‘Money in the pockets of administrators’: California charter school network steers millions in taxpayer money to opaque firm tied to execs

For five years Eric Shirley taught home-school students for a small California charter school structure called Elite Academic Academy He left in he explained because of several things he revealed fishy about Elite s administration Among them Elite s CEO Meghan Freeman lives in a mountain resort town in Montana and gets paid more than in salary and benefits each year to serve students And when Elite first started in and served a scarce hundred students its founder and then-CEO Brent Woodard made more than Related Articles Pleasanton teachers feeling the squeeze amid million in budget cuts The fate of Concord s KVHS radio tower is up in the air Here s why the society wants to save it Hilding Tex Ronning - Santa Cruz mourns loss of inspirational coach lecturer Bay Area school official apologizes for handling of antisemitism inquiry Supreme Court tie vote dooms taxpayer funded Catholic charter school in Oklahoma But Shirley s biggest concern was that Elite was paying millions of dollars a year to an obscure third-party corporation one created by Woodard This corporation not only employs family members of Elite administrators in high-level jobs but also has paid him six-figure sums each year as a consultant The intent of specific of these programs is not to provide a better tuition Shirley revealed It s to put money in the pockets of administrators Elite pulled in million in masses school funding last school year according to audit reports for the system s two schools Shirley is one of three former Elite teachers who stated The San Diego Union-Tribune they worry the charter organization which includes a school authorized out of San Diego County is the latest in a string of examples of how operators of charter schools which are independently run populace schools can exploit lax charter laws and oversight requirements to use taxpayer funds in questionable tactics Other examples include the now-defunct A charter grid whose leaders pleaded guilty to conspiracy for manipulating participant enrollment to profit off of residents school funding and the Inspire charter infrastructure which state auditors uncovered was collecting millions in society school dollars without records to justify the collections Elite is one of a large number of California charter school networks that have close financial relationships with third-party privately run corporations that have close ties to the charter s own leaders raising concerns from experts educators and taxpayers about transparency and conflicts of interest in how millions of community school dollars are spent Experts and former Elite teachers see similar practices happening at Elite At a bare minimum it looks like cronyism revealed Sean McMorris transparency ethics and accountability effort manager for California Common Cause about Elite s leadership structure and related-party ties In latest years revelations of such charter relationships have spurred calls for tougher charter auditing and oversight requirements from state lawmakers state agency officers local prosecutors and charter accountability advocates but attempts to change charter laws have failed amid staunch resistance from charter schools The latest effort is Assembly Bill which would among various other things require increased transparency of relationships between charters and third parties and reduce funding for certain types of charters like Elite The bill which is facing heavy opposition from charter schools passed out of the Assembly Appropriations Committee with only majority Democrats sponsorship The Union-Tribune repeatedly tried to reach Elite leaders for comment for this story including emailing lists of questions to Woodard Freeman and the members of Elite s two school boards On a Thursday afternoon visit to Elite s headquarters in Temecula its storefront office was locked Nobody responded despite repeat emails requesting comment Elite s origins Before he started Elite Woodard was the superintendent of Acton-Agua Dulce Unified a small rural school district at the edge of the Mojave Desert that was facing declining enrollment and financial trouble Freeman also worked there as an administrator At Acton-Agua Dulce Woodard pioneered what would become a controversial revenue-generating scheme among small school districts statewide The district authorized several charter schools so that it could collect fees from the charters meant to pay for the costs of overseeing them By Acton-Agua Dulce had charter schools in its portfolio including an A school that together enrolled students dwarfing the district s own three schools with students according to state evidence State auditors later concluded in October that the district under Woodard s leadership had not only improperly authorized charter schools outside its boundaries but had conducted flawed oversight and reviews of charter petitions By the time the audit s findings were circulated however Woodard was nine months gone from the district In and he filed petitions to create at least three Elite Academic Academy charter schools one authorized by San Diego County s Mountain Empire Unified School District and two authorized by Lucerne Valley Unified a rural district northeast of San Bernardino One of the Lucerne Valley-authorized schools later separated from Elite changed its name and replaced its board members The mission of Elite according to Woodard s petitions was to provide flexible and individualized programs for students who hadn t succeeded in or didn t want to attend traditional brick-and-mortar schools I truly concluded in this model and that for children who are looking for an alternative that together with a fantastic group we could create something special Freeman revealed about Elite s origins in an online interview she did not mention Woodard So that is how Elite was born Inspire Charter School Lending Library is seen here on Wednesday Aug in Poway California Hayne Palmour IV The San Diego Union-Tribune Elite provides three schooling options for students virtual school hybrid school and home schooling Most of of its students are enrolled in its home-schooling model where students are not taught directly by the school s teachers but rather by parents and third-party vendors under the guide s guidance Like other home-schooling charters in California Elite provides every trainee up to in educational funds each year to spend on academic and enrichment pursuits of their parents choosing provided their Elite tutor approves the expenditure That could mean tutoring curriculum materials athletic training lessons in dance music or horseback riding and even tuition at a private in-person academy Elite populace school dollars designated for educational services have gone to vendors including Universal Studios Knott s Berry Farm San Diego Padres Los Angeles Dodgers Snow Valley Mountain Resort a roller skating rink a pottery studio martial arts and gymnastics schools and enrichment centers that offer in-person instruction like schools do Elite s warrant registers show Basically one and the same Elite wasn t the only organization Woodard created In Woodard filed papers with the state to create a nonprofit corporation called Prime Educational Solutions that would go on to take millions of dollars of revenue annually from the Elite schools he had created Prime is based in Temecula the address listed on its tax filings is a UPS Store Prime s purpose as an organization is to provide services to Elite according to Prime s articles of incorporation and tax filings Elite is the sole client of Prime Leadership accountability experts say the arrangement creates the expected for a conflict of interest On its face it looks like self-enrichment McMorris commented of the relationship between Prime and Elite Prime handles or assists Elite with a wide range of services including finance management human reserve management record-keeping IT marketing and coordination of special instruction services Prime even schedules Elite s board meetings and prepares Elite s board agendas according to Elite s contracts with Prime In return the Elite schools have paid Prime of their revenue plus other fees their contracts with Prime show The Elite schools expect to pay at least million to Prime this school year according to the schools board documents Prime was intended not only to provide services to Elite but to control Elite s operations Elite s original bylaws show In Elite s bylaws had listed Prime as its sole controlling entity meaning Prime could choose Elite s board members and change Elite s articles or bylaws However Elite s two school boards changed Elite s bylaws in June to remove Prime s sole member title Elite s arrangement with Prime as a private corporation obscures details of how millions of its society school dollars are ultimately spent By having a separate back-office provider handle operations rather than the schools themselves Elite s community funding can be spent through an outside private corporation that is not held to population transparency laws the way charter schools are even though Prime functions as an extension of Elite s operations They re basically one and the same because the only revenue Prime receives is from Elite Shirley stated McMorris questions why Prime is handling a multitude of of the duties that the Elite schools could be handling themselves Why not just set up this operation within the school rather than set up a separate entity to funnel state money from the school to this contractor where there s presumably less oversight and regulation he explained Shirley is concerned that Prime can act as a automobile for Elite dollars to be spent in solutions that are not allowable for citizens schools He referenced an Elite-organized staff party at a Temecula winery in for which Prime provided alcohol as an example The insufficient publicly available documents about Prime also show it spends a considerable amount of its revenue on executive pay About a third of the million that Prime spent in fiscal went to compensation for Prime s officers according to the organization s tax filing At the time Prime employed just people Prime s CEO Catherine Heredia was paid more than in salary and benefits that year and Chief Personnel Officer Tracy Hasper more than And several of Prime s executives are family members of Elite staff according to Elite s employee directory and constituents records Adam Woodard is Prime s finance director Adam and Tracy Hasper are administrators for Elite and Prime respectively and each was a founding board member for the Elite schools Sam Heredia works for Elite and Vincent Heredia works for Prime Two board members of Prime Tony Jacob and Daniel Jacob co-own an engineering company that has received contract work from Acton-Agua Dulce Unified where Woodard was superintendent When Elite opened in the Jacobs were listed as officers of Elite on state filings Heredia and the Jacobs did not respond to multiple requests for comment Conflicts of interest prevalent It s not uncommon for a California charter structure to have a close relationship with a third-party corporation that was the affair with both the A and Inspire charter networks Such arrangements have raised concerns among ruling body accountability advocates because these third-party corporations often have key control or influence over their respective charter school clients which provide them revenue And when charter schools have hired these corporations as vendors they ve often done so without soliciting bids raising questions about whether the schools are getting the best deal on services The people holding top leadership positions at the charter and the third-party entity are also often the same people or are related raising concerns about conflicts of interest In the cases of Inspire A and Elite the founders created the charter schools then went on to create the corporations that would provide the charters back-office services in exchange for substantial set percentages of the charters revenue Former A charter school leader Jason Schrock middle sits with his defense club while being sentenced in court for his part in a fraud scheme at San Diego Superior Court on Friday Sept in San Diego Jarrod Valliere The San Diego Union-Tribune Such arrangements aren t necessarily illegal in California or an improper use of general funds It is illegal for population agents including employees of charter schools and third-party corporations that manage charters to make or influence any decision in which they have a financial interest Whether or not an official took part in such a decision any related-party transactions are required to be disclosed for charter schools per national nonprofit audit standards which charters must follow per state law The auditor is supposed to test for related parties declared Michael Fine the CEO of California s Fiscal Dilemma Management Assistance Organization or FCMAT the state s school auditing agency It s all a matter of arms-length transactions You want full disclosure out there related to those kinds of things The last five annual audits for both Elite charter schools do not identify Prime as a related party for Elite and do not mention Prime at all A joint overview about charter schools last year by the Legislative Analyst s Office and FCMAT called for greater transparency about third-party entities required in charter school audits including a schedule of the charter s largest payments or transfers to organizations The document also stated the state should develop a procedure for school auditors to find out whether a charter has a relationship with a third-party entity and to see if it constitutes a material relationship AB would require these and several other new accountability measures for charters Although these types of contracts are not necessarily illegal or a poor use of funding the conflicts of interest prevalent in these situations can raise questions about whether funds are being used properly for the benefit of students the LAO FCMAT assessment stated Salaries in the hundreds of thousands A few Elite teachers have criticized how much Elite s top administrators are paid figures far higher than bulk local charter leaders Founding Elite gave Woodard an immediate raise from what he was making as a superintendent In Elite s first year of operation when it recorded a financial deficit and had just students enrolled Woodard was compensated more than in salary and benefits per Elite s tax filings That s significantly more than what the bulk local charter leaders make and more than what all but one San Diego County school district superintendent made at the time including San Diego Unified s Cindy Marten who made to oversee the county s largest district with more than students Elite s executive compensation levels are not unprecedented for charters For example the former CEO of Classical Academies which gets twice as much revenue as Elite was compensated in the CEO of Altus Schools made more than in per tax filings But it s typical for leaders of local charters which are nonprofit schools to receive compensation more on par with that of high school principals or district superintendents Woodard retired from Elite in after three years at Elite Woodard s contract gave him a retirement incentive of to be paid out over three years the equivalent of three years of Elite s contributions to his pension Even after he left the schools Woodard has been paid more than half a million dollars for Elite-related work After he retired from Elite Woodard was hired as a consultant for Prime which he had also founded Prime has paid him more than for consulting during the to fiscal years per Prime s tax filings Meanwhile Freeman Woodard s successor CEO was paid more than in pay and benefits during - according to Elite s the majority up-to-date tax filing That includes her salary retirement benefits stipends and payouts of unused vacation days Freeman has received automatic annual raises according to her contracts McMorris and the former Elite teachers unveiled the salaries to be over the top especially considering Elite s small size I think they would need to justify that type of salary for two charter schools It s higher than what the superintendent of San Diego schools was getting McMorris revealed Charter executive compensation isn t necessarily something that demands to be scrutinized in the syllabus of charter oversight particularly if the charter is producing good results explained Tom Hutton executive director of California Charter Authorizing Professionals And charters are meant to have more flexibility in how they approach school operations than district schools At the same time charter schools are still citizens agencies Hutton disclosed These are constituents institutions that are publicly funded and the optics are things that inhabitants schools have to be sensitive to he commented In addition to having founded Elite together Woodard and Freeman both have the same residential address in the resort town of Whitefish Mont according to Prime s tax filings and Montana property records Several other Elite administrators also don t live in California Elite employee records show Elite s chief attendee growth officer and compliance liaison both live in Texas its compliance coordinator lives in Utah its creative music coordinator lives in Washington state and its home-school director lives in Michigan When these people are operating in all these other states honestly I think it s not appropriate stated Kath Gray a former Elite lecturer who stated she left the school in because of concerns with Elite s management and financial practices It just feels like they re more out of touch with the students and the teachers The summer-school scheme There s a way high school students across Southern California can attend cheerleading camp for free they just have to sign up for a couple summer classes through Elite That s according to the website of Elite Spirit Cheer and Dance a Southern California business that offers a three-day overnight cheer camp at a DoubleTree hotel near Palm Springs The camp typically costs hundreds of dollars per child But Elite Spirit advertises to families that it will be free for youths if they enroll in and complete packets for two courses offered by the Elite charter school for the summer It s a win win Elite Spirit says on its website Elite Spirit s website advertises to families that it will be free for youth if they enroll in and complete packets for two courses offered by the Elite charter school for the summer Elite Spirit Camps It s a practice that mirrors what other California charters including the Inspire and former A schools have done to get more citizens school funds from the state than they are allowed Here s how it works Vendors like Elite Spirit recruit students across Southern California including students enrolled in other schools besides Elite into summer-only enrichment programs advertised as no-cost The programs enroll students into Elite for about a month during the summer In exchange for receiving the free summer scheme those students have to complete two courses for credit through Elite Meanwhile students remain enrolled in their regular schools during the programs Elite Spirit for example says on its website that students do not have to un-enroll from their current schools in order to do the cheer camp Charter schools have then submitted those students attendance hours to the state to collect school funding which is allocated based on average daily attendance In its contracts with Elite Spirit the Elite charter schools have commented their payments to Elite Spirit are based on aspirant attendance records and complete attendance reporting will ensure it can fully pay Elite Spirit But such a practice is essentially double-dipping from the state A prosecutors and state school auditors have commented because the state is paying for the same novice who is enrolled in two schools at the same time For any students a district or charter school enrolls the school must provide a full school days of instruction per state development code it cannot provide just a summer s worth of instruction as California does not provide funding for summer-only programs mentioned Fine of FCMAT Elite says on its website that its summer undertaking called Level Up is offered within a year-round school calendar But the scheme only runs from July to Aug and Elite acknowledges multiple students will choose to leave the school after Aug Cristina Planchon the Elite educator who owns and runs Elite Spirit did not respond to repeated requests for comment Oversight overlooked Multiple state-level task forces of school experts and state bureaucrats have concluded that California s system of holding charters accountable has major weaknesses and gaps which have made it easier for charters to conduct exercises they find questionable In California charter schools must seek permission from a residents tuition agency to open the bulk often a school district Then that agency becomes responsible for holding the charter accountable But with hundreds of school districts that have authorized charter schools charter oversight varies in quality and depth from district to district Multiple California virtual or home-schooling charters have flocked to small rural districts to authorize them as a product the state often relies on these small districts to watchdog several charter schools at once California s charter laws require little from authorizers in terms of oversight They are required to designate a staff contact for the charter visit the charter once a year ensure the charter submits required reports monitor the charter s financial condition and notify the state promptly if the charter will close State laws also don t require oversight for outside entities like Prime that have close financial and personnel relationships with charters Fresh reports following the A Inspire and other charter scandals have recommended a slew of reforms to address gaps in oversight They have called for more oversight duties for charter authorizers such as regular reviews of charter spending and attendance something that AB would require Patrick Keeley superintendent of Mountain Empire Unified School District looks out at a field on Tuesday May at a school in Pine Valley Ana Ramirez The San Diego Union-Tribune The agencies in charge of overseeing the Elite schools are two small rural school districts Mountain Empire Unified in San Diego s far East County and Lucerne Valley Unified in San Bernardino County In both districts the numbers of students who attend their authorized charter schools far exceed the numbers of students the districts serve in their own schools Mountain Empire Unified has district students and more than students enrolled in the five virtual charter schools it oversees Lucerne Valley Unified serves students with nearly times as a large number of in the six virtual charter schools it oversees Charter oversight is one of a long list of responsibilities for Mountain Empire which is working to address more immediate challenges of its own It s trying to raise money to replace crumbling facilities that pose safety hazards and it s dealing with a financial deficit staffing shortages candidate poverty harsh weather that forces school closures and more Mountain Empire Superintendent Patrick Keeley announced he has not received any complaints or concerns about Elite s events discussed in this story Keeley explained in an email that as part of the district s oversight duties he and other district administrators communicate regularly with charter schools answer the charters questions complete funding transfers conduct site visits and more He commented the district reviews all of its charter schools periodic attendance reports and financial reports and the district does not weigh in on issues like charter school staff s salaries and living situations Keeley became the district s superintendent in after the district had authorized Elite Lucerne Valley Superintendent Peter Livingston did not respond to multiple requests for comment