals.

“California law also enables troubled charter operators to escape sanction or scrutiny by moving to school districts more willing to accept them. The Parkers have used this to their advantage, keeping one step ahead of the regulators.”

The Parkers live in a 7,700 foot mansion in Beverley Hills, valued at more than $15 million.

The city and county have repeatedly tried to close down their charter schools, only to be overridden by the state. Their scores swing wildly from the lowest in the state to among the highest, then down again. The Parkers contributed to the then superintendent’s campaign fund. He recommended renewal. The state board agreed. Soon after the renewal, a teacher at the school wrote county and state officials to complain about malfeasance and neglect at the school, so bad that students were endangered. Children were sometimes served food that was spoiled or undercooked. Supplies were scarce.He was fired.

Mrs. Parker, who receives a salary of $285,000 as superintendent of her charter chain, gave Mr. Parker a contract for $575,000 to manage construction of their new school in Inglewood.

Last year, Governor Jerry Brown reluctantly signed legislation banning for-profit charters (reluctantly, because he had previously vetoed similar legislation), but that has no effect on this charter chain, which is technically not for profit.

Phillips describes the law, how it was written to “unleash creativity” by deregulating charters and by requiring them to get approvals by local, then county, then state officials. California has 330 different authorizers, compared to only 18 in Texas. Oversight is patchy, slipshod, sometimes nonexistent. As the Parkers realized, campaign contributions to school board members can ease the way to approval.

The Parkers are adept at shopping for friendly authorizers. They opened a charter in distressed Compton and generously contributed to the campaign funds of board members, including the board President.

When the school came up for renewal, district staff warned of deficiencies, noting that “Jeanette Parker had not disclosed who was on her organization’s board or whom her charter was doing business with.”

“Please note that the petition is generally vague and inconsistent regarding the details of the programs outlined in the petition,” the report said.

“Still, district officials recommended renewal. They had been assured, Brawley said, “that the deficiencies identified in the petition would be rectified.”

“When the charter’s renewal came up in December, Compton school board members did not discuss the charter’s academic performance. They did not question the Parkers, who sat before them in the audience.

“What they did was a foregone conclusion.

“The board took less than a minute to vote unanimously to renew Today’s Fresh Start until June 2023.”

Preston Green III is a scholar at the University of Connecticut who studies the legal and political issues associated with school choice. He fears that school choice, unregulated and unaccountable, will be the new Enron, a financial scandal of massive proportions.

Professor Green says:

As school choice champions like Secretary of Education Betsy DeVos push to make charter schools a larger part of the educational landscape, it’s important to understand the Enron scandal and how charter schools are vulnerable to similar schemes.

Enron’s downfall was caused largely by something called “related-party transactions.” Understanding this concept is crucial for grasping how charter schools may also be in danger.

Related-party transactions are business arrangements between companies with close associations: It could be between two companies owned or managed by the same group or it could be between one large company and a smaller company that it owns. Although related-party transactions are legal, they can create severe conflicts of interest, allowing those in power to profit from employees, investors and even taxpayers.

This is what happened at Enron. Because Enron wanted to look good to investors, the company created thousands of “special purpose entities” to hide its debt. Because of these off-the-books partnerships, Enron was able to artificially boost its profits, thus tricking investors.

Enron’s Chief Financial Officer Andrew Fastow managed several of these special purpose entities, benefiting from his position of power at the expense of the company’s shareholders. For instance, these companies paid him US$30 million in management fees – far more than his Enron salary.

Fastow also conspired with other Enron employees to pocket another $30 million from one of these entities, and he moved $4.5 million from this scheme into his family foundation.

Enron’s collapse revealed the weaknesses of the gatekeepers – including boards of directors and the Securities and Exchange Commission – that are responsible for protecting the markets. Because of lax accountability and federal deregulation, these watchdogs failed to detect the dangers posed by Fastow’s conflict of interest until it was too late. Congress responded by passing the Sarbanes-Oxley Act, which tightened the requirements for oversight.

Forty-four states and the District of Columbia have legislation that allows for charter schools. Just like public schools, charter schools receive public funding. However, unlike public schools, charter schools are exempt from many laws governing financial transparency.

Without strict regulation, some bad actors have been able to take advantage of charter schools as an opportunity for private investment. In the worst cases, individuals have been able to use related-party transactions to fraudulently funnel public money intended for charter schools into other business ventures that they control.

Such was the case with Ivy Academia, a Los Angeles-area charter school. The co-founders, Yevgeny Selivanov and Tatayana Berkovich, also owned a private preschool that shared facilities with the charter school. The preschool entered into a sublease for the facilities at a monthly rent of $18,390 – the fair-market value. The preschool then assigned the sublease to the charter school at a monthly rent of $43,870.

The Los Angeles district attorney’s office charged the husband-and-wife team with multiple counts of fraud. Selivanov was sentenced to nearly five years in jail in 2013.

Fraudulent related-party transactions can also occur between education management organizations (EMOs) and their affiliates. EMOs are for-profit or nonprofit entities that sometimes manage charter schools, and might also own smaller companies that could provide services to those schools.

For example, Imagine Schools is a nonprofit EMO that runs 63 charter schools enrolling 33,000 students across the country. It also owns SchoolHouse Finance, a for-profit company that, among other things, handles real estate for many of Imagine’s charter schools. Though charter schools typically spend around 14 percent of their funding on rent, some of the Imagine Schools were paying SchoolHouse Finance up to 40 percent of their funding for rent.

One of the charter schools operated by Imagine Schools, Renaissance Academy in Kansas City, sued the company for charging it excessive rent. In 2015, a federal judge agreed, ordering Imagine Schools to pay almost $1 million in damages to Renaissance. The court’s ruling suggested that Imagine Schools was essentially taking advantage of the charter school: The EMO profited from the excessive rent and failed to tell the school’s board of directors how the cost might disrupt the school’s ability to pay for textbooks and teacher salaries.

Because of insufficient oversight, Fastow’s fraudulent use of related-party transactions at Enron was not stopped until it was too late. Similarly, the Ivy Academia and Renaissance Academy examples reveal insufficient checks and balances in the charter school sector. In both cases, the monitors responsible for protecting charter schools found nothing wrong with the rental agreements.

Green says these cases are not isolated. The risks grow as degulation grows. It is already obvious that DeVos and Trump will prevent regulation to the greatest extent possible. The conditions will be right for massive fraud.

Mercedes Schneider dug into the background of Chris Clemons, the Atlanta charter school principal, who has been accused of stealing $600,000 from his school.

She found an article from his days at MIT, explaining how he developed a passion for teaching “impoverished children in urban areas.”

He trained as a school leader at “Building Excellent Schools,” a Boston-based program to prepare principals to open and run charter schools. He launched a charter school in Denver, his hometown. And then he went to Atlanta to open charter schools. He was charged by the FBI with theft, not only for the missing $600,000 from his current school, but for another $350,000 that was missing from two other charter schools that he ran.

Here is the latest from Donald Cohen of “In the Public Interest,” which exposes privatization scams.

Donald Cohen writes:

“A $300,000 plane. $861,000 to pay off personal debts and keep open a struggling restaurant. A down payment on a house and an office flush with flat-screen televisions, executive bathrooms and granite counter tops. This isn’t a list of expenditures from Lifestyles of the Rich and Famous, this represents a small slice of the more than $30 million of taxpayer funds that have been wasted through fraud and abuse in Pennsylvania’s charter schools since they first opened in 1997.

A new report from the Center for Popular Democracy, Integrity in Education, and Action United is blowing the lid off the lack of public oversight at Pennsylvania’s 186 charter schools.

“Inadequate audit techniques, insufficient oversight staff, and a lack of basic transparency have created a charter system that is ripe for abuse in the Keystone state. But there is hope. The report provides a detailed roadmap for the state to create an effective oversight structure and provide meaningful protections that can curtail endemic fraud and waste.

“The report calls for an immediate moratorium on new charters until the inadequate oversight system can be replaced with rigorous and transparent oversight. That’s the right first step.

“According to the authors, charter school enrollment in the state has doubled three times since 2000 and Pennsylvania’s students, their families, and taxpayers cannot afford to lose another $30 million. Pennsylvania’s students and taxpayers deserve better.

Sincerely,

Donald Cohen
Executive Director
In the Public Interest

Thank you!

From the In The Public Interest Team

Carol Corbett Burris was a teacher and principal on Long Island, in New York state for many years. After retiring, she became executive director of the Network for Public Education.

She writes:

Last spring, HBO released Bad Education, which tells the story of how a Roslyn, New York Superintendent named Frank Tassone conspired to steal $11.2 million with the help of his business officer, Pamela Gluckin.  Promo materials called the film “the largest public school embezzlement in U.S. history.”

I did not watch it. I am waiting. I am waiting for HBO to release a movie on how a crafty fellow from Australia, Sean McManus, defrauded California taxpayers out of $50 millionvia an elaborate scheme to create phony attendance records to increase revenue to an online charter chain known as A3. 

Or the documentary about the tens of millions that the Electronic Classroom of Tomorrow (ECOT) owes taxpayers for cooking the books on attendance. Or perhaps there will be a mini-series about the fraud and racketeering that charter operator Marcus May engaged in that brought his net worth from $200,000 to $8.5 million in five years and landed him a 20-year sentence in jail. 

The truth is, Frank Tassone and his accomplice are small potatoes compared to the preponderance of charter school scandals that happen every day. What is different is how lawmakers respond. 

When the Tassone case hit the news, I was a principal in a neighboring district. The New York State Legislature came down hard with unfunded mandates on public schools.

We all had to hire external auditors and internal auditors that went over every receipt, no matter how small. Simple things like collecting money for field trips or a club’s T-shirt sale suddenly became a big deal. Although there was no evidence that any other district was engaging in anything like what happened in Roslyn, every district transaction came under scrutiny.

Whether those regulations and their expenses were justified or not is irrelevant. What is relevant is that despite the years and years of scandal in the charter sector, state legislatures never change laws or impose new rules. For-profits run schools doing business with their related companies behind a wall of secrecy, and lawmakers do not worry a bit. 

I am puzzled. Why can’t charter schools be as transparent as public schools?  Why is the ability to easily engage in fraud necessary to promote innovation? 

No one has been able to answer my question yet. 

The principal of the Discovery Creemos Charter School pled guilty to inflating enrollment and stealing $2.5 million from the state and federal governments. 

The former principal of the shuttered Discovery Creemos Academy pleaded guilty Friday to participating in a $2.5 million scheme to inflate enrollment at the defunct charter school.

Harold Cadiz, 55, faces up to 12 ½ years in prison after pleading guilty in Maricopa County Superior Court to two counts of felony theft during the 2016-17 and 2017-18 school years. He’s scheduled to be sentenced March 27.

Cadiz is the second administrator from the Goodyear charter school, also known as the Bradley Academy of Excellence, to admit to participating in the scheme to defraud the state and federal governments by inflating the school’s enrollment by hundreds of students.

Cadiz’s plea calls for a prison sentence of 3 to 12 ½ years and up to 7 years of probation.

Arizona public schools are funded based on the number of students, meaning each additional student a school reports to the state brings more tax dollars.

Daniel K. Hughes, president and CEO of Discovery Creemos, was the first executive at the school to cut a plea bargain with the Arizona Attorney General’s Office, admitting to theft and conspiracy in November 2018. He faces a presumptive prison sentence of five years.

The school closed January 2018, just after the 100th day of the school year, ensuring it would receive as much state money as possible before it closed.

A few months before Discovery Creemos Academy closed, Hughes had assured the Charter Board that he would turn around the financially and academically failing charter school. Reviews by the Charter Board for the 2013-14, 2014-15 and 2015-16 school years found the school did not meet its financial performance recommendations.

Hughes has admitted that during the 2017-18 school year, his school reported an enrollment of 528 students, but 453 of them were fraudulent. In 2016-17, the school reported it had 652 students, but 191 were fraudulent.

 

 

The Bay Area Technology School, a charter school in Oakland, California, was thrown into chaos and confusion when the principal suddenly resigned and left the country amid a financial investigation.

The school is believed to be part of the Gulen charter network associated with the reclusive imam Fethullah Gulen, who lives in seclusion in the Poconos Mountains of Pennsylvania, because of the unusual number of Turkish board members.

Just before the end of the last school year, the principal of Oakland’s Bay Area Technology School, Hayri Hatipoglu, suddenly resigned. At least four other senior staff and two of the charter school’s five board members also abruptly quit. As a result, the organization was thrown into chaos. And then Hatipoglu disappeared. According to several sources, he left the country with his family for Australia, where he is a citizen.

Afterwards, the Oakland Unified School District, which is responsible for overseeing the BayTech charter school, opened an investigation. BayTech’s three remaining board members also hired an independent party to carry out their own internal review.

While OUSD and BayTech have both attempted to keep the mini-crisis under wraps, the Express has learned that BayTech’s three remaining board members are accusing Hatipoglu of defrauding the school. They allege that Hatipoglu surreptitiously changed his employment contract to provide himself with three years’ worth of severance pay totaling about $450,000, an unusually large sum for a small school with an annual budget of approximately $3 million. His previous contract provided for only six months of severance pay, a standard in the education sector.

“We believe he changed his contract,” said BayTech board member Fatih Dagdelen in a recent interview. “According to his contract, he’d get paid a six-months salary if he resigned, but all of a sudden his contract said he’d get paid two-and-a-half years further.”

Remaining board members suspect fraud.

In an unusual and unsolicited email to the Express sent on June 28, Hatipoglu wrote that the school’s Turkish board members conspired to punish him for his decision to break ties with a Southern California-based nonprofit. The nonprofit, Accord Institute, happens to be controlled by the followers of a powerful Turkish imam who leads a global Islamic political force called the Gülen movement.

Founded in the 1970s by the religious leader Fethullah Gülen, the Gülen movement is an Islamic-inspired social and political force that globalized as its followers immigrated to Europe, Australia, and the United States. The Turkish government considers the Gülen movement a terrorist organization because its members helped organize the 2016 coup attempt against President Recep Erdogan, and Erdogan has ordered thousands of Gülenists jailed. (The U.S. government, however, does not classify the Gülen movement as a terrorist organization.) Fethullah Gülen currently lives in self-exile in Pennsylvania, but he’s considered one of the most powerful men in Turkish politics. His followers also set up and operate one of the largest chains of charter schools in the U.S. BayTech is one of these schools.

Might I suggest that these events are evidence that public schools that are funded by taxpayers should be subject to public supervision and oversight–not by private and unaccountable boards– and should be staffed by certified teachers and other staff? Charter schools in California operate without any accountability or transparency, which is an open invitation to rob taxpayers.

 

Renegade Teacher hast taught in both public schools and charter schools in Detroit. He writes here about the highly profitable fraud of online charter schools. Among their most prominent supporters are Betsy DeVos (who invested in them, and now advocates for them) and Jeb Bush, who relentlessly promotes online learning.

From his own experience as a teacher, he saw what online learning lacks: human relationships between students and teachers and between peers. It is soul-deadening.

“Online education in the K-12 sphere is a growing trend- as of 2015, there were some 275,000 students enrolled in online charter schools. In my home state of Michigan, from 2010 to 2014, the number of students in Online Charter Schools increased from 718 students to 7,934 students (over 1000% increase).

“Private, for-profit companies (using public funds) are cashing in- the two largest online charter companies, K12 and Connections Academy, are raking in an estimated $1 billion per year (as of 2014). The motive is profit over substance: less operating costs, less teachers, and less building maintenance.

“The results have been damning: according a study from the Center on Reinventing Public Education (CREDO), students in online charters lost an average of about 72 days of learning in reading and 180 days of learning in math IN THE COURSE OF AN 180-DAY SCHOOL YEAR. They could have had equal math progress if they had spent the entire year asleep.

“In Philadelphia, a system composed of mainly poverty-stricken Black and Latinx students, online schools educated more than one-third of students as of 2014 [1]. The kicker is that, between 2011 and 2014, 100% of those students failed their state achievement tests. 100%!!! [2].”

The biggest online charter school in Ohio recently collapsed, both an academic and financial disaster.

Renegade Teacher thinks they should be banned. They are educational frauds.

ProPublica and USA Today teamed up to conduct an investigation of charter fraud in Ohio (although there is so much charter fraud in Ohio that this piece investigates only one aspect of it).

This story is about dropout recovery centers that collect large sums of money even if the students don’t show up.

It focuses on a “school” run by EdisonLearning, the latest version of the Edison Schools that were launched in the early 1990s with the goal of creating a network of 200 privately run schools.

It begins like this:

Last school year, Ohio’s cash-strapped education department paid Capital High $1.4 million in taxpayer dollars to teach students on the verge of dropping out. But on a Thursday in May, students’ workstations in the storefront charter school run by for-profit EdisonLearning resembled place settings for a dinner party where most guests never arrived.

In one room, empty chairs faced 25 blank computer monitors. Just three students sat in a science lab down the hall, and nine more in an unlit classroom, including one youth who sprawled out, head down, sleeping.

Only three of the more than 170 students on Capital’s rolls attended class the required five hours that day, records obtained by ProPublica show. Almost two-thirds of the school’s students never showed up; others left early. Nearly a third of the roster failed to attend class all week.

Some stay away even longer. ProPublica reviewed 38 days of Capital High’s records from late March to late May and found six students skipped 22 or more days straight with no excused absences. Two were gone the entire 38-day period. Under state rules, Capital should have unenrolled them after 21 consecutive unexcused absences.

Though the school is largely funded on a per-student basis, the no-shows didn’t hurt the school’s revenue stream. Capital billed and received payment from the state for teaching the equivalent of 171 students full time in May.

It is yet another charter fraud.

Another reform scam. It is not about “the kids.” It is about the money.

Do legislators care?

Question: How many charter scandals and frauds does it take to get the attention of the Ohio legislature?

Speaking of scandals, ECOT (the Electronic Classroom of Tomorrow) has threatened to close its virtual doors if the state doesn’t leave them alone and stop pestering them to provide a real education to real students. No doubt the owner William Lager is bluffing. But if he does close down ECOT, he will do everyone a favor by shutting down the nation’s biggest dropout factory. He has collected more than a billion dollars since he opened ECOT and given only a few millions to Republican (and a few Democratic) politicians (in Ohio, they sell their votes cheaply). How likely is he to walk away from his fabulous money stream?

I dare you! I double-dare you! Close your doors, ECOT! You won’t be missed.

Although the legislators and other elected officials will miss your campaign contributions.

Jeff Bryant, writing for the Education Opportunity Network, analyzes the U.S. Department of Education’s recent award of $253 Million to the Failing Charter Industry. He is especially appalled by the funding of charters in New Mexico, whose state auditor has identified numerous frauds in the charter sector, and whose public schools are shamefully underfunded.

He writes:

“Previous targets for federal charter grants have resembled a “black hole” for taxpayer money with little tracking and accountability for how funds have been spent spent. In the past 26 years, the federal government has sent over $4 billion to charters, with the money often going to “ghost schools” that never opened or quickly failed.

“In 2015, charter skeptics denounced the stunning selection of Ohio for a $71 million federal chart grant, despite the state’s charter school program being one of the most reviled and ridiculed in the nation.

“This year’s list of state recipients raises eyebrows as well.

“One of the larger grants is going to Indiana, whose charter schools generally underperform the public schools in the state. Nearly half of the Hoosier state’s charters receive poor or failing grades, and the state recently closed one of its online charter schools after six straight years of failure.

“Another state recipient, Mississippi, won a federal grant that was curiously timed to coincide with the state’s decision, pending the governor’s approval, to take over the Jackson school district and likely hand control of the schools to a charter management group.”

(Coincidentally, Stephen Dyer just posted about Ohio’s scandal-plagued charter sector. He wrote that nearly one-third of the charters that received federal funding never opened or closed right after they got the money, I.e., they were “ghost schools.”)

Worst of all, writes Bryant, is the $22.5 Million that will be sent to New Mexico, which has high child poverty and perennially underfunded public schools, as well as a low-performing charter sector.

What possible reason is there to fund a parallel school system when the state refuses to fund its public schools?

“According to a state-based child advocacy group, per-pupil spending in the state is 7 percent lower in 2017 than it was in 2008. New Mexico is also “one of 19 states” that cut general aid for schools in 2017, with spending falling 1.7 percent. “Only seven states made deeper cuts than New Mexico.”

“New Mexico’s school funding situation has grown so dire, bond rating agency Moody’s Investors Service recently reduced the credit outlook for two-thirds of the school districts in the state, and parent and advocacy groups have sued the state for failing to meet constitutional obligations to provide education opportunities to all students.

“To fill a deficit gap in the state’s most recent budget, Republican Governor Susana Martinez tapped $46 million in local school district reserves while rejecting any proposed tax increases.

“Given the state’s grim education funding situation, it would seem foolhardy to ramp up a parallel system of charter schools that further stretches education dollars, but New Mexico has doubled-down on the charter money drain by tilting spending advantages to the sector.”

To make matters worse, charter schools are funded at a higher level than public schools, and the state’s three online charters operate for profit. Despite their funding advantage, the charters do not perform as well as public schools. There is seldom any penalty for failure.

The state auditor in New Mexico has called attention to frauds and scams that result from lack of oversight in the charter industry.

So the U.S. Department of Education under Betsy DeVos is now in the business of funding failure. Quality doesn’t matter. Ethics don’t matter. Undermining the educational opportunity of the majority of children doesn’t matter. For sure, money matters, but only when it is spent for privatization.

A few pundits predicted that DeVos would be unable to inflict harm on the nation’s public schools. They were wrong.