Charter Schools – Havens For Waste, Fraud And Abuse?

Ken O’Brien

May 4th through the 10th is National Teacher Appreciation Week. It is also National Charter School Week.

In what may be regarded as a poke in the eye to that latter occasion, a new study has been issued that focuses on what it maintains is a culture of criminal behavior that infects charter schools around the country.  Titled “Charter School Vulnerabilities to Waste, Fraud and Abuse,” the report focused on 15 states representing large charter markets, out of the 42 states that have charter schools.

The report, co-authored by the Center for Popular Democracy and Integrity in Education, makes the point that the problem of charter school waste, fraud and abuse, which it focuses on, is just one symptom of the underlying problem: inadequate regulation of charter schools.

There are plenty of troubling issues surrounding charter schools — from high rates of racial segregation, to their lackluster overall performance records, to questionable admission and expulsion practices — this report sets all those admittedly important issues aside to focus squarely on activity that appears it could be criminal, and arguably totally out of control. It does not even mention questions raised by sky-high salaries paid to some charter CEOs, such as 16 New York City charter school CEOs who earned more than the head of the city’s public school system in 2011-12. Crime, not greed, is the focus here.

Drawing on news reports, criminal complaints, regulatory findings, audits and other sources, it “found fraud, waste and abuse cases totaling over $100 million in losses to taxpayers,” but warned that due to inadequate oversight, “…the fraud and mismanagement that has been uncovered thus far might be just the tip of the iceberg.”

The report found that “charter operator fraud and mismanagement is endemic to the vast majority of states that have passed a charter school law.” It organized the abuse into six basic categories, each of which is treated in its own section:

• Charter operators using public funds illegally for personal gain;
• School revenue used to illegally support other charter operator businesses;
• Mismanagement that puts children in actual or potential danger;
• Charters illegally requesting public dollars for services not provided;
• Charter operators illegally inflating enrollment to boost revenues; and,
• Charter operators mismanaging public funds and schools.

Under the first category, a number of charter school officials displayed a wide range criminal behavior. Examples include:

• Joel Pourier, former CEO of Oh Day Aki Heart Charter School in Minnesota, who embezzled $1.38 million from 2003 to 2008. He used the money on houses, cars, and trips to strip clubs. Meanwhile, according to an article in the Star Tribune, the school “lacked funds for field trips, supplies, computers and textbooks.”

• Nicholas Trombetta, founder of the Pennsylvania Cyber Charter School is accused of diverting funds from it for his private purchases. He allegedly bought houses, a Florida Condominium and a $300,000 plane, hid income from the IRS, formed businesses that billed even though they had done no work, and took $550,000 in kickbacks for a laptop computer contract.

• A regular financial audit in 2009 of the Langston Hughes Academy in New Orleans uncovered theft of $660,000 by Kelly Thompson, the school’s business manager. Thompson admitted that from shortly after she assumed the position until she was fired 15 months later, she diverted funds to herself in order to support her gambling in local casinos.

The report’s first proposal is that all states should establish an oversight “Office of Charter Schools.” It “should have the statutory responsibility, authority, and resources to investigate fraud, waste, mismanagement and misconduct,” including the authority to refer findings for prosecution.

A second proposal is that states amend their charter laws to “explicitly declare that charter schools are public schools, and are subject to the same non-discrimination and transparency requirements as are other publicly funded schools.”

A third proposal is to require public online availability of each charter school’s original application and charter agreement.

With all the controversy that has swirled around our own school district many have advocated for a local charter school. Before impulsively favoring another “magic bullet” solution, people should look at the potential negatives experienced by others. There are plenty of issues around education that are controversial. Protecting ourselves, our children and their future against a massive white-collar crime wave should not be one of them.

The study is reproduced below.

Charter School Vulnerabilities to Waste, Fraud, & Abuse