April 2017 – Sarah Parker Blog (2024)

Julian Vasquez Heilig dissects the claims about vouchers by posing eight questions about vouchers that Betsy DeVos cannot or will not ever answer.

First is, where did the idea come from? Well, there is that famous essay by libertarian economist Milton Friedman in 1955, but there is also the advocacy of Southern politicians following the Brown decision. Friedman had the idealistic belief that parents should spend their education voucher in any school. Southern politicians persistently and loudly called for “school choice” as a way to preserve racially segregated schools.

Julian also asks about the international repute of the free market and mentions Chile, which has seen the inevitable segregation that follows vouchers. He might have also mentioned Sweden, which took the same path, and found not only increased segregation but plummeting scores on international tests.

Voucher advocates have noticed that research does not support their claims about higher test scores or better education so they have resorted to advocating for choice for the sake of choice.

Today we have the unprecedented phenomenon of a U.S. Secretary of Education who advocates for a policy that will produce ever higher levels of segregation. This is wrong.

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Russ Walsh posted this column earlier this year. I am reposting it now because it is an insightful critique of DeVos’s ideology that choice is always good.

Walsh points out that there are many choices we used to have that we don’t have any more. We are not free to smoke where we want. He remembers the thick smoke in the teachers’ lounge. I remember the smokers on the commercial airplanes. He remembers the days when we drove without seat belts. We no longer have those choices. One could make a long list of the things you cannot do because of their effect on the common good, which overrides your personal choice.

School choice undermines the common good by taking resources from the schools that we are all obliged to support, even if we don’t have children.

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The Los Angeles Times has written extensively about the Celerity charter schools and their record of financial mismanagement, self-dealing, and possible conflicts of interest.

In this expose, the Times revealed that the founder of the charter chain was paid $471,000 a year, 35% more than the superintendent of the Los Angeles public school system. The article also documented use of the schools’ credit card for expensive meals, hotels, resorts, restaurants, chauffeured limousines, and other personal expenses.

Now, the Times reports, the chain of seven schools is under federal investigation and in danger of losing accreditation.

Los Angeles charter schools that are part of a network currently under federal investigation have been put on notice that their accreditation is in jeopardy.

Seven schools run by the nonprofit Celerity Educational Group are spread across the Los Angeles Unified School District. Six carry the seal of approval of the Western Assn. of Schools and Colleges, commonly known by its acronym WASC, an accrediting agency recognized by the U.S. Department of Education.

On Wednesday, the association sent Celerity Chief Executive Grace Canada a letter saying that after a preliminary investigation, it had found the network to be in violation of several of the agency’s policies. It demanded that Celerity provide evidence to show “why the accreditation status of all CEG schools should not be withheld,” according to the letter signed by WASC President Fred Van Leuven.

Founded by a former L.A. Unified employee, Celerity Educational Group has been operating charter schools in Los Angeles for over a decade. In recent years, it has gone national, expanding into Ohio and Florida — where it struggled to gain a foothold and eventually withdrew — and Louisiana, where it still operates four charter schools today.

But after years of relatively little scrutiny, the charter school network is now the subject of two investigations, one by the inspector general of L.A. Unified, who has been looking into allegations of misuse of public funds, and another by federal agencies including the U.S. Department of Education.

In January, agents from the Department of Homeland Security, the FBI and other agencies raided Celerity’s offices as well as the headquarters of a related nonprofit, Celerity Global Development, and the home of the organization’s founder, Vielka McFarlane.

Interestingly, the response from the charter was that what they did was not unusual in the charter sector. Everyone does it.

“In its review of the group’s financial records, The Times documented years of questionable spending by Celerity’s leaders and potential conflicts of interest.

“No one at Celerity, including McFarlane, has been charged with a crime stemming from the schools’ operations. Celerity’s leaders have repeatedly defended the network’s management and financial decisions as perfectly legal and typical of charter schools, which are privately managed but publicly funded.”

Despite the investigations, despite the revelations, the state education department wants to give this chain more students and schools:

Despite the questions surrounding Celerity’s operations, the network is poised to open two new charter schools next year. And on Friday, the California Department of Education issued a recommendation that the state Board of Education renew two of Celerity’s existing schools, which L.A. Unified had refused to grant another five-year term. The recommendation came with conditions that Celerity agree to turn over more information about its inner workings to state officials.

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The marker of the first 100 days of a presidency was set during the first administration of Franklin Delano Roosevelt.FDR started office with plans, advisors, and legislation.

He called Congress into session and passed monumental legislation. Like Trump, Roosevelt had a Congress controlled by his own party.

In all, Roosevelt got 15 major bills through Congress in his first 100 days. “Congress doesn’t pass legislation anymore—they just wave at the bills as they go by,” said humorist Will Rogers.

Trump’s party controls both houses of Congress. Not a single piece of legislation has passed. Here is an insightful summary of Trump’s first 100 days.

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Former Congressman Dennis Kucinich, who may be thinking of a run for Governor of Ohio, launched a four-city speaking tour across the state, castigating the corruption in the charter industry at every stop.

Kucinich understands that every dollar that goes to a charter is taken away from a public school. He is the first politician who understands the shell game. Defund public schools while funding a dual system.

“Former U.S. Rep. Dennis Kucinich launched a four-city, anti-charter school tour in Columbus, Ohio on Monday, telling attendees at a press conference that “public education’s financial base is being destroyed by private, for-profit corporate interests.”

Kucinich, who served 16 years in Congress, was Cleveland mayor in the late 1970s, and ran for president in 2004 and 2008, plans to hold town hall-style forums across the state in Centerville, Columbus, Parma, and Elyria Monday through Thursday. He kicked it off by talking to reporters at the Ohio statehouse.

“When state revenue for public schools decreases because of money which goes to private for-profit charters, public school officials must make up the difference by asking local property taxpayers for more money,” Kucinich said. “It represents a deliberate, destructive undermining of the public education of Ohio’s children. What is our educational philosophy today? Let for-profit corporations exploit the mass of children by controlling the state government?”

“With that last line, he was referring to state legislators “who have accepted millions of dollars in campaign contributions from charter-school operators, notably William Lager of the Electronic Classroom of Tomorrow and David Brennan of White Hat Management,” according to the Columbus Dispatch….

According to a report released in advance of DeVos’ visit, since the 2012-2013 school year, $3,744,988 in state funding originally meant for children attending Van Wert County’s local public schools “has instead gone to privately run brick-and-mortar and online charter schools.” In turn, said the report from Innovation Ohio, “local taxpayers in Van Wert…have had to subsidize these larger state payments to charter schools to the tune of $1.4 million—money that should have supplemented the larger state aid amount but is now being used to subsidize poorer performing, privately run charter schools.”

Supporting Kucinich’s criticism, the report pointed out that indeed, “local property taxpayers in Van Wert County schools are paying $3 million more in property taxes in 2015 (the most recent available data from the Ohio Department of Taxation) than they did in 2013, which is increasing those communities’ reliance on property taxes to pay for education—a result deemed unconstitutional four times by the Ohio Supreme Court.”

According to a report released in advance of DeVos’ visit, since the 2012-2013 school year, $3,744,988 in state funding originally meant for children attending Van Wert County’s local public schools “has instead gone to privately run brick-and-mortar and online charter schools.” In turn, said the report from Innovation Ohio, “local taxpayers in Van Wert…have had to subsidize these larger state payments to charter schools to the tune of $1.4 million—money that should have supplemented the larger state aid amount but is now being used to subsidize poorer performing, privately run charter schools.”

Supporting Kucinich’s criticism, the report pointed out that indeed, “local property taxpayers in Van Wert County schools are paying $3 million more in property taxes in 2015 (the most recent available data from the Ohio Department of Taxation) than they did in 2013, which is increasing those communities’ reliance on property taxes to pay for education—a result deemed unconstitutional four times by the Ohio Supreme Court.”

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While teachers continue to struggle for a decent middle-income salary, the edtech entrepreneurs are salivating about their success in the ed marketplace. Listen to the audio to hear the sound of happy money-makers.

Some people are getting very rich indeed by investing in technology to replace teachers and to call it “personalization.” When there is no teacher involved, it is “depersonalization.”

Here is the press release.

When Tom Davidson served as a state legislator for a small district in southern Maine two decades ago, he became intimately familiar with the byzantine, bureaucratic, and often, frankly, subpar sausage-making that goes into bankrolling education at a local level. (“There was never a shortage of good ideas, but almost always a shortage of money,” he says.)

So Davidson took his learnings to the private sector and founded EverFi, an education software startup, in 2008. As CEO, Davidson has been rallying some of the biggest names in business behind his cause. Indeed, on Wednesday, EverFi will announce that it has raised $190 million in new funding from a host of magnates to help bring schooling into the digital age. The company last raised $40 million a year ago, news Fortune covered first.

The round marks one of the largest deals to date in the area of education technology, also known as “ed tech.” It is exceeded in size by only two others: German publishing giant Bertelsmann’s $230 million stake in HotChalk, a firm that develops software for online graduate degree programs, and a $200 million fundraising by TutorGroup, an Alibaba-backed (BABA, -0.36%) startup that helps Chinese speakers learn English online. Both of those came in November 2015.

“We’re starting to see for the first time some scale in the space and the investments are reflective of that playing out,” Davidson said on a phone call.

In addition to catapulting EverFi into the ed tech big leagues, the fundraising round marks the debut deal for lead investor Rise, a newly established social impact investing fund managed by TPG Growth, a private equity firm that has also backed Internet hotshots like Uber and Airbnb. Rise contr

Other new investors included TPG Growth, which contributed $30 million, and L.A.-based MainStreet Advisors. The firms join existing investors Advance Publications, Rethink Impact, Allen & Co, as well as Jeff Bezos, CEO of Amazon (AMZN, +0.38%). Eric Schmidt, executive chairman of Alphabet (GOOGL, +0.31%), and Evan Williams, cofounder of Twitter (TWTR, +10.78%), are investors in earlier rounds.

Nehal Raj, a partner at TPG who leads tech investments, said that EverFi’s business meshes well with the firm’s investment thesis, which involves homing in on an outdated process in a market featuring relatively few competitors. Education has traditionally been “done in a labor-intensive, inefficient way,” Raj said on a call, mentioning the paper-based products, in-person meetings, and binders filled with sign-in sheets and lists of checkboxes, that are its hallmarks.

EverFi “automates all that in a tech-centric way,” Raj added.

Based in Washington, D.C., EverFi has about 200 employees. The company sells software subscriptions to schools and businesses that help teach financial literacy (understanding mortgages and credit, for example), responsible college behavior (involving hazing and alcohol consumption), corporate compliance (like sexual harassment and diversity training), and other programs. Among the firm’s customers are Google, Oracle (ORCL, +0.56%), Whole Foods (WFM, +0.94%), and Airbnb, as well as universities such as Harvard, MIT, and Stanford and 20,000 K-12 schools.

Another part of EverFi’s business involves striking partnerships with organizations that agree to license software on behalf of schools around the country. General Electric (GE, +0.05%), the NHL, the NFL, and Intel (INTC, +0.38%)have all done so.

To date EverFi has raised a total of $251 million including the latest round, its Series D. People familiar with the deal declined to comment on the firm’s private valuation, though one person familiar with the terms suggested that the company had not, at this stage, hit that oft-vaunted billion-dollar milestone.

Davidson said he plans to put money from the latest funding round into international expansion as well as possible acquisitions.

Rise, the lead backer, was cofounded by Bill McGlashan, managing partner of TPG Growth, along with Bono, frontman of U2 and well-known social activist, and Jeff Skoll, an early eBay (EBAY, -0.21%) exec, philanthropist, and film producer. Supplementing that trio, the fund’s board is stacked with philanthropic powerhouses who double as investors, such as Laurene Powell Jobs, Richard Branson, Reid Hoffman, Lynne Benioff, and Pierre Omidyar, to name a few.

Rise is set to announce Wednesday that it is adding three people to its education team as well. John Rogers, a veteran education, healthcare, and social impact investor, will lead the segment. Meanwhile, Arne Duncan, U.S. Secretary of Education under former President Barack Obama, and Rick Levin, CEO of Coursera and former longtime president of Yale University, are joining as senior advisors.

Though Rise has bright-eyed, do-gooder aims, it is far from a charity, in its backers’ view. The fund is expected to deliver social returns—helping underserved communities gain access to educational resources, for instance—along with financial ones, people involved in its management told Fortune.

Davidson said he spent considerable time walking the new set of investors through the fundamentals of EverFi’s business and technology. Bono, for instance, interrupted a few family dinners to go over aspects in granular detail, according to Davidson.

“It was super impressive how in the weeds he was in the deal and what we were building,” Davidson said. “He was hammering me with questions around Title IX school implementations.”

When Davidson’s wife would ask how much longer he might be, Davidson says he would inevitably reply, “I’m still on the phone with him. He’s asking about our rural Mississippi programs.”

Despite the interruptions, Davidson said he loved how involved the Irish rockstar had been in the process. “He is deadly serious about these issues,” he said about Bono. (You can read more about Bono’s business pursuits in this Fortune magazine profile from last year.)

EverFi will no doubt prove a bellwether for Rise’s investment strategy: an attempt to make money while achieving some social good. If the plan works, EverFi could also end up teaching the world a valuable economic lesson—that capitalism can strive for ideals beyond merely increasing shareholder value.

Just don’t call it philanthropy.

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The California Teachers Association has assembled a large coalition of groups to support the reform of charter schools. The press release calls it a “Broad Coalition” but in California that is a double entendre. (Do they mean a coalition funded by billionaire Eli Broad? No!).

Broad Coalition of Legislators, Educators and Parents Back 3 Bills to Stop Waste, Fraud and Abuse, Ensure Equal Access for All Students at California’s Charter Schools

Contacts: Claudia Briggs at 916-325-1550 or Mike Myslinski at 650-552-5324

SACRAMENTO – Lawmakers, educators, parents and a broad coalition of community supporters joined for a news conference today in the State Capitol to shed light on a very important package of bills that must be enacted to ensure California charter school accountability and transparency and to also ensure unbiased access to all students.

SB 808 by Sen. Tony Mendoza, AB 1478 by Assembly Member Reggie Jones-Sawyer and AB 1360 by Assembly Member Rob Bonta would address many of the injustices and fraudulent practices that are negatively impacting California’s students.

SB 808 would ensure local control by allowing charter schools to be authorized only by the school district in which the charters would be located. “It is important, especially as an educator, to have people engage in open discussion about ensuring that our children’s educational system continues to improve. Part of ensuring that our education system advances is to make sure that all schools – charter and traditional – are held accountable for the concerns of parents and students,” said Senator Mendoza, author of SB 808.

AB 1478 would require charter school governing boards to comply with existing laws rightfully demanding transparency and accountability to parents and the public in the operation of taxpayer-funded schools.

“Evidence shows that this lack of accountability has led to financial gains for for-profit corporate charter operators, has too often been disastrous for thousands of California students and has cost taxpayers millions of dollars in waste, fraud and abuse,” said Terri Jackson, California Teachers Association Board Member and fourth-grade teacher in Contra Costa County. “Public education should be about kids, not profits. Instead of subsidizing corporate charter schools run by for-profit companies with taxpayer dollars, we should be using the money to strengthen our local neighborhood public schools for all California children.”

The California Federation of Teachers also co-sponsored the bills urging lawmakers and the governor to enact them to stop the fraudulent and wasteful spending of taxpayer dollars. “By creating non-profit shells, charter corporations are able to hide behind a technicality to skim off profits from public dollars. AB 1478 will help put an end to this practice, and this package of bills will make charter schools more accountable overall,” said Gemma Abels, a CFT Vice President and president of the Morgan Hill Federation of Teachers.

AB 1360 would set new requirements for charter schools’ admission, suspension and expulsion policies, bringing them more in line with traditional schools. “AB 1360 provides equal opportunity for our students by ensuring they have fair access to learning opportunities in all publicly funded California schools,” said Assembly Member Bonta. “Our young people must not be disadvantaged or pushed out of learning environments through unfair admissions policies or disciplinary rules. AB 1360 puts our children first.”

The impact on California’s students has raised many red flags for community supporters around the state, causing heightened attention, concern and action to ensure social justice, equity and consistent application of policies for all students regardless of ZIP code.

“The Alliance for Boys and Men of Color is co-sponsoring AB 1360 because we are committed to ensuring all schools have nondiscriminatory admissions policies and procedural protections for students in place guaranteed by the right to due process that are clear and consistent,” said Jordan Thierry, Senior Associate, Alliance for Boys and Men of Color. “This legislation will help ensure decisions related to admissions or disciplinary actions are not arbitrary, but rather based on established guidelines aligned with state and federal law.”

Support for these bills is widespread. In fact, the Los Angeles Unified School District Board of Education, at the helm of the district where there are many recent cases in which the FBI is investigating fraud and fiscal mismanagement at charter operations like at Celerity Educational Group, adopted a resolution April 18 in support of this legislation that would provide much relief for the students in LAUSD schools.

“These bills reflect the idea that all publicly funded charter schools must adhere to the same accountability and transparency standards as district public schools. In Tuesday’s vote, the School Board signaled that the Trump/DeVos ‘anything goes’ agenda to privatize our public schools is not welcome in Los Angeles,” said United Teachers Los Angeles President Alex Caputo-Pearl about the school board’s action. “We applaud George McKenna, Steve Zimmer, Scott Schmerelson, and Richard Vladovic, all veteran classroom teachers, counselors, and school administrators, who led the charge in this important vote.”

During the 2016 statewide campaign and, once again, in the school board election in Los Angeles, corporate billionaires with a coordinated agenda to privatize public schools are spending millions of dollars to elect candidates whose agenda is aligned to theirs. A concerned group of educators, parents and community supporters launched Kids Not Profits. The campaign exposes privately managed charter schools, their impact on students, the billionaires behind them and urges supporters to take action to demand that state lawmakers create stronger charter regulations, more accountability, transparency and equal access for all students.

Recent news headlines and academic studies have documented the waste, fraud and abuse by privately managed charter schools that have cost taxpayers millions while hurting students. A new report from national nonprofit In the Public Interest finds that much of this public investment, hundreds of millions of dollars, has been misspent on schools that do not fulfill the intent of state charter school policy and undermine the financial viability of California’s public school districts.

In a report released earlier this month, Spending Blind: The Failure of Policy Planning in California’s Charter School Facility Funding, In the Public Interest reveals that a substantial portion of the more than $2.5 billion in tax dollars or taxpayer subsidized financing spent on California charter school facilities in the past 15 years has been misspent on: schools that underperformed nearby traditional public schools; schools built in districts that already had enough classroom space; schools that were found to have discriminatory enrollment policies; and, in the worst cases, schools that engaged in unethical or corrupt practices.

An ACLU report, “Unequal Access,” found that more than 20 percent of California’s charter schools deny access to students with disabilities, English learners, or students who have lower grades and test scores. The NAACP recently called for a ban on privately managed charters.

Charter school scandals continue to make headlines, while another report shows that an expansion of privately run charter schools would cost the Los Angeles Unified School District more than $500 million this year alone.

And important to note, research by In The Public Interest shows Californians overwhelmingly favor proposals to reform charter schools—proposals that include strengthening charter school accountability and transparency, improving teacher training and qualifications, preventing fraud, returning money to taxpayers when charter schools close, and ensuring that neighborhood public schools are not adversely affected.

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Sue Legg of the Florida League of Voters wonders whether Florida’s policy of holding back third grade students who don’t pass the reading test is working.

It certainly boosts fourth grade reading scores.

But she notes a strange anomaly: Why does the number of high-scoring students decline from fourth grade to eighth grade?

She also notes that the biggest improvement in fourth grade reading scores occurred before the “reforms” were implemented.

She welcomes your thoughts in explaining why the number of high scoring students drops from fourth to eighth grades.

She writes:

“Do Florida students’ reading skills get worse over time? This seems unlikely. There was a relatively large increase in reading scores for eighth grade in 2009, and scores have only fluctuated slightly since then.

“Other possible explanations. Perhaps eighth grade student characteristics are now different than in fourth grade? How could this be? There are several ways to explore this possibility:

“Florida’s retention policy is more extreme than most other states’ policies.

“Thus, Florida has more students who have been in school longer by fourth grade than do other states. One would expect their reading and math levels to be higher. This advantage may be lost by eighth grade when these skills are more complex.

“Does Florida’s school choice policy pull out more low scoring students in elementary grades, thereby elevating its fourth grade scores compared to other states?

“Do many of these students return to public schools in middle school and lower the state achievement scores?

“We know from Florida DOE data that the Florida tax credit program enrollment drops more than one half between kindergarten and eighth grade.

“Which students leave the private schools and which remain? If the struggling students leave, as the DOE evaluations suggest, eighth grade scores in public schools would decline.

“A similar examination of the achievement levels of students who return to public schools from charter schools between fourth and eighth grade may also shed some light on the changing student achievement

“I welcome an evaluation of Florida’s school accountability approach to improving student learning.”

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Gary Rubinstein wrote a post about the curiosity of the KIPP high school in New York City that was ranked one of the best in the nation by U.S. News & World Report, even though it had only 58 students and the three other KIPP high schools had zero students who took and passed AP exams. The name of the school is KIPP Academy Charter School. Were they trying to game the system, he wondered? But some comments on his blog alerted him to the fact, if fact it is, that the only KIPP high school is KIPP NYC College Prep High School.

Gary untangles the puzzle here.

“The reader informed me that there are not four KIPP high schools in New York City, but just one, KIPP NYC College Prep High School. This was puzzling to me since the school that was ranked 29th in the country and 4th in New York was not called KIPP NYC College Prep High School, but called KIPP Academy Charter School.

“When I went to look at the data at the public data site for school report cards, there was no report card for a KIPP NYC College Prep High School, however. But there were report cards for the four MIDDLE schools, KIPP Academy, KIPP AMP, KIPP Infinity, and KIPP STAR. On these report cards, it shows that 5-8 middle schools also have students in 9th, 10th, 11th, and 12th grade, in small numbers.

“One of those four middle schools is the KIPP Academy with its 58 12th graders, and this is the ‘school’ that was rated so highly on the U.S. News ranking.

“But the reality is that there is just one high school and it does not have just 58 students, but around 150 students, basically the four 12th grade classes from the four middle schools are actually not attending that middle school but all attending the KIPP high school.

“Why the students are still ‘officially’ in their middle schools is a mystery to me and why there is not report card for the KIPP high school is also pretty baffling.

“The non-existent KIPP Academy Charter High School that was ranked 29th in the country and 4th in New York claimed to have 58 students with a 100% AP participation rate and a 98% passing rate. We now know that these 58 students are only a subset, around a fourth, of an existing school KIPP NYC College Prep. Though there is no state report card for KIPP NYC College Prep, the school has one on their website for the 2014-2015 school year on which the U.S. News ratings were based.”

Read Gary’s analysis.

One thing is clear: the U.S. News & World Report ranking of high schools is phony. A fraud. Meaningless. They rank high schools to sell magazines. They don’t fact-check. They set themselves up as the arbiters of which are the best high schools in the nation, based on flawed data, and they are not qualified to do this work. Of what value is their product?

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Preston Green III is a scholar at the University of Connecticut who studies the legal and political issues associated with school choice. He fears that school choice, unregulated and unaccountable, will be the new Enron, a financial scandal of massive proportions.

Professor Green says:

“As school choice champions like Secretary of Education Betsy DeVos push to make charter schools a larger part of the educational landscape, it’s important to understand the Enron scandal and how charter schools are vulnerable to similar schemes.

Enron’s downfall was caused largely by something called “related-party transactions.” Understanding this concept is crucial for grasping how charter schools may also be in danger.

Related-party transactions are business arrangements between companies with close associations: It could be between two companies owned or managed by the same group or it could be between one large company and a smaller company that it owns. Although related-party transactions are legal, they can create severe conflicts of interest, allowing those in power to profit from employees, investors and even taxpayers.

This is what happened at Enron. Because Enron wanted to look good to investors, the company created thousands of “special purpose entities” to hide its debt. Because of these off-the-books partnerships, Enron was able to artificially boost its profits, thus tricking investors.

Enron’s Chief Financial Officer Andrew Fastow managed several of these special purpose entities, benefiting from his position of power at the expense of the company’s shareholders. For instance, these companies paid him US$30 million in management fees – far more than his Enron salary.

Fastow also conspired with other Enron employees to pocket another $30 million from one of these entities, and he moved $4.5 million from this scheme into his family foundation.

Enron’s collapse revealed the weaknesses of the gatekeepers – including boards of directors and the Securities and Exchange Commission – that are responsible for protecting the markets. Because of lax accountability and federal deregulation, these watchdogs failed to detect the dangers posed by Fastow’s conflict of interest until it was too late. Congress responded by passing the Sarbanes-Oxley Act, which tightened the requirements for oversight.

Forty-four states and the District of Columbia have legislation that allows for charter schools. Just like public schools, charter schools receive public funding. However, unlike public schools, charter schools are exempt from many laws governing financial transparency.

Without strict regulation, some bad actors have been able to take advantage of charter schools as an opportunity for private investment. In the worst cases, individuals have been able to use related-party transactions to fraudulently funnel public money intended for charter schools into other business ventures that they control.

Such was the case with Ivy Academia, a Los Angeles-area charter school. The co-founders, Yevgeny Selivanov and Tatayana Berkovich, also owned a private preschool that shared facilities with the charter school. The preschool entered into a sublease for the facilities at a monthly rent of $18,390 – the fair-market value. The preschool then assigned the sublease to the charter school at a monthly rent of $43,870.

The Los Angeles district attorney’s office charged the husband-and-wife team with multiple counts of fraud. Selivanov was sentenced to nearly five years in jail in 2013.

Fraudulent related-party transactions can also occur between education management organizations (EMOs) and their affiliates. EMOs are for-profit or nonprofit entities that sometimes manage charter schools, and might also own smaller companies that could provide services to those schools.

For example, Imagine Schools is a nonprofit EMO that runs 63 charter schools enrolling 33,000 students across the country. It also owns SchoolHouse Finance, a for-profit company that, among other things, handles real estate for many of Imagine’s charter schools. Though charter schools typically spend around 14 percent of their funding on rent, some of the Imagine Schools were paying SchoolHouse Finance up to 40 percent of their funding for rent.

One of the charter schools operated by Imagine Schools, Renaissance Academy in Kansas City, sued the company for charging it excessive rent. In 2015, a federal judge agreed, ordering Imagine Schools to pay almost $1 million in damages to Renaissance. The court’s ruling suggested that Imagine Schools was essentially taking advantage of the charter school: The EMO profited from the excessive rent and failed to tell the school’s board of directors how the cost might disrupt the school’s ability to pay for textbooks and teacher salaries.

Because of insufficient oversight, Fastow’s fraudulent use of related-party transactions at Enron was not stopped until it was too late. Similarly, the Ivy Academia and Renaissance Academy examples reveal insufficient checks and balances in the charter school sector. In both cases, the monitors responsible for protecting charter schools found nothing wrong with the rental agreements.

Green says these cases are not isolated. The risks grow as degulation grows. It is already obvious that DeVos and Trump will prevent regulation to the greatest extent possible. The conditions will be right for massive fraud.

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