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How Online Charter Operators Scammed More Than $50 Million from Taxpayers and Schools in California

By dianeravitch
June 18, 2019 //
7

 

Valerie Strauss posted a fascinating column about the biggest charter scam in history. 

She writes:

Late last month, San Diego officials indicted 11 people in what they described as a charter scam that defrauded the state of California of more than $50 million in education funds.

The indictment details a scheme in which an Australian man and his business partner in Southern California opened 19 charter schools throughout the state and then took the public funding the schools received to operate and used it instead for real estate and other ventures.

This post explains the scam that the 235-page indictment spells out in detail. This is long but worth the time to read to get an understanding of how easy it is, because of lax charter sector laws in some states, to defraud the public.

California, which has more charter schools and more charter school students than any other state, now has one of the most lax charter laws in the country, allowing these schools to operate with little if any accountability or transparency to the public.

The story was written by Will Huntsberry, a reporter for the Voice of San Diego. She received permission from the Voice of San Diego to repost it in full. It is an important story.

It begins like this:

Sean McManus and Jason Schrock created an online charter school empire that covered more than half the state of California, according to prosecutors and investigators for an outside charter school organization.

From the port of entry at San Ysidro up to Los Angeles, past the cliffs of Big Sur all the way to Santa Cruz; east through Raisin City, past the giant sequoias of Sierra National Forest, and down into the flat and quiet of Death Valley; south again to the Mexican border; and back to the coast — a person could travel unbroken through 20 counties that made up the lower half of their empire. An outpost of 14 counties encompassing Sonoma and Sacramento sits further north.

From this vast swath of territory, McManus and Schrock absorbed mind-blowing profits. Take just some of their 2016 tax returns (1): Their nonprofit charter management company A3 brought in $14.2 million in revenue. It spent only $3.6 million. Of the money it spent, $855,796 went to McManus and Schrock’s salaries. They appeared to be the only two employees, according to the tax return.

The profits climbed even higher in the months that followed, according to an indictment (2) filed by prosecutors. A3 Education and other companies controlled by McManus and Schrock ultimately brought in more than $80 million, prosecutors say.

Categories California, Corruption, Fraud, Virtual Charter Schools

California: Online Charter Scam Cost Taxpayers More Than $50 Million, Says Indictment

By dianeravitch
June 6, 2019 //
16

 

With the encouragement of the super lobbyists of the California CharterSchoolAssociation, the California Legislature continues to block any meaningful reform of its lax charter law, even as the news breaks that online charter operators were charged with scamming more than $50 million from taxpayers.

Peter Greene calls this one “a spectacular charter scam.” He is right. We have seen plenty of garden-variety scams and multi-Million dollar charter frauds, but this one is the biggest yet!

Morgan Cook and Kristin Taketa report in the San Diego Union-Tribune (a newspaper that supports charters):

Using in-depth knowledge of California education funding, charter school regulations and deceptive business disclosures, an Australian citizen and his partner in Long Beach orchestrated a multi-year conspiracy to fleece taxpayers out of more than $50 million, prosecutors say.

Sean McManus, 46, an Australian who operated charter schools in California, and another charter school operator, Jason Schrock, 44, and nine others were named as defendants in a 67-count indictment announced this past week by the San Diego County District Attorney’s Office.

Prosecutors say McManus, Schrock and others enrolled thousands of students into online charter schools, often without their knowledge, and collected millions in state funds using student information obtained from private schools and youth athletic groups.

This criminal enterprise funneled millions of taxpayer dollars into private bank accounts of the defendants,” said District Attorney Summer Stephan.

Eight of the 11 co-defendants have pleaded not guilty and denied the allegations. Two more are expected to be arraigned June 6….McManus is at large, possibly in Australia, prosecutors said. A San Diego Superior Court judge issued a $5-million bench warrant for his arrest and froze the accounts of charter schools, related companies and individuals related to the alleged conspiracy.

A reader who calls himself “Francisco” has commented recently that there are just as many frauds in public schools as in charter schools. Hey, Francisco, can you top this?

Peter Greene responds:

The twitterverse rebuttal has been, “Oh, yeah. You’re just focusing on charters. I’ll bet we could public school scams just as bad.” Maybe. But the oversight provided by a locally-elected board and mandated transparency of financial dealings would make it pretty damn hard. To pull off a scam of this magnitude, you need to wide-open barely-regulated low-oversight world of charters.

As Greene points out, in what world is it possible to buy and sell schools like franchises other than Charter World?

 

Categories Accountability, California, Charter Schools, Corruption, Education Reform, For-Profit, Fraud, Virtual Charter Schools

Jack Schneider: Why Are Americans Turning Against Charter Schools?

By dianeravitch
June 6, 2019 //
22

 

Jack Schneider, a historian of education who often collaborates with Jennifer Berkshire, analyzes the fading allure of charter schools. After years of claims that they would “save” public schools and poor children, the public has given up on them. Why? They have not delivered, and the public gets it.

For most of the past thirty years, charters seemed unstoppable, especially because their expansion was backed by billions from people like the Waltons, Gates, and Broad, as well as the federal government. But they have not kept their promises.

Today, however, the grand promises of the charter movement remain unfulfilled, and so the costs of charters are being evaluated in a new light.

After three decades, charters enroll six percent of students. Despite bold predictions by their advocates that this number will grow fivefold, charters are increasingly in disrepute.

First, the promise of innovation was not met. Iron discipline is not exactly innovative.

Second, the promise that charters would be significantly better than public schools did not happen. In large part, that is because the introduction of charters simply creates an opportunity for choice; it does not ensure the quality of schools. Rigorous research, from groups like Mathematica Policy Research and Stanford University, has found that average charter performance is roughly equivalent to that of traditional public schools. A recent study in Ohio, for instance, concluded that some of the state’s charters perform worse than the state’s public schools, some perform better, and roughly half do not significantly differ.

Finally, charters have not produced the systemic improvement promised by their boosters.

Competition did not lift all boats. In fact, competition has weakened the public schools that enroll most students at the same time that charters do not necessarily provide a better alternative.

Schneider does not mention one other important reason for the diminishing reputation of charters: scandals, frauds, embezzlement, and other scams that appear daily in local and state media. A significant number of charters are launched and operated by non-educators and by entrepreneurs, which amplifies the reasons for charter instability and failure.

 

 

 

Categories Accountability, Betsy DeVos, Billionaires, Charter Schools, Closing schools, Competition, Corruption, Education Industry, Failure, For-Profit, Fraud, Innovation, Privatization, Scandals Fraud and Hoaxes

Pennsylvania: Charter Lobby Pushes to Remove All Quality Controls and Allow Unlimited Expansion

By dianeravitch
June 1, 2019 //
12

Two officials of the Philadelphia school system wrote an opinion piece warning that proposals for “charter reform” are actually a blank check for unlimited charter expansion with no regulation at all.

Dr. William R. Hite is superintendent of the Philadelphia public schools. Joyce Wilkerson is president of the Philadelphia school board.

They point out that the State Auditor said that Pennsylvania’s charter law is the worst in the nation.

Current proposals to benefit charter schools would make it even worse.

They write:

Legislation pending in the General Assembly pushes the charter law in the wrong direction. House Bills 356 and 357 create more risk for students, local districts, and taxpayers. We vehemently oppose these bills.

The legislation would allow all charter schools, even the poorest performers, to expand without the authorizing district’s knowledge or approval. These unpredictable expenses would not only create short-term fiscal challenges for the district but make it impossible to reasonably utilize multiyear budgeting — the very approach to budgeting that has allowed the district to make the strategic, sustainable investments that are resulting in improved academic performance across our schools. These bills undermine the fiscal-stability promise of local control.

Newly proposed charter legislation also frees charters from oversight that is necessary to ensure they are meeting academic standards. They make it harder to close underperforming charters and allow unfettered expansion of charters — even those with failing performance — without regard for their ability to successfully operate. The proposed standard charter application form lacks information on an applicant’s’ experience, finances, past performance, and operational ability, all of which are necessary to meaningfully assess whether the applicant can sustain a school that meets the needs of the very students it aspires to serve.

The original vision for charter schools was teacher-driven laboratories of innovation that would develop promising practices to inform and advance all public schools. Charters have not lived up to that promise. In fact, charter schools are only 6 percent of public schools in Pennsylvania but are 25 percent of the lowest-performing schools under new state standards. Is this the future we want for the commonwealth’s public education system? Is this the future our students and families deserve?

As usually, the charter lobbyists are advocating for no accountability, no supervision, and more money.

Disgraceful.

 

 

Categories Accountability, Charter Schools, Corruption, Education Industry, Pennsylvania, Privatization

California: Charter Reform Fails, Charter Lobbyists Celebrate Victory for Privatization and Non-Regulation

By dianeravitch
May 31, 2019 //
40

The California Legislature failed to take action on bills to impose a moratorium on new charter schools, and charter lobbyists were exultant.

Despite the ongoing scandals in the charter industry, the Legislature was unable to act.

Only this week, eleven charter leaders were indicted for misappropriating millions of dollars that ended up in their personal bank accounts.

Only last week, the founder of a charter chain was sentenced to thirty months in prison for theft of millions of dollars.

The California Charter School Association, funded by billionaires such as Reed Hastings and Eli Broad, want predators to go unsupervised and unregulated. They want no limits on charter growth, public schools be damned.

If it is not there already, I place the CCSA on this blog’s Wall of Shame.

Let’s see what happens to AB 1505, which enables districts to have some say over whether charters can open in their space, which would curb the rapacious appetite of sleazy operators who are able to get a charter in Rural District Z and open the school in an urban district that doesn’t want them.

Ten percent of the students in California are enrolled in privately managed charter schools; 90% are enrolled in public schools. Why undermine and deprive the 90% for the (possible) benefit of the 10%? Only one group benefits from the legislators’ inaction: the charter industry. This is insane. And corrupt.

Categories Accountability, California, Charter Schools, Corruption, Education Industry, Privatization, Wall of Shame

San Diego: Eleven People Indicted in Connection to Online Charter Fraud

By dianeravitch
May 30, 2019 //
7

 

The California Legislature is considering four bills to reform the state’s massive charter school industry (1,300 schools, mostly unregulated and unsupervised). One of the bills would prohibit school districts from authorizing charters in other districts. The following story is a classic example of rural school districts authorizing online charters in San Diego and Los Angeles, solely to get the commission attached to each student. In this case, the online charters were cash cows for their owners. [A personal aside: Last February, I was in Newport Beach, California, having breakfast at a hotel. The man at the next table was loudly discussing his schools with someone who was selling athletic services, $5 a student. When he got up to leave, I asked him if he was “in the charter school business.” He said, “Yes,” and said he owned 40 schools under six different corporate names. I asked him his name. He said, “Sean McManus.” I should have asked him to join us. He is one of the key figures in the following article.]

The San Diego Union-Tribune reports that eleven people connected to online charter schools have been indicted for “criminal charges of conspiracy, personal use of public money without legal authority, grand theft and financial conflict of interest.“

The online charters operate in San Diego and Los Angeles, but were authorized by other districts that get a slice of the revenues. This is one of the corrupt practices that have been rampant in California, where lax state law allows sharp operators to get public money and cheat students with no consequences. The Legislature is currently debating a proposal to stop allowing District A to authorize a charter in District B, a practice that is mercenary and predatory. Until now, the powerful California Charter Schools Association—enriched by billionaires like Reed Hastings and Eli Broad—has fought all accountability for charter schools.

At the center of the allegations are leaders of the charter school management corporation A3 Education, a Newport Beach corporation whose leaders control 13 charter schools across California, according to an indictment filed May 17.

A3’s chairman, Sean McManus, and president, Jason Schrock, essentially owned and operated the charter schools throughout California at the same time that A3 contracted with those schools, according to the indictment.

McManus and Schrock operated multiple businesses that charged their own charter schools millions of dollars for services. Then they channeled money from those businesses into their own charitable trust and personal bank accounts, according to the indictment.

A3 Education and the businesses affiliated with McManus and Schrock together have invoiced at least $83.3 million from the 13 charter schools, according to the indictment.

From the affiliated businesses, at least $8.18 million went into personal bank accounts, some in Australia, and into charitable trust accounts for McManus, Schrock and their wives, and $500,000 went to a family member of McManus, according to the indictment.

McManus and Schrock also used $1.6 million of A3 Education’s funds to buy a private residence for McManus in San Juan Capistrano, the indictment states.

Also according to the indictment, six people, including McManus and Schrock, conspired to collect state money for students who were listed as being enrolled in Valiant Charter Schools but were not receiving services.

The two Valiant schools will close permanently on June 30. Several thousand students will need to find new schools. The San Diego online charter was authorized by the Dehesa School District, and the one in Los Angeles was authorized by the Acton-Agua Dulce Unified School District.

The children were not assigned to teachers who have state-required professional certificates, the indictment said. The students were not in contact with the schools or provided with educational services during the summer months, as some of the co-conspirators claimed, according to the indictment…

Also indicted is Nancy Hauer, who is superintendent of Dehesa School District, which authorized several charter schools, including Valiant Academy of Southern California. The Dehesa district office did not immediately provide a comment Tuesday.

Also among the indicted is Steve Van Zant, a former Mountain Empire Unified superintendent who three years ago pleaded guilty to violating conflict-of-interest laws, after he brokered deals with charter schools to operate in other school districts, prosecutors said at the time.

Valiant Academy had 43 students two years ago, 726 last year, and 2,250 this year. It’s academic performance was so poor that even the California Charter School Association recommended that it be closed.

Betsy DeVos says that parents always know what’s best. Why were they enrolling their children in these failing “schools.”?

 

 

 

Categories Accountability, California, Corruption, Education Industry, Ethics, For-Profit, Fraud, Los Angeles, Privatization, San Diego, Virtual Charter Schools

Sue M. Legg: The Failure of Jeb Bush’s A+ Plan in Florida

By dianeravitch
May 14, 2019 //
66

Sue M. Legg is a scholar at the University of Florida, a leader in Florida’s League of Women Voters, and a new board member of the Network for Public Education. She has written an incisive and devastating critique of Jeb Bush’s education program in Florida, which began twenty years ago. Bush called it his A+ Plan, but by her careful analysis, it rates an F. Advocates of school choice tout Florida’s fourth-grade scores on NAEP, which are artificially inflated by holding back third graders who dontpass the state test. By eighth grade, Florida’s students rank no better than the national average. Note to “Reformers”: a state that ranks “average” is NOT a national model.

Twenty Years Later, Jeb Bush’s A+ Plan Fails Florida’s Students. 

Sue Legg explodes the myth of the Florida miracle in her well documented report:  Twenty Years Later: Jeb Bush’s A+ Plan Fails Florida’s Students. She has compiled the research over twenty years showing the negative impact of privatization in Florida.  The highly touted achievement gains of retained third graders are lost by eighth grade.  Top ranked fourth grade NAEP scores fall to the national average by eighth grade. One half of twelfth graders read below grade level.  The graduation rate is above only 14 states.

The A+ Plan was a great slogan, but its defects resulted in a twenty-year cycle of trial and error to fix the problems.   School grades are unreliable.  A school receiving a ‘B’ grade one year has about a thirty percent chance of retaining the grade the following year. Invalid grades occur so frequently that State Impact reports that Florida made sixteen changes to the school grade formula since 2010.  It was thrown out but the new version is no more stable.  What it means to be a failing school, moreover, is consistently redefined to make more opportunity for charter school takeovers.  

Florida touts improving academic achievement in the private sector that is not supported by research.  The CREDO Study reams Florida’s for-profit charter industry.  According to a Brookings Institution study, low quality private schools are on the rise, and the LeRoy Collins Institute’s 2017 study, Tough Choices, explains that there are twice as many severely segregated Florida schools (90% non-white students) than there were in 1994-5.  The legislature ignores the problem in part because key legislators have personal interest in charter and private schools.  “Florida suits him” said Roger Stone, recently indicted in the Mueller investigation.  The New York Times article: Stone Cold Loser: quoted Stone’s admiration for Florida when he said “…it was a sunny place for shady people”.  A Miami Herald series “Cashing in on Kids” reported a list of questionable land deals and conflicts of interest by for-profit charter school management. The federal government began an investigation in 2014.  Last year a  charter management firm faced criminal charges, and Florida charters have the nation’s highest closure rate.

WalletHub reports that Florida is 47th of 50 states in working conditions for teachers.  As a result, the Florida Education Association projects 10,000 vacancies next fall. Teacher shortages are not only related to money, they are due to a deliberate attack on the profession in order to break teacher unions and impose a political ideology.  As Steve Denning in a Forbes magazine article explains: “The system” grinds forward, at ever increasing cost and declining efficiency, dispiriting students, teachers and schools alike”. The thinking, he says, is embedded in the No Child Left Behind (NCLB) and Race to the Top policies.   The A+ Plan is an extension of these policies that includes increased testing and rewards and punishments related to results.

Florida’s teachers are not allowed to strike.  Parents may have to.  The legislature recently approved small raises for teachers but expanded the unconstitutional voucher program.  The governor is not concerned; he appointed three new judges to the Florida Supreme Court.  In the May 3rd 2019 Senate session, Senator Tom Lee chastised his fellow Republicans.  He has supported charter schools for years, but said ‘the industry has not been honest with us...first they wanted PECO facility funds, then local millage; now they want a portion of local discretionary referendum funds’.  He called the current supporters ‘ideologues who have drunk the kool-aid‘.

The full report is published on the NPE-Action website.

Categories Accountability, Bush, Jeb, Charter Schools, Corporate Reformers, Corruption, Education Industry, Failure, Florida, For-Profit, Fraud, Privatization, Testing, Vouchers

Milwaukee: Former School Board President Convicted of Accepting Bribes from Charter Operator

By dianeravitch
May 7, 2019 //
7

 

Former Milwaukee School Board President Michael Bonds was convicted of accepting bribes to help a Philadelphia charter school operator. 

As part of an agreement with prosecutors, Bonds, 60, pleaded guilty to two counts in federal court in Philadelphia. He faces up to 10 years in prison and a $500,000 fine at his sentencing, tentatively set for September, but which will depend on when he completes his pledged cooperation with an ongoing federal investigation…

Bonds served on the MPS board from 2007 until he abruptly resigned in July 2018, nine months before his term was to end. 

He was charged last month with conspiracy and violations of the Travel Act for taking kickbacks in return for votes beneficial to Universal Cos. between 2014 and 2016. Two unnamed Universal executives were implicated in the scheme but have not been charged.

Veteran Milwaukee journalist Alan Borsuk described the affair as “a scandal with few rivals in the recent history of Milwaukee education.”  He sums up the details.

Universal Academy. Universal came into Milwaukee riding some celebrity appeal — its founder, Kenny Gamble, was a soul music star — and a reputation for running some decent charter schools, some housing projects and other ventures in its home town, Philadelphia.

Universal also initially named a well-regarded Milwaukee educator as its local leader. Ronn Johnson had founded and led the YMCA Young Leaders Academy. But months before Universal opened, Johnson was charged with sexually assaulting several students years earlier. A few months later, he died in a fire at his home in Brown Deer. His death was ruled a suicide.

The president and CEO of Universal in Philadelphia, Rahim Islam, stepped in to oversee the Milwaukee operation and spent a lot of time in the city. According to the Philadelphia Inquirer, he is one of the main figures in the bribery scheme involving Bonds. 

At one point, Universal schools enrolled 1,000 students.

Perhaps because enrollment didn’t meet expectations and then started to fall, and perhaps because Universal was overextended with the large amount of MPS property it was using, Universal began to slide. Islam became unreachable (he had been glad to talk in early times). Leadership of the schools kept changing. It was clear Universal wasn’t investing in Milwaukee any further.

And things got worse. First two schools closed. Then, the third. It was done abruptly, leaving kids and staff in the lurch.

And now a former Board President is headed to jail. Very sad.

 

Categories Accountability, Charter Schools, Corruption, Education Industry, Fraud, Milwaukee, Privatization

Arizona: Legislators Are Trying to Sneak a Voucher Bill Through. Stop Them!

By dianeravitch
May 2, 2019 //
2

Last fall, the voters of Arizona rejected vouchers by an overwhelming vote.

But the Koch brothers and devious Doug Ducey are not giving up. They slipped through an innocuous bill to thwart the will of the people.

Stop them!

From: “Save Our Schools Arizona” <info@sosarizona.org>
Date: May 1, 2019 at 8:16:11 PM MST
To: “Barbara Veltri” <barbvbtv@aol.com>
Subject: 🚨🚨🚨 Red Alert: Stealth bill SB 1349 needs IMMEDIATE opposition
Reply-To: info@sosarizona.org
SB 1349 “Family College Savings Program” sounded innocent, and flew right under our radar. But when we took a closer look, we realized this program was introducing vouchers by another name.  

We are asking for IMMEDIATE action, since this bill has already passed Senate and House and is now back in the Senate for conformity review. We have only ONE chance to kill this bad bill.

  1. Call your Senator and ask for a NO vote on the conformed SB 1349
  2. Use “RTS 2.0” to enter AGAINST SB 1349 (Request to Speak → My Bill Positions → Enter Bill Number, select bill, then click AGAINST)

This bill creates a new way to siphon tax dollars out of the state’s general fund by incentivizing Arizona families to spend their 529 savings on K-12 private school tuition and expenses (up to $10,000 per account per year!) instead of saving for college, as the accounts are intended.

To add insult to injury, the bill could drain up to $438K annually from the general fund (and therefore our public schools), according to the state’s own nonpartisan fiscal review board.

This is NOT fiscally responsible and harms our public schools.

Thank you for your activism!
The Leadership Team

Save Our Schools Arizona
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Save Our Schools Arizona
PO Box 28370
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Categories Arizona, Betsy DeVos, Corruption, Education Industry, Education Reform, Koch Brothers, Lies, Privatization

Peter Greene: Charter Thievery and the Worst Legislature in America

By dianeravitch
April 19, 2019 //
20

 

Peter Greene writes here about the open theft of public funds, transferred from public schools to to charter schools, in Florida. He raises a question that I have often wondered about: When did Republicans become the enemies of local control? The answer in Florida is obvious: when the money is there to pay the legislators to change their views, they change their views. It is not about improving education, since they are reducing the funds available to educate the vast majority of Florida’s children. This is a pay-to-play sellout of public education. When people vote to put thieves in office, they should not be surprised when the thieves rob them and their schools.

He writes:

“Imagine. You live on the 300 block of your city, and your neighborhood is starting to look kind of run down, mostly because the city has redirected a ton of your tax dollars to the neighborhood on the 400 block. You try to fight city hall, but that’s futile, so instead, you get the neighborhood together, and you collect money from amongst yourselves to upgrade sidewalks, clean the streets, refurbish the curbs, and just generally fix the place up. And then the city sends a message– “That money you just collected? You have to give some of it to the neighborhood in the 400 block.”

“Congratulations. You live in Florida.

“Florida’s elected Tallahassee-dwellers have pretty much dropped all pretense; under Governor Desantis, the goal is to completely demolish public education, with no more cover story than to insist that the resulting privatized system is still a “public school system.” I have seen better gaslighting from a fourteen year old saying, “I did not throw that pencil at Chris” even though he watched me watch him do it.

“The Tampa Bay Times offers some background:

“Let’s check the record. For years, Republicans who control the Legislature have attacked teacher unions as the enemy and complained about under-performing public schools while starving them of financial resources. They would not let local school districts keep additional tax revenue created by rising property values. They gave them little or no money for construction and renovation. And last year, they increased base spending per student by a grand total of 47 cents.

We’ll put Swampland Charter right here.

“Florida has been systematically starving its public school system, so some districts took the most logical step available to them– they levied taxes on themselves to raise teacher salaries, replace programs that were cut, and basically use their own local money to reverse the problems caused by state-level neglect. They stepped up to solve the problems the state caused.

“Last week, Florida GOP legislators pooped out a proposal to stop all this locally controlled self-reliant bootstrapping (because, you know, conservatives hate local control, self-reliance, and bootstraps, apparently, now). The bill, proposed by the House Ways and Means Committee led by Rep. Bryan Avila, R-Miami Springs, says those local districts must hand over some of those tax dollars to charter schools or the state will just cut their state funding even more.

“This is just nuts on so many levels. In addition to pissing on the conservative values of local control and self-reliance, this also thumbs its nose at one of the traditional arguments for charter schools– that competition will make public schools up their games. I’d call bullshit on that point, except that’s exactly what happened here– with their ability to compete hamstrung by Tallahassee tightwads, these local districts found a way to be competitive, including competing for teachers in the midst of Florida’s well-deserved and completely predictable teacher shortage.”

Categories Accountability, Charter Schools, Corruption, Education Industry, Florida, For-Profit, Fraud, Privatization
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