Atlanta Preparatory Academy

“Atlanta school board considers own police force.” Atlanta Journal-Constitution (GA), 1/14/2013

“... The board on Monday also decided the fate of Atlanta Preparatory Academy, voting 8-1 (Byron Amos dissenting) to follow Davis’ recommendation not to renew the charter of the school. APS executive director of innovation Allen Mueller told the board the school has underperformed academically and has financial problems.

According to Mueller, the K-8 school with about 450 students ranks in the bottom 20 percent of schools statewide in academic performance; its enrollment is 45 percent lower than originally projected; and it owes $801,384 to for-profit education management company Mosaica Education, Inc.

Atlanta Prep board members and Mosaica co-founder and president Gene Eidelman said afterward the school will take its case to the state charter commission, which was approved by voters last November in part to consider charter proposals rejected by local school boards...”

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“Atlanta school facing loss of charter.” Atlanta-Journal Constitution (GA), 1/2/2013

The Atlanta school board will hear arguments in January whether to renew the charter of Atlanta Preparatory Academy or follow a staff recommendation to terminate it in June...

The dispute over renewal illustrates the dynamics and nuances of charter school relationships with local school boards, especially charters run by for-profit management companies that collect taxpayer funds from the district and extract hundreds of thousands of dollars in management fees.

Allen Mueller, APS’s executive director of innovation, told the board Dec. 3 the case against Atlanta Prep’s renewal is clear-cut and the school’s failings manifold. Atlanta Prep ranks in the bottom 20 percent of schools statewide in academic performance; its enrollment is 45 percent lower than originally projected; and it owes $801,384 to for-profit education management company, Mosaica Education, Inc., he said.

Mosaica has agreed to restructure the loan to eliminate a $568,000 balloon payment due in June, said Mueller. But the financial arrangement is still “untenable” because it’s a potential threat to the autonomy of the board, he said. The state of Georgia recommends charter boards have the independence to overrule their management companies...

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“Charter Founder Profits; Students Struggle.” East Atlanta Patch (GA), 12/11/2012

...In December 2006, Mosaica’s President Gene Eidelman filed a charter petition to open the Atlanta Preparatory Academy (APA).  The charter application indicates that non-profit APA intended to contract with for-profit Mosaica to provide all services.

Unlike Grant Park’s community-based Atlanta Neighborhood Charter School, APA was not founded by a group of local parents seeking better options for their kids. Instead, Gene Eidelman was joined by a team of three outsiders, none of whom live in the community where APA planned to operate its school and none of whom send children to the school...

The application acknowledged a conflict of interest as APA’s President was also the founder, owner, and President of Mosaica.

Undeterred by this conflict, the APS Board of Education approved the application...

Since the Board of Education approved the school’s charter five years ago, APA has been a revolving door for board members who join then leave the organization... None of the individuals who have served as CFO appear to have earned a degree in finance or accounting...

This instability and lack of financial experience stands in stark contrast to the consistent financial leadership seen at Atlanta’s successful charters...

Much like Mosaica’s other schools, APA’s students rank among the bottom of the pack on Georgia exams...

Importantly, the school’s highest performing students are 7th graders who received their K-4 educations elsewhere, prior to APA opening...

In addition to the charter’s dismal academic achievement, a review of APA’s financial statements raises questions about whether the school has been a good steward of public resources...

The Management Agreement between APA and Mosaica calls for a fee of 12.5% of per-pupil revenue received by the school, which in 2012 amounted to $577,716. It goes on to say that this fee “will not preclude the payment of additional consideration,” paving the way for Mosaica to charge more for any services not covered under the Management Agreement...

Only 36.2% of APA’s revenue for the year ended June 30, 2012 actually went toward instruction. This was the lowest percentage of expenses allocated to instruction among all of Atlanta’s charter schools...

To date, APA has spent close to one million dollars of public money on a site which in no way contributed to education...

[READ THE WHOLE PIECE]

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UNO Charter Schools

“More money from clout-heavy Hispanic group UNO went to insider.” Chicago Sun Times (IL), 4/22/2013

Weeks after Federico “Fred” d’Escoto stepped down from the board of the United Neighborhood Organization, his company, d’Escoto Inc., got its first check from the influential charter-school operator toward what now totals more than $1.8 million in state-funded payments.

But d’Escoto Inc.’s ties to UNO — part of a pattern of insider hiring now under scrutiny by state authorities — date back years before that, internal documents obtained by the Chicago Sun-Times show.

The private, not-for-profit organization already had been using d’Escoto’s Chicago construction-management company for three years to do rehabilitation work on its largely taxpayer-funded charter schools, the records show.

And it did so even as d’Escoto was a member of UNO’s board and while his brother Miguel d’Escoto was both a top executive at UNO and a member of d’Escoto Inc.’s board, state and city government documents show...

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“New schools meet old school cronyism ...” Chicago Tribune (IL), 2/22/2013

... The Chicago Sun-Times recently reported that much of a $98 million state grant given to UNO to build schools was funneled to companies that have deep connections to the organization's political allies and a top UNO executive, Miguel d'Escoto. Shortly after the story broke, d'Escoto resigned.

D'Escoto Inc., a company owned by Miguel d'Escoto's brother Federico, reaped more than $1.5 million for work as the "owner's representative" in the construction of several schools.

Reflection Window Co., owned by another d'Escoto brother, Rodrigo, stands to earn nearly $10 million for work on several schools.

Plumbing contracts went to a company owned by the sister of Victor Reyes, the clout-heavy lawyer and lobbyist who helped UNO snag the state grant.

UNO hired Aguila Security, a firm run by two brothers of state Rep. Edward Acevedo, a longtime UNO ally who voted to approve the UNO grant in 2009...

At first, UNO chief executive Juan Rangel defended the contracts, saying he hired Hispanic-owned companies that "have proven themselves."

In recent days Rangel has acknowledged his organization has a serious problem. He has suspended UNO's contract with d'Escoto Inc., while UNO reviews its contracting practices. He has brought on former U.S. District Judge Wayne Andersen to review how UNO picked companies to build its schools. He accepted the resignation of Miguel d'Escoto...

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"Ald. Solis: Insider charter-school deals were 'improper.'” Chicago Sun-Times (IL), 2/13/2013

Ald. Danny Solis (25th) — a co-founder and former head of the United Neighborhood Organization — said Wednesday he thinks it was “improper, at the very least,” for the politically influential organization to use a $98 million state school grant to hire contractors with close ties to the leadership of UNO’s charter-school network.

The Chicago Sun-Times reported last week that UNO’s insider deals included giving contracts paid for by the state grant to companies owned by two brothers of Miguel d’Escoto, the group’s No. 2 executive until he resigned Tuesday from his $200,000-a-year post as senior vice president of operations in the fallout from that revelation...

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“For insiders, community group UNO's charter schools pay.” Chicago Sun-Times (IL), 2/4/2013

Built in 2011 with $25 million from Illinois taxpayers, the curvy, stainless-steel structure that houses the UNO Soccer Academy Elementary Charter School leaps out from the neighboring landscape of boxy brick houses on the Southwest Side.

The school on South Homan Avenue isn’t just eye-catching. It has provided opportunities for working-class, Hispanic parents who want an alternative to crowded, poorly performing public schools for their children, says the head of the United Neighborhood Organization, the increasingly influential group that built and operates the school.

But the way it and other UNO schools were built also has provided a financial boon to people close to the group’s leaders, records obtained by the Chicago Sun-Times show...

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Brooklyn Dreams Charter School

“Charter management firm charging huge rent markups to charter schools.”New York Post (NY), 4/30/2012

A for-profit education firm is soaking taxpayers by subleasing buildings to the Brooklyn public charter schools it runs at astronomical rates — including one at an incredible 1,000 percent markup, sources said.

While the city Department of Education leases buildings in Brooklyn for between $5 and $25 per square foot, the Michigan-based National Heritage Academies subleases to the charter schools it operates for roughly $38 to $45 per square foot, according to a review of public school leases by The Post.

For example, NHA is leasing a former school building on Parkville Avenue in Kensington from the Brooklyn Diocese for approximately $264,000 per year, according to a church source.

Yet the firm billed the site, the Brooklyn Dreams Charter School, $2.76 million for rent and related charges there last year — a 1,000 percent markup, financial filings show.

Critics say it’s part of the company’s MO: putting considerable money down to purchase or renovate properties, charging sky-high rents to recoup its investment — and eventually turning a hefty profit...

Most public charter schools get no funding for facilities, and mortgage lenders are wary of dealing with them because their charters are up for renewal every five years, supporters say.

“The bottom line is that if it wasn’t for NHA’s upfront investment in the real estate, the [Bushwick] school would probably not exist in private space,” [Cynthia Proctor, a spokeswoman for the State University of New York Charter Schools Institute] said...

The firm is one of the few for-profits in New York that manages all educational aspects of its charter schools, after being grandfathered in when state law abolished the practice in 2010.

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Arizona charter schools (analysis finds insiders made $70M)

“Insiders benefiting in charter deals, Board members, school officials did more than $70mil in business.” The Arizona Republic, 11/17/2012 

Board members and administrators from more than a dozen state-funded charter schools are profiting from their affiliations by doing business with schools they oversee.

The deals, worth more than $70 million over the last five years, are legal, but critics of the arrangements say they can lead to conflicts of interest. Charter executives, on the other hand, say they are able to help the schools get better deals on services and goods ranging from air-conditioners to textbooks and thus save taxpayers money.

The Arizona Republic reviewed thousands of pages of federal tax returns, audits, corporate filings, and records filed with the Arizona State Board for Charter Schools. The analysis looked at the 50 largest non-profit charter schools in the state as well as schools with assets of more than $10 million. For-profit schools were not analyzed because their tax records are not public.

The Republic’s analysis found at least 17 contracts or arrangements, totaling more than $70 million over five years and involving about 40 school sites, in which money from the non-profit charter school went to for-profit or non-profit companies run by board members, executives or their relatives...

Arizona’s regulations on charter schools are relatively lax. The state allows charters to seek exemptions from state laws that require schools to obtain competitive bids for goods or services. Nearly 90 percent of the state’s charter holders have gotten permanent exemptions from the state Board for Charter Schools, according to the state’s database.

The schools’ purchases from their own officials range from curriculum and business consulting to land leases and transportation services. A handful of non-profit schools outsource most of their operations to a board member’s for-profit company. The transactions are legal provided schools report the relationships on their federal tax forms and board members abstain from voting on their own contracts...

Educators and ethicists say the arrangements raise questions about whether the schools are being used partly for personal gain...

A for-profit company paid by a charter school, even a company that operates most of the school, does not have to disclose spending details or how much profit it makes. Some board members who did business with their schools told The Republic they made a profit on the transactions. Others said they lost money. Some refused to comment...

An ethics expert says it’s generally problematic to have board members also doing business with the schools they govern. The transactions — even if well-intentioned, as many are — can erode public trust when people find out, said Judy Nadler, a senior fellow in government ethics at Santa Clara University. The perception may be that the board members received the contract because of insider knowledge or relationships with their colleagues, she said.

In the end, a board member needs to differentiate between being a businessperson from being a policy maker, she said. Boards that oversee non-profit schools are there to serve the public, she said.

“If you’re tempted to get involved in the business end of the deal, you have to really look at which one of these will you give up,” she said...

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Primavera Technical Learning Center

“4 charter-school organizations where insiders benefited.” The Arizona Republic, 11/17/2012

... Damien Creamer and Vanessa Baviera Rudilla run one of the largest online schools in Arizona, and the non-profit school contracts with a for-profit company, American Virtual Academy, for its curriculum and software. Creamer and Rudilla are officers of the non-profit and earn salaries. American Virtual Academy also is owned by Creamer and Rudilla. From fiscal 2007 to 2011, the non-profit paid $42.3 million to American Virtual Academy. The non-profit is exempt from state purchasing laws...

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Desert Heights Charter School

“4 charter-school organizations where insiders benefited.” The Arizona Republic, 11/17/2012 

For several years, [Desert Heights Charter School] had an agreement with Waterhouse Management, owned by a board member of the non-profit school, Richard Waterhouse. From fiscal 2007 through 2011, the firm was paid at least $1 million, according to federal tax returns. In 2009 and again in 2010 and 2011, auditors questioned the transaction, saying the value of the agreement for contracted business services is “not supported by documentation that provides the method and/or rationale for how such fees for services were determined to be fair value.”..

... In August 2011, school-board minutes show the board removed Waterhouse as CEO and board member and terminated the business contract “for material breach of contract.”...

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Career Success Schools

“4 charter-school organizations where insiders benefited.” The Arizona Republic, 11/17/2012 

Payments: For several years, the non-profit organization [Career Success Schools] has contracted with the company of a board member, Kevin Zirk, for its employee 401(k) plan, and Zirk receives commissions based on the deposits... In fiscal 2011 and 2010, the non-profit contracted with the company of another board member, Ditza BenShalom, for air-conditioning repairs totaling $154,241. In fiscal 2010, the non-profit also paid $1.3 million for land for a new school campus from a company that Zirk and two others owned.

 

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Adelanto Charter Academy

“Adelanto Charter School’s Demise Involved Postmus & DeFazio.” San Bernardino County Sentinel (CA), 5/27/2011

ADELANTO—The Adelanto School District has revoked the Adelanto Charter Academy’s charter, based on a laundry list of operational shortcomings...

While charter schools are by law non-profit entities, it appears that those involved with the school in some cases formed for-profit companies that were devoted to providing the charter academy with materials, ranging from furniture to computers to visual aids to books to writing materials that were sold at inflated prices.

A similar circumstance developed with the failed California Charter Academy a decade ago...

Involved in the California Charter Academy debacle but avoiding indictment was former county supervisor and assessor Bill Postmus. Postmus was a member of the Snowline School District Board of Trustees that had granted the California Charter Academy one of its charters, was later a board member for the Charter Academy and in the heyday of the California Charter Academy was riding high as chairman of the county board of supervisors and the chairman of the San Bernardino County Republican Central Committee. He dictated the California Charter Academy’s hiring policy, insisting that Cox hire several of his associates and family members who had no real educational qualifications. And Cox and the California Charter Academy made political donations to Postmus campaign funds totaling thousands of dollars.

The Sentinel has learned that Postmus and two of his associates, John Dino DeFazio and Jennifer Ruiz, sought to emulate in many respects the California Charter Academy/Educational Administrative Services Corporation/Maniaque Enterprises/Everything For Schools operation.

... Ruiz, a former educator with the Hesperia School District, was registered as the Adelanto Charter Academy’s principal. DeFazio, like Cox and Honeycutt, created two corporations, Professional Charter Management Inc. and Educational Development Inc. Hidden in the operation was Postmus, who advised Ruiz in the set up of the enterprise.

Postmus, whose political career foundered in January 2009 when he was arrested for possession of methamphetamine and the hallucinogen Extacy, advised Ruiz to bill the Adelanto Charter Academy as one embracing conservative and Christian values to build character in students that were to be drawn mostly from impoverished home settings...

In November the audit was released. It showed the academy was plagued with fiscal mismanagement, poor or non-existent record-keeping, problems with the teacher to student ratios and unsanitary or unsafe food handling that put students at risk. Moreover, according to a summary of the audit put together by the Adelanto School District, DeFazio and others making money off the district were not providing what they were obliged to provide...

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 “Politicians & Their CroniesLooted Adelanto Charter Academy.”San Bernardino County Sentinel (CA), 6/12/2012

A number of current and former office holders, their associates and other politically connected figures, including ones currently facing charges in San Bernardino County’s corruption scandal, siphoned off money from the now shuttered Adelanto Charter Academy, documents obtained by the Sentinel show...

During the school’s operation, indicted and now convicted former San Bernardino County Assessor Bill Postmus, current Hesperia School District board member Anthony Riley, indicted former California Charter Academy founder Charles Steven Cox, Peggy Baker (Cox’s sister-in-law), San Bernardino County Supervisor Brad Mitzelfelt’s campaign fund, Mitzelfelt’s field representative Jessie Flores, indicted former assistant assessor Adam Aleman and indicted local businessman John “Dino” DeFazio all received money from the Adelanto Charter Academy or entities deriving money from the academy...

[More on California Charter Academy @ http://charterschoolscandals.blogspot.com/2010/05/california-charter-academy-60-schools.html]

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Florida virtual schools provider K12 (43 school districts)

“State Investigating Virtual Schools Provider K12.” Florida Center for Investigative Reporting (FL), 9/11/2012

The Florida Department of Education has launched an investigation of K12, the nation’s largest online educator, over allegations the company uses uncertified teachers and has asked employees to help cover up the practice.

K12 officials asked state-certified teachers to sign class rosters that included students they hadn’t taught, according to documents that are part of the investigation.

In one case, a K12 manager instructed a certified teacher to sign a class roster of more than 100 students. She only recognized seven names on that list...

The state investigation started in January, when a former K12 employee forwarded a series of emails to Seminole County Public Schools officials...

After reading these emails, Seminole County officials followed up with a survey of parents whose kids were enrolled in K12 classes. Parents were given a list of teachers who reportedly instructed their children.

More than one-third of parents said the listed teacher did not teach their child.

Only 36 percent of parents said their child’s teacher was the one K12 had listed. The rest could not be reached or said they couldn’t remember.

The survey and emails prompted Seminole County officials to request that the Department of Education investigate. They warned the state that the problems they uncovered with K12 may be widespread...

K12 has a financial incentive to skirt Florida’s law requiring the use of certified teachers. Simply, K12 can pay uncertified teachers less than certified teachers while collecting the same amount per student from state public school districts, increasing profits for shareholders.

Founded in 2000 by William Bennett, a former U.S. education secretary under President Ronald Reagan, K12 is an $864 million publicly traded company whose stock price has more than doubled in the last year.

In recent years, K12 has increased profits while student performance has suffered, raising questions about whether the for-profit virtual schools provider is making money at the expense of academics.

A July 2012 study by the National Education Policy Center at the University of Colorado found that students at K12 schools fell further behind in reading and math scores than pupils in traditional schools.

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National Heritage Academies (huge rent markups @ NYC charter schools)

“Charter management firm charging huge rent markups to charter schools; Charters’ 1,000% markup.” New York Post, 4/30/2012  

A for-profit education firm is soaking taxpayers by subleasing buildings to the Brooklyn public charter schools it runs at astronomical rates — including one at an incredible 1,000 percent markup, sources said.

While the city Department of Education leases buildings in Brooklyn for between $5 and $25 per square foot, the Michigan-based National Heritage Academies subleases to the charter schools it operates for roughly $38 to $45 per square foot, according to a review of public school leases by The Post.

For example, NHA is leasing a former school building on Parkville Avenue in Kensington from the Brooklyn Diocese for approximately $264,000 per year, according to a church source.

Yet the firm billed the site, the Brooklyn Dreams Charter School, $2.76 million for rent and related charges there last year — a 1,000 percent markup, financial filings show...

The firm is one of the few for-profits in New York that manages all educational aspects of its charter schools, after being grandfathered in when state law abolished the practice in 2010.

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Mavericks in Education Florida LLC

“Mavericks High Schools Hope to Profit From Education – But at What Cost?” Broward-Palm Beach New Times (FL), 12/29/2011    

...This is Frank Biden, the brother of Vice President Joe Biden. He's here, at a ribbon-cutting event August 31, to promote the first Palm Beach County location of a local for-profit chain of charter schools called Mavericks in Education Florida...

But so far, Mavericks' lofty goals haven't materialized. Most of their schools graduate less than 15 percent of eligible students. On state report cards, the schools get "incompletes" because so few of their students are taking the FCAT. In Miami, two former teachers filed whistle-blower lawsuits alleging the Homestead school is inflating attendance records and failing to report grades properly.

Plus, there are rampant financial questions, cozy ties between Mavericks and local politicians, and a legal fight with former celebrity spokesman Dwyane Wade...

Mavericks' story begins in Akron, Ohio, with a wealthy industrialist who loved to wear big cowboy hats and donate millions of dollars to Republican politicians. In 1998, David Brennan launched White Hat Management. His charter schools were housed in strip malls, and the students herded in to sit at computers for three shifts a day. This was an education model Mavericks would later call the "next generation in education." But state auditors weren't so fond of the company...

One of White Hat's early leaders was Mark Thimmig. As CEO from 2001 to 2005, he helped grow the company into one of the largest charter school chains in the country. As of 2010, White Hat had 51 charter schools in six states, including ten charter schools in Florida called Life Skills Centers.

Two years after leaving White Hat, Thimmig alleges in court documents, he was approached by Palm Beach Gardens developer Mark Rodberg about launching a chain of charter schools here. Rodberg had built a few schools for White Hat, but had never run one before. He owned restaurants, including Bucky's Bar-B-Que in Boca Raton and Bucky's Grill in Fort Lauderdale. Together, Thimmig and Rodberg came up with a plan that was nearly identical to White Hat's: Students would attend school but take all their courses online, using virtual technology that required minimal maintenance. Classrooms could hold rows of cubicles with computers where kids would sit elbow-to-elbow. There would be no after-school sports teams, just "cyber-athletics" that allowed kids to play Wii instead of shooting hoops...

Each school is overseen by a local, nonprofit board. Mavericks in Education Florida LLC then charges the nonprofit hundreds of thousands of dollars in management fees to run daily operations. Mavericks also handles the real estate, charging the schools $350,000 a year in rent...

Hollander says the charters planned to use the basketball star [Miami Heat star Dwyane Wade] as a celebrity spokesman, encouraging kids to enroll in Mavericks and graduate. "Kids related to him. Parents related to him. Even grandparents related to him! He was the biggest celebrity ever to be connected with the national high school dropout crisis," Thimmig told New Times in 2009...

But pairing schools with a restaurant chain and a basketball star turned out to be a lethal mix. Wade would later allege in court documents that the partners were scheming to cut him out of profits. When they asked him to invest $1 million in the Aventura location of the restaurant, he refused...

In December 2009, Thimmig resigned as CEO. Then he sued Mavericks for back salary and money he said he lent the company — a total of at least $300,000. He also aired the company's dirty laundry in public court documents. Just two years after its founding, the hope factory was floundering...

... Only Michigan has more charter schools run by for-profit companies than Florida, according to a 2010 study published by the National Education Policy Center at the University of Colorado. Last year, there were 145 schools in Florida run by companies such as Mavericks.

Plenty of government grants help charters grow. Reports submitted to the state by Mavericks show their schools each receive about $250,000 a year in federal grants...

Often these schools struggle academically or financially, yet their management companies are allowed to keep opening new campuses...

Biden says, "We just graduated almost 200 people in one location."

But figures from the Florida Department of Education paint a vastly different picture, showing that Mavericks schools have a worse graduation rate than traditional public schools in Florida...

On Florida's state report cards, Mavericks schools in Miami-Dade, Pinellas, and Osceola counties have all scored "incomplete" because not enough students have taken the FCAT. Hollander says she expects the FCAT grade to change as more students enroll...

Meanwhile, recent lawsuits filed against Mavericks raise questions about whether any of the schools' statistics can be trusted...

Mavericks' paper trail is also troubling. Accountability reports, submitted by Mavericks to the state, contain bizarre financial figures...

Money has long been a problem for Mavericks. At the Fort Lauderdale Mavericks in June, independent auditors found the school met state criteria for a "financial emergency," with a net deficit of at least $520,000. At the same time, an audit showed that the North Miami Beach Mavericks was $400,000 in debt and had borrowed from the Mavericks management company to stay afloat. The state department of education also required the Mavericks school in Pinellas to create a financial corrective action plan...

...In 2010, Mavericks in Homestead paid the management company $418,000, or 17 percent of its state funds...

But most of the time, Mavericks isn't buying buildings. It's striking deals with private landlords, then charging individual schools rent of $350,000 per year for five years, regardless of the price of the building. That's the case in Homestead, North Miami, Kissimmee, and Pinellas. In Homestead, the school building's current market value is $1.2 million, but the school is on the hook for $1.75 million in rent over five years.

That sum, combined with its management fee, means the Homestead school paid 28 percent of its revenue to Mavericks in Education in 2010...

BE SURE TO READ THE WHOLE THING!

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“Joe Biden’s Brother Helping God Privatize Public Schools.” By Doug Martin, Firedoglake, 11/29/2011   

When Lisa Rab outed Joe Biden’s brother, Frank, as a major force behind a for-profit education management organization (EMO) dead set on building 100 new charter schools across Florida,* it came as no surprise to anyone who has been paying the slightest bit of attention to the corporate school reform movement, the Obama/Biden/Duncan regime, or Florida.

What was surprising was that Francis W. Biden told Rab that he and Mavericks in Education Florida, LLC  were on “a mission from God.”...

Not testing students to earn state ratings is nothing new to Mark Thimmig, one of the original founders of Mavericks in 2007. In 2005, after the former AutoNation official joined the notorious for-profit charter school operator White Hat Ventures, Thimmig took heat from the Ohio Department of Education for not adequately reporting student test scores in four of its Life Skills high schools. Also, the Akron Beacon Journal discovered that when Ohio switched testing from the 9th to the 10th grade, White Hat enrolled almost half of its Life Skills schools’ student body into the 9th grade in order to avoid testing these students...

READ THIS ARTICLE, TOO!

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K12, Inc.

“Faruqi & Faruqi, LLP Announces Investigation of K12, Inc.” Press Release: Faruqi & Faruqi, LLP, 12/16/2011 

NEW YORK--(BUSINESS WIRE)-- Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential securities fraud at K12, Inc. (“K12” or the “Company”) (NYSE: LRN - News).

The investigation focuses on whether the Company and its executives violated federal securities laws by failing to disclose that: (1) according to various academic benchmarks, K12 students were chronically underperforming their peers at traditional schools; (2) K12 has aggressively recruited students to their schools, regardless of how well-suited they might be for the Company’s curriculum; (3) as a result of K12’s haphazard recruiting process, the Company experiences student retention problems resulting in high rates of withdrawal; (4) K12 schools often have far larger student-to-teacher ratios than the Company advertises; and (5) K12 teachers have been pressured to allow students to pass regardless of academic performance, in order to receive federal funds.

On December 12, 2011, after several months of research, the New York Times published an article entitled “Profits and Questions at Online Charter Schools.” The article raised serious concerns about K12’s business practices, alleging that Company schools inflate their student rosters, are underperforming academically, have detrimental student-to-teacher ratios and gain wrongful access to public funds. On this devastating news, K12 shares collapsed almost 24%, closing at $22 per share on December 13.

Request more information now by clicking here: www.faruqilaw.com/LRN

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“Profits and Questions at Online Charter Schools.” New York Times, 12/12/2011  

By almost every educational measure, the Agora Cyber Charter School is failing.

Nearly 60 percent of its students are behind grade level in math. Nearly 50 percent trail in reading. A third do not graduate on time. And hundreds of children, from kindergartners to seniors, withdraw within months after they enroll.

By Wall Street standards, though, Agora is a remarkable success that has helped enrich K12 Inc., the publicly traded company that manages the school. And the entire enterprise is paid for by taxpayers.

Agora is one of the largest in a portfolio of similar public schools across the country run by K12. Eight other for-profit companies also run online public elementary and high schools, enrolling a large chunk of the more than 200,000 full-time cyberpupils in the United States...

Kids mean money. Agora is expecting income of $72 million this school year, accounting for more than 10 percent of the total anticipated revenues of K12, the biggest player in the online-school business. The second-largest, Connections Education, with revenues estimated at $190 million, was bought this year by the education and publishing giant Pearson for $400 million...

The New York Times has spent several months examining this idea, focusing on K12 Inc. A look at the company’s operations, based on interviews and a review of school finances and performance records, raises serious questions about whether K12 schools — and full-time online schools in general — benefit children or taxpayers, particularly as state education budgets are being slashed.

Instead, a portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards.

Current and former staff members of K12 Inc. schools say problems begin with intense recruitment efforts that fail to filter out students who are not suited for the program, which requires strong parental commitment and self-motivated students. Online schools typically are characterized by high rates of withdrawal...

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K12, Inc. / LRN stock price trends @ http://www.marketwatch.com/investing/stock/LRN

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Prime Prep Academy

“Former football player’s charter school raised questions.” Austin American-Statesman, 11/4/2011

Last month, the state Board of Education granted its approval for two charter schools affiliated with former professional football and baseball star Deion Sanders to open next fall, in Fort Worth and Dallas. A review of recently released public records shows that early versions of the charter’s application contained two business arrangements that appeared to be designed to give school executives opportunities to personally profit off the school.

A spokeswoman for the Texas Education Agency said the suspect deals have since been removed from Prime Prep Academy’s application, after state officials investigated and confronted the school’s executives. Prime Prep’s executive director, Damien L. Wallace, confirmed that the specific contract deals had been excised from the charter’s application.

TEA, the agency that vets new charter schools, says it has beefed up its scrutiny of applicants in recent years. Several of the publicly funded schools have been revealed to be paying executives generous salaries, often through not-exactly-arm’s-length deals with side companies controlled by school officials...

Although Sanders’ name does not appear as an official executive for the school, his name does show up in the application, with his fame promoted as a benefit to the new school. “Deion Sanders’ powerful media presence has been utilized to bring more attention to the plans of bringing a charter school of this type to the DFW area,” the school’s application states.

In newspaper accounts, Sanders said he began thinking about founding a charter school approximately three years ago. Wallace said Sanders has been a personal friend and business associate for many years...

The charter school’s application also contained a “sales/marketing” agreement with a company called PrimeTimePlayer. Primetimeplayer.com’s website promises students help with mentoring and recruiting, and features Sanders’ photo. Incorporation documents filed with the Texas Secretary of State’s office list the company’s managing members as Damien L. Wallace and Chazma Jones — both of whom are also listed as executives for Prime Prep Academy.

The marketing agreement called for PrimeTimePlayer to be paid either $1,000 or $7,500 a month (the contract’s wording is unclear) for its services, as well as a percentage of any money it raised for the school; a 5 percent commission on all “special fundraising events” and a 10 percent commission on “all monies derived from corporate, local business and private donor sponsorships.”

According to the January application, the charter had already lined up commitments for about $200,000 in such donations, including $50,000 from Wal-Mart, $25,000 from Bank of America, and $50,000 from the NFL Network, a channel operated by the National Football League.

The school’s application also stated that Prime Prep’s Fort Worth school would be entering into a lease/purchase agreement for the building the school will occupy. The contract included in the charter’s application called for Prime Prep to pay $5,000 a month the first year, $7,000 the second, and $9,500 a month the third year of its occupancy to a company called Pinnacle Commercial Property Group.

Secretary of State records show the company’s directors as of May 2011 to be Damien Wallace and Chazma Jones.

Ratcliffe said TEA’s review staff also noticed the same contracts in Prime Prep’s application and brought them to the attention of the school’s lawyer. “Our lawyer went to their lawyer and said, ‘We have a problem with them doing business with themselves,’” she recalled, adding: “They didn’t initially reveal all the connections there.”...

There is another claim that has raised questions about the finances of the school. In July 2010, seven plaintiffs filed a lawsuit in Tarrant County District Court, claiming Wallace and Sanders had promised to market high school athletes to college athletic departments, but never delivered.

In the same lawsuit, the plaintiffs, led by Lawrence Smith, assert that Wallace and Sanders “made fraudulent and deceptive misrepresentations to induce Mr. Smith into investing money in a Charter School venture.”

According to the lawsuit, Wallace told Smith and others that if they invested $25,000 in the school, a “revenue sharing agreement” would pay them back $174,600, based on rent collected on a building at 4400 Panola Ave., Fort Worth — the same building in which Prime Prep’s Forth Worth campus is to be located, according to the school’s application.

A lawyer representing Wallace and Sanders declined to comment on the case; Smith’s lawyer, Don Stewart, said in court filings the defendants had denied his client’s allegations and were contesting the claims.

Ratcliffe said Prime Prep most likely will receive its final approval from the Texas Education Agency in a couple of weeks.

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“Deion Sanders’ new charterschool drawing questions about financial, academic plans.” The Texas Independent, 11/16/2011 

...While the board gave its go-ahead in September, SBOE member Michael Soto (D-San Antonio) wasn’t impressed by what he saw in Sanders’ presentation. “I have no idea what the applicant plans to do in the classroom,” Soto said before the vote, according to the Fort Worth Star-Telegram.

Since then, other questions have arisen about some of the school’s financial arrangements — deals that would help its top officials profit from the school’s fundraising and property rental...

The conflicts of interest were uncovered by TEA only after the SBOE approved Prime Prep’s charter, but Soto is concerned by the school’s “incredibly vague” academic plans, and told the Texas Independent he’s been getting concerned calls about the school.

Soto said he was unfamiliar, though, with another possible concern: that where Prime Prep’s plans do get specific about academics, the language is nearly identical to wording developed by some other schools.

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“The Strange Tale of Deion Sanders' Charter School; Coming soon in North Texas, a charter school built on star power.” The Texas Observer, 12/5/2011 

The State Board of Education approved eight new charter schools back in September, but only one of them came backed by the star power of Prime Prep Academy, with an emotional presentation by former Dallas Cowboys great Deion Sanders...

The most novel aspect of these charters, though, may be the private funding sources they'll depend on to round out their $10 million-a-year budget: not usual suspects like Bill and Melinda Gates or the Walton Family Foundation, but big brands Sanders has endorsed or worked with over the years, which he name-drops regularly when talking about the school.

Sanders says Prime Prep is a natural extension of TRUTH, a sports-and-study program he's run for the last few years, that has received money from many of these sponsors already. The school's leadership team told the state it had secured pledges from a few of those companies already, but when contacted, many said they hadn't, in fact, pledged money to the school—at least not yet...

What Prime Prep's leaders stress is unique about its plans are its emphasis on sports along with academics, its dedication to serving inner-city kids in low-scoring school districts, and, of course, the big money that Deion Sanders' friends at big brands will throw at the school...

The SBOE approved Prime Prep's application 8-4.

"We met with Direct TV, with Van Heusen, we met with Procter & Gamble, we met Under Armor, we met with the NFL on assisting us with in endeavors and they did a cartwheel," said Sanders.

In its charter application Prime Prep also listed $186,000 in donations that had already been pledged “upon approval of the charter school," including a pair from Walmart and the NFL Network worth $50,000 each.

But as enthusiastic as Sanders said they all were, most of the companies on the list told me this week that they never did pledge money to the school. The other three either didn't return calls or didn't have an answer ready...

Texas Education Agency spokeswoman Debbie Ratcliffe says Prime Prep’s list of pledges doesn't matter much to their application. “Even if a charter applicant says they have pledges for land or services from various corporations or entities, we don’t let them count that as revenue unless they have a signed letter from the donor.”

But while the SBOE grilled other applicants about where they'd be getting startup cash or grants to augment state funding, Prime Prep seems to be running entirely on star power. The only signed agreements in its application at first—a $1,000 loan from a Fort Worth real estate firm and a fundraising agreement with a group called PrimeTimePlayer—were dropped because Wallace and other school officials were aslo in leadership roles at the companies that stood to profit, as the Austin American-Statesman reported last month...

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Imagine Charter School at Firestone

SVVSD RENEWS IMAGINE’S CHARTER: SCHOOL BOARD STILL EXAMINING CHARTER SCHOOL POLICIES; January 13, 2011; Longmont Times-Call (CO) 

The St. Vrain Valley School District Board of Education on Wednesday renewed one charter school’s charter, then continued to grapple with how to handle applications for new charter schools.

Although the vote to renew Imagine Charter School at Firestone’s charter was unanimous, school board members raised concerns about its budget.

Only 32 percent of Imagine at Firestone’s revenue is spent on instruction, board vice president Rick Hammans said. The school’s 2010 audit showed $1.3 million of its $4.3 million revenue going to instruction.

The audit shows that Imagine at Firestone is paying its educational management provider — Imagine, Inc. — about 23.6 percent of its revenue, or $1 million, for the lease on its building and other equipment, and another 14.6 percent, or $625,000, for services.

Hammans urged Imagine at Firestone’s board of directors to make a “significant effort” to spend more money in the classrooms…

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