Remember that old Frank Sinatra, “Love and Marriage…go together like a horse and carriage.”
Mercedes Schneider discovered a web site whose purpose is to help charter schools manage their credit cards, which have been the cause of so many charter school scandals.
California Attorney General Kamala Harris reached a settlement of $168.6 million with mega-virtual charter K12 Inc. This settlement reflects the good investigative reporting of Jessica Calefati of the San Jose Mercury News, whose investigative reporting led to Harris’ review of K12’s finances and practices.
There are two more investigations underway: one by the California State Department of Education and the other by the State Controller. Now that virtual charters have been discredited by studies and thrown under the bus by the rest of the charter industry, this aspect of the industry may finally be on the skids.
“California Attorney General Kamala Harris announced Friday the state Department of Justice has reached a $168.5 million settlement with for-profit online charter school operator K12 Inc. over an array of alleged violations of false claims, false advertising and unfair competition laws.
“The settlement comes almost three months after the Bay Area News Group published a two-part investigative series on the publicly-traded Virginia company, which runs a network of profitable but low-performing online charter schools serving about 15,000 students across the state.
“Harris’ office found that K12 and the “virtual” academies it operates across the state used deceptive advertising to mislead parents about students’ academic progress, parent satisfaction and their graduates’ eligibility for University of California and California State University admission.
“The Attorney General’s office also found that K12 and its affiliated schools collected more state funding from the California Department of Education than they were entitled to by submitting inflated student attendance data and that the company improperly coerced the non-profit schools it operates to sign unfavorable contracts that put them in a deep financial hole.”
Politico reports that K12 Inc. disagrees with the characterization of the settlement:
– Speaking of charter schools, California Attorney General Kamala Harris said Friday that virtual charter school operator K12 Inc. will pay $168.5 million to settle [http://politico.pro/29NP6eM] alleged violations of the state’s false claims, false advertising and unfair competition laws: http://politico.pro/29nJ0Nj . But K12 pushed back on the settlement amount – preferring not to include $160 million in financial relief that Harris’ office says will be provided to certain schools that K12 manages. Instead, K12 CEO Stuart Udell said the company will only pay $2.5 million to settle the case, and another $6 million for Harris’ investigative costs. Udell said his company admitted no wrongdoing. “The Attorney General’s claim of $168.5 million in today’s announcement is flat wrong,” Udell said. “Despite our full cooperation throughout the process, the Office of the Attorney General grossly mischaracterized the value of the settlement, just as it did with regard to the issues it investigated.”
– The settlement is another black eye for the virtual charter industry, which just last month had three reform-minded groups calling for it to be improved, or else problems such as low graduation rates will “overshadow the positive impacts this model currently has on some students.” [http://politi.co/1tyKbnt] More from Kimberly Hefling: http://politico.pro/29ImzF8
Anita Senkowski is a blogger in Michigan who has been closely following the unraveling of Grand Traverse Academy, a charter chain founded by optometrist Steven Ingersoll. Ingersoll developed a new pedagogy, he said, based on “visual learning,” and he gathered a governing board of other optometrists to lead the charter venture. Unfortunately, no one kept close watch on the financial affairs, and Dr. Ingersoll transferred millions of dollars from the schools’ account to his personal bank account. The members of the board were not troubled by this minor oversight, but federal prosecutors were not so understanding. Ingersoll was indicted and convicted. But the saga continues.
Anita Senkowski wrote to me:
File this one under “I thought I’d seen everything”: Steven Ingersoll’s optometry license may be yanked (revoked) by the Michigan Board of Optometry, and guess who sent letters of recommendation? [Board members] Mark Noss and Brad Habermehl:
In addition, in late March, federal prosecutors revealed a former Noss accountant blew the whistle as he exited the place and revealed a years-long pattern of cash payments:
However, using the accountant’s information, federal prosecutors later substantiated two previously undiscovered Ingersoll bank accounts and ID a total of (wait for it!) $627,624.14 was paid to Ingersoll by Noss. Although it’s later claimed that one of the payments was a reimbursement for an early payroll payment made by Ingersoll during the transition from his Smart Schools Management to Noss and Full Spectrum, that’s still a hell of lot of money. And did Ingersoll report the money on his taxes? According to the government, nope!
http://glisteningquiveringunderbelly.blogspot.com/2016/04/full-diaperfilled-with-money-complete.html
At the start of each fiscal year (July 1), beginning in 2007 and continuing for six years until 2013, Grand Traverse Academy (GTA) manager Steven Ingersoll advanced his entire annual Smart Schools Management, Inc. fee from the Traverse City, Michigan charter school’s bank account before it had been earned — and before he was contractually entitled to receive it. Although based on a percentage of the GTA board’s approved preliminary budget figures, Ingersoll’s management fee was adjusted downward after actual budgets were calculated.
However, Ingersoll never really repaid the difference between the amount he’d advanced himself and the actual management fee he received.
How did the receivable grow from $538,864 on June 30, 2007 to $3,551,328 on June 30, 2012 if Ingersoll, as he claimed to the GTA board, booked each year’s fee overpayment as a receivable and paid it off at the beginning of the next fiscal year?
Simple: after Ingersoll had paid the previous year’s receivable balance using Michigan state aid money provided to the Grand Traverse Academy, he transferred that money back from the Academy’s bank account to one of his Smart Schools accounts, and created a new, and even larger, receivable balance. (Ingersoll finally admitted the scheme on December 9, 2015 while testifying during his ongoing sentencing hearing).
Representatives of the GTA board, including its then-president Mark Noss, met with attorneys from the Thrun Law Firm and Steven Ingersoll on May 20, 2013. During the meeting, Ingersoll admitted owing the charter school at least $3.5 million but asked to have the debt classified as a “loan”.
According to the May 30, 2013 Thrun Law Firm legal recommendation to Noss, the issue before the Board “relates to funds withdrawn from the Academy’s general fund by Steven Ingersoll and/or representatives of SSM, which exceed the amount appropriated or authorized by the Board to be paid to SSM for either management fees or the reimbursement of Academy expenses.”
The letter estimated Ingersoll’s debt to the Traverse City charter school at $3,548,319 (based on information provided by Ingersoll’s handpicked CPA, Tony Henning). As Henning had relied solely on “financial reports and representations of Steve Ingersoll” to determine the amount, Thrun repeatedly urged the GTA board to “independently verify the full sum due” instead of merely accepting Henning’s number.
Representing the interests of the GTA and its board, not Steven Ingersoll and Smart Schools Management, Thrun affirmed in its May 30, 2013 letter that “Steven Ingersoll openly admitted, when asked by us during the May 20th meeting, that a conflict exists between his personal interests and the interests of the Academy.”
However, the Academy Board ignored Thrun’s recommendation to verify Ingersoll’s numbers, instead using CPA Henning’s exact $3,548,319 amount in its June 13, 2013 “demand letter” to Steven Ingersoll.
On June 30, 2013, the GTA board and Ingersoll agreed on a “repayment plan”, revealing the details in the Academy’s 2013 financial statement. The agreement allowed Ingersoll to “work off” his balance by foregoing management fee payments over the remaining three fiscal years of his management contract.
GTA board president Mark Noss oversaw an early morning meeting on March 19, 2014 where the board voted unanimously to officially “withdraw from the management contract with Smart Schools Management, Inc.”
Minutes later, the board accepted the resignation of “Mark Noss as the President of the Board.” Although Noss tendered his resignation during this meeting, the resignation was not effective immediately.
GTA records reveal Noss continued to serve in a dual role as a board member until its May 2014 meeting, nearly two months after signing a multi-year, multi-million dollar management contract.
Steven Ingersoll was indicted on April 9, 2014.
Ingersoll was charged with three counts of wire fraud, two counts of tax evasion, one count of conspiracy to defraud the government, and one count of attempted conspiracy. (Four co-defendants, including Ingersoll’s wife Deborah, were also charged on various fraud and conspiracy counts).
An April 24, 2014 superseding indictment further charged Steven Ingersoll with tax evasion regarding his attempt to “disguise the money allegedly received from Grand Traverse Academy” —which was also named by the government as the motive for the bank fraud conspiracy and tax evasion conspiracy.
Steven Ingersoll was convicted of three counts of fraud and tax evasion on March 10, 2015.
Ingersoll’s sentencing hearing began on October 21, 2015 and is scheduled to resume July 11, 2016.
On March 15, 2016, an accountant formerly employed by Mark Noss at Full Spectrum Management reveals to the GTA board and the charter school’s authorizer, Lake Superior State University, Noss had been making $12,500 monthly payments to Ingersoll since April 2014, shortly after Noss assumed control of the GTA.
Using information provided by the whistleblowing accountant, (who resigned shortly after making his revelations public), federal prosecutors were able to substantiate that between April 8, 2014 and March 1, 2016, Steven Ingersoll received a total of $627, 624.14 from Full Spectrum Management, the educational services provider owned by Mark Noss and holder of the management contract for the Grand Traverse Academy or Grand Traverse Academy itself. All of that money went into accounts owned by Steven Ingersoll and his solely owned entities.
An excerpt from the April 29, 2016 document: “In assessing the credibility of Habermehl as a witness and Noss as an affiant in this matter, the court must consider the relationships they have with Ingersoll and how their financial and personal relationships with Ingersoll have influenced the representations that Habermehl and Noss have made to the court.
The evidence discussed above casts doubt on the credibility of Ingersoll, Noss and Habermehl.”
Stuff like this, which seldom are noticed by the mainsteam media, can drive bloggers crazy. Is anyone listening? Does anyone care?
California has more than 1,000 charter schools. When Governor Arnold Schwarzenegger was in charge, he filled the state school board with charter advocates, even though students in charters were only 5% of the enrollment. Today, the California Charter School Association is one of the richest, most powerful lobbies in the state. They don’t lobby for all children. They lobby only for charter expansion and continued deregulation.
Because the State Education Department lacks the staff to supervise so many charters, each of which is akin to an independent district, the charters regularly produce stories of graft and corruption. The exposes roll out almost daily of theft of public dollars. The CCSA thinks that is just fine. They oppose any regulation or oversight of these unaccountable schools.
Here is your chance to join with others who are defending public education in California. Learn about the all-day seminar on July 30, 2016, at Richmond High School in Richmond, California.
See the flyer with information about the event here.
The new federal law titled “Every Student Succeeds Act” encourages states to welcome newcomers to the field of teacher education, such as the Relay Graduate School of Education and the Match Graduate School of Education. Relay and Match have much in common. They do not have scholars or researchers on their “faculty.” At last check, neither had anyone with a doctorate in any subject on their faculty. They do not appear to teach cognitive development, child study, the history or economics of education, the uses and misuses of testing, early childhood education, or any other subject normally found in a typical graduate school of education. These “graduate schools” consist of charter teachers teaching future charter teachers how to raise test scores and how to maintain strict discipline. They might appropriately be called a “program,” but they are not “graduate schools of education,” nor should they have the right to award master’s degrees. Going to Match or Relay is akin to taking classes in computer programming or cooking or going to a trade school.
I discovered that EduShyster explained the Match “Graduate School of Education” a few years back. Read this short piece to understand what Match is and why so many of its ill-prepared teachers don’t last.
And remember, the Congress of the United States wants to promote more of these sham teacher-preparation programs.
Throughout this presidential campaign, we have been treated (or subjected) to statements by both Democratic candidates Clinton and Sanders about charters: They don’t like “private charters” (Sanders) or “for-profit charters” (Clinton).
There are no “private charters.” All charters receive public funding. That’s what makes them so attractive to investors. That secure stream of government funding.
At the very least, we can be glad that Clinton is opposed to the for-profits, which rip off taxpayers and divert public funding to their stockholders and owners. Let’s hope that means she is prepared to cut off federal funding that goes to the scam artists of the charter world. No more 3-card Monte with public dollars.
But is there a difference between “for-profit charters” and “non-profit charters”?
Peter Greene says it is a distinction without a difference.
He writes:
In this scenario, I set up my non-profit school– and then I hire a profitable management company to run the school for me. The examples of this dodge are nearly endless, but let’s consider a classic. There’s the White hat management company that was being dragged into court way back in 2011. This particular type of arrangement was known as a “sweeps contract,’ in which the school turns over close to all of its public tax dollars and the company operates the school with that money– and keeps whatever they don’t spend. The White Hat story is particularly impressive, because the court decided that White Hat got to keep all of the materials and resources that it bought with the public tax dollars.
Or consider North Carolina businessman Baker Mitchell, who set up some non-profit charter schools and promptly had them buy and lease everything– from desks to computers to teacher training to the buildings and the land– from companies belonging to Baker Mitchell. From Marian Wang’s 2014 profile:
To Mitchell, his schools are simply an example of the triumph of the free market. “People here think it’s unholy if you make a profit” from schools, he said in July, while attending a country-club luncheon to celebrate the legacy of free-market sage Milton Friedman.
Real estate grabs
All charter schools– even the non-profits– can get into the real estate business as a tasty sideline for providing a school-like product. Charter producers can find money to fund a building and then– voila– they own a tasty piece of real estate. Remember– thanks to some Clinton-era tax breaks, an investor in a charter school can double the original investment in just seven years!
In fact, there are real estate companies in the charter school business. And this can be a particularly terrible deal for the taxpayers. Bruce Baker lays out here how the public can pay for the same building twice– and end up not owning it. Read the whole thing– it’s absolutely astonishing.
Write a big fat check
If you have the giant cojones for it, you can just write yourself a big fat check with all those public taxpayer dollars. To use one of everyone’s favorite data points– Carmen farina is paid $200,000 to oversee 135,000 employees and 1.1 million students. Eva Moskowitz’s Success Academy chain handles 9,000 students, for which Moskowitz is paid almost half a million dollars. And while Moskowitz gets plenty of attention, she is by no means unique….
And that’s just the profit issue
This is before we talk about every anti-democratic, school-destroying, segregation-spreading, education-failing, community-disrupting, and achievement-gap-increasing aspect of charter schools. As readers of this blog know, while charters can (and once were) a good thing, the modern charter movement has turned them into one of the most destructive forces in education today.
But we’re going to maintain focus
We’re going to stick to one point, and the point is this– to pretend that there is a substantive difference between profit and non-profit charter schools is either willfully ignorant or deliberately misleading. I’ve said it many times– a modern non-profit charter school is just a for-profit school with a good money-laundering plan.
We previously read about El Camino Real Charter School in the Los Angeles Unified School District. The principal got into trouble because he was moonlighting as a coach for the NBA and charging his travel expenses to the school (i.e., the taxpayers).
The principal spent over $100,000 on personal items and charged them to the school. The school learned of the principal’s lavish spending in October 2015. This past week, the board decided to hire an investigator. Why did it take eight months to act?
He bought a $95 bottle of fine Syrah. Paid for first-class airfare and luxury hotel rooms. And racked up a $15,500 credit card tab at Monty’s Prime Steaks & Seafood.
David Fehte, executive director-principal of El Camino Real Charter High School in Woodland Hills, used the same school-issued American Express card to charge $100,000 over two years. Some charges came while moonlighting as a college basketball talent scout for the San Antonio Spurs.
Now the El Camino high board of directors has decided to launch an independent financial probe of the popular principal’s spending. The forensic accounting comes ahead of a year-long management assistance review by a state financial turnaround agency prompted by the credit card scandal.
“I want guidance from agencies to tighten up the (school fiscal) policy,” El Camino board Chairman Jonathan Wasser said after a unanimous vote late Wednesday to pay for the probe of its principal. “I believe in due process.
“We need to have the forensic accounting look over all the information because it’s big, and I’m not an accountant, and it requires somebody trained to look over the evidence.”
It gets worse.
Carl Petersen, a charter school parent at another charter school, reports on the efforts at El Camino Real Charter School to pre-empt the story before it came out. The school and the principal went into a defensive crouch, treating those who questioned its finances as enemies.
This is one of the strangest stories of the week or year. Back in 2008, a group of parents at the Agora Cyber Charter school in Pennsylvania began questioning the financial affairs of the corporation that owned it. Agora was paying rent and management fees to another company, the Cynwyd Group, which June Brown, the founder of Agora, also owned.
In January 2009, the owners of Agora filed suit against the parents:
As parents tried to gather records and sort out the business relationships at Agora, they circulated emails expressing their concerns. They also complained to the state Education Department when the school did not provide information they requested.
In the suit filed in January 2009, Brown and Cynwyd Group charged that the parents had made statements that defamed and libeled Brown.
The complaint also alleged that the parents’ group had tried to interfere with Cynwyd’s contractual relationship with Agora “by spreading untruths about Dr. Brown and by implying that she had improperly used public funds.”
Brown and Cynwyd sought more than $150,000 in damages from the six parents for libel, slander, and civil conspiracy.
The parents denied the allegations and said they had merely sought information about the taxpayer-funded school their children attended.
Brown said the parents had defamed her and she had to defend her reputation. The parents had trouble paying for legal representation.
The suit dragged on, but in 2012, “federal grand jurors indicted Brown and charged her with defrauding Agora and her other charters of $6.7 million.”
The case against the parents remained active, to be addressed after the conclusion of the criminal trial. Brown’s criminal trial ended in a hung jury in 2014, and a retrial was canceled in 2015 after Brown’s lawyer said that she suffered from dementia. So, she escaped legal action, kept the money, but the parents were in limbo, still facing the charges of defamation that Brown had lodged against them.
Earlier this month, the charges were dismissed. The parents were relieved. One had used the family’s mortgage payment to pay a lawyer and lost her home fighting the lawsuit.
It does seem unjust that the parents were dragged through legal proceedings for more than seven years, accused of defaming Brown, even while she was under federal indictment for defrauding her charters of millions of dollars.
Senator Sherrod Brown of Ohio is a Democrat, and he is known as a progressive. He has also been known in the past as a supporter of charter schools.
However, even Senator Brown had a wake-up call as charter scandals multiplied in his home state. He could not help but notice the multiple editorials appearing in newspapers across the state, as well as news stories in national media about the charter owners who were becoming multimillionaires by donating to Republican politicians and getting more funding and less scrutiny of their charter schools.
He wrote a letter to Secretary of Education John King expressing his concern with the U.S. Department of Education’s award of $71 million to Ohio to open more charter schools (a grant put on hold because of outrage from Ohioans), as well as the embarrassing performance of the state’s charter sector. If Senator Brown has had his eyes opened, at last, that is a big step forward.
The letter can be read here.
Juan Rangel, a political activist in Chicago, created the city’s largest charter chain, called UNO. Rangel was co-chairman of Rahm Emanuel’s mayoral campaign in 2011, when he first ran for mayor. UNO was an amazing cash cow. It collected $280 million over five years from the state. Governor Pat Quinn and House Speaker Mike Madigan took care of UNO, giving it a grant of $98 million to expand, a staggering amount for a single charter chain. Meanwhile, UNO fired its for-profit management firm and took charge of its operations, claiming 10% of all revenues for itself. None of UNO’s activities were monitored by anyone. Conflict of interest rules covered public schools, but not UNO.
Here is the ultimate nonpartisan article summing up the rise and fall of UNO and Juan Rangel. Here is my short summary of that brilliant article.
Once UNO won $98 million from the state, many friends and relatives got a piece of the action:
As the Sun-Times would reveal in February 2013, a long line of contractors, plumbers, electricians, security firms, and consultants tied to many of the VIPs on UNO’s organizational chart got a piece of the action. Rangel spelled out in tax documents and in later bond disclosures that the construction firm d’Escoto Inc.—owned by former UNO board member Federico d’Escoto, the brother of Miguel d’Escoto—was the owner’s representative on three projects funded by the grant. Another d’Escoto brother, Rodrigo, was paid $10 million for glass subcontracts for UNO’s two Soccer Academies and a third school in the Northwest Side neighborhood of Halewood.
The vendor lists were peppered with other familiar names: a $101,000 plumbing contract awarded to the sister of Victor Reyes, UNO’s lobbyist, who helped secure the state grant; a $1.7 million electrical contract given to a firm co-owned by one of Ed Burke’s precinct captains; tens of thousands in security contracts to Citywide Security, a firm that had given money to Danny Solis, and to Aguila Security, managed by the brother of Rep. Edward Acevedo, who voted for the $98 million for UNO.
As the scandals broke into public view, thanks to the enterprising reporting of the Chicago Sun-Times, Rangel resigned in December 2013.
Fred Klonsky writes about the consequences for Rangel. The SEC fined Rangel $10,000 while he admitted no wrong-doing. He is allowed to pay it off at $2,500 per quarter.
Klonsky writes in incredulity:
When he resigned from UNO he received a severance package of nearly a quarter million bucks.
$2500 a quarter?
That probably equals his lunch tab.
When Rangel ran UNO it was reported by the Sun-Times as having spent more than $60,000 for restaurants on his American Express “business platinum” card including thousand dollar tabs at Gene & Georgetti, the Chicago steak house.
Diane Ravitch's blog 