Education Opportunity Network

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Education’s Newsmaker Of The Year: Charter School Scandals

Since it’s the time of the year when newspapers, websites, and television talk shows scan their archives to pick the person, place, or thing that sums up the year in entertainment, business, sports, or every other venue, why not do that for education too?

In 2014 education news, lots of personalities came and went.

Michelle Rhee gave way to Campbell Brown as a torchbearer for “reform.” The comedian Louis C. K. had a turn at becoming an education wonk with his commentary on the Common Core standards. Numerous “Chiefs for Change” toppled from the ranks of chiefdom. Pennsylvania Governor Tom Corbett went down in defeat due in part to his gutting of public schools, as Wisconsin Governor Scott Walker remained resilient while spreading the cancerous voucher program from Milwaukee to the rest of the state. New York Mayor Bill De Blasio rose to turn back the failed education reforms of ex-mayor Bloomberg, only to have his populist agenda blocked by New York State Governor Andrew Cuomo who insisted on imposing policies favored by Wall Street. Progressives formed Democrats for Public Education to counter the neoliberal, big money clout of Democrats for Education Reform. And Kentucky Senator Rand Paul and former Florida Governor Jeb Bush emerged as rival voices in the ongoing debate about the Common Core among potential Republican presidential candidates.

But hogging the camera throughout the year was another notable character: charter school scandals.

In 2014, charter schools, which had always been marketed for a legendary ability to deliver promising new innovations for education, became known primarily for their ability to concoct innovative new scams.

From Local Stories To National Scandal

Troubling news stories about the financial workings of charter schools had been leaking slowly into the media stream for some years.

A story that appeared at Forbes in late 2013 foretold a lot of what would emerge in 2014. That post “Charter School Gravy Train Runs Express To Fat City” brought to light for the first time in a mainstream source the financial rewards that were being mined from charter schools. As author Addison Wiggin explained, a mixture of tax incentives, government programs, and Wall St. investors eager to make money were coming together to deliver a charter school bonanza – especially if the charter operation could “escape scrutiny” behind the veil of being privately held or if the charter operation could mix its business in “with other ventures that have nothing to do with education.”

As 2014 began, more stories about charter schools scandals continued to drip out from local press outlets – a chain of charter schools teaching creationism, a charter school closing abruptly for mysterious reasons, a charter high school operating as a for-profit “basketball factory,” recruiting players from around the world while delivering a sub-par education.

Here and there, stories emerged: a charter school trying to open up inside the walls of a gated community while a closed one continued to get over $2 million in taxpayer funds. Stories about charter operators being found guilty of embezzling thousands of taxpayer dollars turned into other stories about operators stealing even more thousands of dollars, which turned into even more stories about operators stealing over a million dollars.

While some charter schools schemed to steer huge percentages of their money away from instruction toward management salaries and property leases (to firms connected to the charter owners, of course), others worked the system to make sure fewer students with special needs were in their classrooms.

Then the steady drip-drip from local news sources turned into a fire hose in May when a blockbuster report released by Integrity in Education and the Center for Popular Democracy revealed, “Fraudulent charter operators in 15 states are responsible for losing, misusing, or wasting over $100 million in taxpayer money.”

The report, “Charter School Vulnerabilities to Waste, Fraud And Abuse,” combed through news stories, criminal records, and other documents to find hundreds of cases of charter school operators embezzling funds, using tax dollars to illegally support other, non-educational businesses, taking public dollars for services they didn’t provide, inflating their enrollment numbers to boost revenues, and putting children in potential danger by foregoing safety regulations or withholding services.

The report made charter school scandals a nationwide story and received in-depth coverage at Salon, Bill Moyers and Company, The Washington Post, and The Nation.

A Summer Of Scams

Charter schools scandals continued to break throughout the summer.

In Ohio, report after report continued to reveal how popular charter school chains like White Hat Management had sky-high dropout rates while they poured public money into advertising campaigns and executive pay.

In Pennsylvania, a report found exorbitant costs associated with charter school operations and lavish CEO salaries and bonuses for charter school operators despite vastly underperforming the state’s traditional public schools. Another report revealed how Pennsylvania charters had gamed the system for special education funding, resulting in annual profits of $200 million to the schools.

In Michigan, a series by the Detroit Free Press found charter schools with “wasteful spending and double-dipping. Board members, school founders and employees steering lucrative deals to themselves or insiders. Schools allowed to operate for years despite poor academic records.”

In Florida, an investigation by the Orlando Sun Sentinel found, “Unchecked charter-school operators are exploiting South Florida’s public school system, collecting taxpayer dollars for schools that quickly shut down.”

Another Florida local news outlet investigating charter school operations found millions of taxpayer dollars misdirected from classrooms and students to management companies. The report pointed to charter school chain Charter Schools USA that uses tax-exempt bonds to build schools that it then rents to UCSA-affiliated schools. Then the CUSA schools are saddled with rent payments back to CUSA and its management company at rates considerably higher than those charged to other non-CUSA schools in the area.

Still more news stories came out about charter schools related to the largest bricks-and-mortar charter-school chain in the United States run by the secretive Turkish cleric, Fethullah Gülen, who lives in exile from Turkey in rural Pennsylvania. The Chicago Sun-Times reported that Chicago-area Concept Schools, part of the Gulen charter chain, were subjects of an ongoing federal investigation. The enquiry is about nearly $1 million that has been paid to contractors all with ties to the Gülen network.

Articles from The Washington Post found District of Columbia charter school operators evading rules to pocket millions in taxpayer dollars and charter schools pumping public money into for-profit management companies.

A report in The Arizona Republic found, board members and administrators from more than a dozen charter schools “profiting from their affiliations by doing business with schools they oversee.”

The rash of summer charter scandal stories resonated in news outlets across the country.

Then to cap off the summer of charter scandals, The Progressive reported an upsurge in FBI raids on charter schools all over the country. “From Pittsburgh to Baton Rouge, from Hartford to Cincinnati to Albuquerque, FBI agents have been busting into schools, carting off documents, and making arrests leading to high-profile indictments.”

Reporter Ruth Conniff found charter schools allegations range from “taking money that was meant for the classroom,” to spending taxpayer dollars on “luxuries such as fine-dining and retreats at exclusive resorts and spas,” to engaging in “bribes and kickbacks.”

Back To Schools For Scandal

As Back to School season rolled out, charter schools scandals broke harder and heavier.

The Center for Popular Democracy, Integrity in Education, and ACTION United published a continuation of their charter schools study with a new report that disclosed charter school officials in Pennsylvania had defrauded at least $30 million intended for school children since 1997.

Startling examples of charter school financial malfeasance revealed by the authors included an administrator who diverted $2.6 million in school funds to a church property he also operated. Another charter school chief was caught spending millions in school funds to bail out other nonprofits associated with the school. A pair of charter school operators stole more than $900,000 from the school by using fraudulent invoices, and a cyber school entrepreneur diverted $8 million of school funds for houses, a Florida condominium, and an airplane.

Then in November, The Center for Popular Democracy, with the Alliance for Quality Education, submitted yet another continuation of its analysis of charter school financial fraud, this time finding as much as $54 million in suspected charter school fraud in New York state.

Specific examples from the report included a New York City charter that issued credit cards to its executives allowing them to charge more than $75,000 in less than two years, a Long Island charter that paid vendors over half a million dollars without competitive bids, an Albany charter that lost between $207,000 to $2.3 million by purchasing a site for its elementary school rather than leasing it, a Rochester charter that awarded contracts to board members, relatives, and other related parties rather than get competitive bids, and a Buffalo charter with a leasing arrangement that paid more than $5 million to a building company at a 20 percent interest rate.

A write-up of the report in the New York Daily News noted CPD “investigators uncovered probable financial mismanagement in 95 percent of the [charter] schools they examined.”

More recently, a widely circulated report from progressive news outlet Propublica revealed how charter schools increasingly use arrangements known as “sweeps” contracts to send nearly all of a school’s public dollars – anywhere from 95 to 100 percent into for-profit charter-management companies.

Reporter Marian Wang wrote, ” The contracts are an example of how the charter schools sometimes cede control of public dollars to private companies that have no legal obligation to act in the best interests of the schools or taxpayers … it can be hard for regulators and even schools themselves to follow the money when nearly all of it goes into the accounts of a private company.”

The New Face Of Charter Schools

In their defense, charter school advocates object to the negative portrayals of their operations by claiming the reports cherry pick bad actors from the broad population of charters. But this year’s avalanche of malfeasance should dispel any argument about cherry picking.

For sure there are examples of charter schools that are doing an excellent job of educating students. But rapid growth in the industry continues to come from charter operators who are not willing to run their operations like these successful charters because it doesn’t suit their “business model.”

Further, would a public school advocate defend public schools by countering, “But look at this good one over here?” they would be mocked and derided by charter school proponents.

Advocates for charter schools also defend the explosion in charter school scandals by pointing to scandals in a public school and contenting, “Look, they do it too.” Indeed, there are instances of financial and other types of scandals in public schools. That’s why they are heavily regulated. Yet charter school backers continue to fight regulations, contribute big money to political candidates who promise a hands-off approach to their schools, and use powerful lobbying firms to coerce legislators to continue unregulated charter governance.

Charter school defenders also argue that these widespread scandals will be remedied by the “market” – that the inevitable “bad” charters will get closed while only the “good” ones remain. It’s true that charter school closures are becoming more commonplace, but charter operators often resist closures – even calling on parents to rally to their cause and appeal to local authorities. Charter schools that close abruptly leave school children and families in the lurch and severely interrupt the students’ learning. Operators of closed charters often flee the scene to practice their malfeasance elsewhere, taking with them the supplies and materials they obtained at taxpayer expense. Meanwhile, enormous sums of precious public money are wasted – with no apparent education benefit – all for the sake of this “market churn.”

As a result of the flood of charter schools scandals, public attitudes about these schools are bound to change.

Surveys show the public generally doesn’t get what charter schools are and don’t understand whether they are private or public or whether they can charge fees or teach religion. Charter operators themselves have muddled their image by arguing successfully in numerous confrontations with legal authorities that “they are exempt from rules that govern traditional public schools, ranging from labor laws to constitutional protections for students.”

But a recent poll in Michigan, a state where rampant charter fraud has been well publicized, found that 73 percent of responders say they want a moratorium on the creation of new charter schools. In many communities, announcements about new charter operations opening up have been greeted with outspoken public protests as we’ve seen in in Nashville, York, PA, and Camden, NJ.

Forecasts about what 2015 will bring to the education landscape frequently foresee more charter schools as charter-friendly lawmakers continue to act witlessly to proliferate these schools. But make no mistake, the charter school scandals of 2014 forever altered the narrative about what these institutions really bring to the populace.

  • joe Nathan says:

    People have been actively seeking and sharing charter school scandals since the beginning of charters, more than 2 decades ago. There are some, and they are outrageous.

    I wish you devoted equal attention to scandals in some traditional districts and in some teacher unions. There are outrageous scandals there too.

    Fortunately, more and more district & charter educators are looking for ways to listen to and learn from eachother. Youngsters benefit from that. Here’s an example.
    http://bit.ly/13jvMxv

    But some people look for the worst. They will find that too.

    December 19, 2014 at 4:02 pm
    • William Thomas says:

      Scandals in traditional school districts? At least it doesn’t take a court order to uncover them. And that’s hardly a fair comparison. Charter school scandals far outnumber public school scandals. No system is perfect.

      So where are the stunning developments in education that charter schools are supposed to unlock? So when do we open up charter dental and doctor schools? Won’t the free market protect us? I want educated, professionals teaching my children. People who are not in it to make a quick buck or who have an agenda to follow.

      December 30, 2014 at 7:54 pm
  • Charles P. Alley, Ph. D. says:

    Opinions on Charter Schools have been shaped by the conduct of the schools themselves.
    Many CS advocates I have talked with do not approve the way Public Schools operate but have made little or no effort to effect change. Private Schools vial public money is not a valid educational objective.

    December 19, 2014 at 7:19 pm
  • Sonia L. Saddler says:

    With all the back and forth about Charter and Traditional Public School scandals, who is looking out for the students that they are supposed to be educating? It is time that the responsible parties at the Federal, State and local levels start a massive cleanup of all school systems, be they Charter, Public or even Private, in some instances, to make sure that everyone is getting what they are paying for either through tax dollars, donations or private funds… THE EDUCATION OF OUR CHILDREN! Our country is not producing young people who are capable of taking on the next level of study.
    Regardless of who does or does not like to hear it said, there are rotten apples at/within every level of the US educational system. We are doing worse than many third world countries without the resources that we have here in the US.
    American Leaders ( political, educational, religious etc.) had better wake up before its too late. And, to make matters worse, the folks who are left holding the bags with the holes in them are the poorest, and in most cases, people of color.

    December 19, 2014 at 10:42 pm
  • Stephen Wyman says:

    Providing the best possible education to every child (and providing a back-up system to folks who, for any reason, weren’t able to get what was needed first time through) is difficult and expensive… It takes time, money and effort to get taxpayers to understand and pony up! The answer is public schools! Before you whine about teachers and teacher’s unions, take 5 years and become a teacher, at a teacher’s pay rate, and you’ll know why it is so hard to attract and retain great teachers (my Dad was a life long teacher and coach; Mom taught after we were all at Dad’s Jr.-Sr. HS; wife taught for five years).

    December 28, 2014 at 8:31 pm
  • joe Nathan says:

    Jeff – looking forward to reading your comments about the ongoing Hempstead district scandals.

    Newsday, December 29, 2014:

    http://www.newsday.com/long-island/nassau/state-audit-highlights-numerous-fiscal-flaws-at-hempstead-school-district-1.9757636

    “The Hempstead school district overpaid its superintendent by tens of thousands of dollars, routinely held closed-door meetings to the exclusion of the public and failed to screen and provide services for some special-needs children, a state audit has found.

    New York State Comptroller Thomas P. DiNapoli said the district repeatedly disregarded sound fiscal and administrative practices…”

    December 30, 2014 at 10:09 pm
    • Jeff Bryant says:

      Joe, the malfeasance was caught by a state comptroller because public schools are financially transparent and accountable because they are subject to government oversight and regulation. I’m looking forward to reading your comments in support of charter schools being subject to at least the same level of oversight and regulation. Maybe start by endorsing these recommendations: http://annenberginstitute.org/sites/default/files/CharterAccountabilityStds.pdf

      December 31, 2014 at 3:06 pm
  • MB says:

    This article doesn’t even scratch the surface.

    December 31, 2014 at 12:38 pm

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