Poorly Monitored Ohio Charter Schools Prioritize Profits, Forget About Students, Rip Off the Public

The charter school sector in Ohio has always been a damn mess.

Even though EdChoice Vouchers are the primary school privatization scandal in Ohio today, it is good to be reminded—in Carol Burris’s new report on Ron Packard’s for-profit ACCEL charter schools—that our state still fails to protect the children enrolled and the public’s investment in charter schools. Ohio’s charter school sector has not improved despite that the state claims to have tightened oversight, despite that David Brennan sold off his White Hat empire before he died, and despite that a scandal about inflated enrollment forced the shut down of Bill Lager’s Electronic Classroom of Tomorrow (ECOT) three years ago.

What are some of the long term problems which plague Ohio’s charter sector and which the Legislature has chosen not to solve?

Charter School Sponsors Make a Lot of Money and Too Often Operate with Impunity

Burris reports that while some states hold a tight rein on charter school sponsorship and oversight, today in Ohio, there are 20 active nonprofit charter school sponsors. As an example, Burris describes the reach across Ohio of the St. Aloysius Orphanage in Cincinnati, an institution that has evolved over several generations from an orphanage to a mental health nonprofit. St. Aloysius Orphanage has figured out that in Ohio it is perfectly legal for a nonprofit institution to collect what is sometimes called “walking around money” by sponsoring charter schools, even if charter schools have nothing to do with the mission of the nonprofit. In other words, nonprofits can pad their own operating budgets by becoming Ohio charter schools sponsors. In Ohio, according to the Education Commission of the States, “Authorizers can retain up to 3% of the total amount of payments for operating expenses that the charter school receives (from the state) for administration fees.”  In the 2020-2021 school year, according to the orphanage’s most recent annual report published by Charter School Specialists, St. Aloysius Orphanage collected administrative fees from sixty-two schools across Ohio for which the St. Aloysius Orphanage is supposedly responsible.

Except that, as Burris explains, St. Aloysius Orphanage, the legal nonprofit authorizer, has created a for-profit corporation, Charter School Specialists, to fulfill the responsibilities of a charter school sponsor.  Burris explains that St. Aloysius Orphanage collected $3.6 million in 2019 for sponsoring charter schools and then turned over $2.3 million to Charter School Specialists for overseeing the schools. The problem is that by law, in Ohio, charter school sponsors must be nonprofits, but some Ohio charter schools have even referred to Charter School Specialists as their authorizer. As Burris points out, in 2017, the Plain Dealer reported that Charter School Specialists was discovered to be  profiting from providing direct services to the schools and even operating as the treasurer of some of the schools St. Aloysius Orphanage sponsors—when the formal authorizer is specifically responsible by law for overseeing the schools’ operations under the law—a clear conflict of interest.

In Ohio For-Profit Charter Management Companies Continue To Get Away with Choosing the Members of the Nonprofit Boards that Supposedly Oversee the Work of the Management Company in their Particular School

Ohio requires that charter schools be sponsored by nonprofit organizations and monitored by the appointed members of each charter school board.  The school board is the body which is responsible for hiring a management company (assuming the board wants to hire a management company) and overseeing the performance of any charter management company. In the early days of Ohio charter schools, David Brennan was notorious for hand picking the board members of charter schools that were were supposed to oversee the relationship of their school to his White Hat empire.

Carol Burris demonstrates that conflict of interest still persists in the schools managed by Ron Packard’s for-profit ACCEL Network, which took over many of Brennan’s schools when he became ill. Burris explains that ACCEL’s speciality is taking over struggling charter schools.  “When ACCEL took over Buckeye prep in 2018, it operated the school as Buckeye for one year—before shutting it down to put another in its place. The for-profit needed to find a board to act as the nonprofit face for the new for-profit-run school.”  That isn’t how it’s supposed to go.  The whole idea is that a community of educators gets together and comes up with an idea for a nonprofit charter school. They propose a board and find a sponsor.

For-Profit Management Companies in Ohio Still Own Real Estate Affiliates and Lease—At Outrageous Rents—School Buildings They Own to the Nonprofit Charter Schools they Manage

Burris reports that Buckeye Community Hope Foundation, a nonprofit low-income housing nonprofit, which served as a sponsor in 2017 of 50 charter schools, also owned a for-profit corporation which owned a building that it rented to Buckeye Prep, a charter school for “more than $162,000 in building and furniture lease payments during 2017.”  Later in 2020, after Buckeye Prep joined Ron Packard’s ACCEL network and found a new sponsor, St. Aloysius Orphanage, Buckeye Prep “paid ACCEL’s related real estate company $145,006 in rent, with ACCEL projecting a rent payment of $319,840 for the very same building in 2025.  At that rate, ACCEL would recoup what they paid in six years—precisely the length of the school’s charter.”  Burris explains: “Global School Properties, located at the same address as ACCEL and Pansophic in Virginia, is the real estate arm of ACCEL, which allows it to acquire properties and then basically rent their own buildings to themselves with public funds—through the schools they manage. ”

Sweeps Contracts Still Exist in Ohio

A sweeps contract is an arrangement by which a charter school board turns over virtually all of the state funds that support the school—with the exception of the 3 percent fee to the sponsor and the rent—to the charter management company.  The management company is then expected to manage all of the school’s functions—usually without transparency even to the members of the school’s appointed board.  Burris describes the for-profit  ACCEL’s management during 2020 of Capital Collegiate Preparatory Academy in Columbus: “The management contract charges the charter school 15 percent of all revenue received, with a few exceptions. That is not where payments would end. A read of the management contract clarifies that ACCEL was in charge of, and would be compensated for all of the school’s day-to-day operations—from the curriculum to student records to all personnel services.”

The Overall Picture of Charter Schools in Ohio

The thread running through Burris’s Ohio story is the growing power and profiteering by Ron Packard’s ACCEL network: “In 2014, the online for-profit charter chain K12 Inc. announced a new yet-to-be-named company financed by Safanad Limited, a Dubai investment company.  Pansophic Learning was launched later that year as the Safanad/K12 joint venture. The name of its American-based charter school company is ACCEL Schools. The CEO of both Pansophic and ACCEL is Ron Packard, formerly of K12 Inc….. ACCEL’s primary strategy is to pluck schools from established for-profit chains that failed or are folding, including Mosaica, White Hat Management, and I CAN Schools.  With no shortage of failing charter schools to buy, ACCEL’s growth has been fast paced. It now manages 73 charter schools (brick and mortar or online) in Arizona, California, Colorado, Indiana, Michigan, Ohio and Washington, and it is attempting to open schools in West Virginia… ACCEL’s largest portfolio is in Ohio. Forty-six schools list ACCEL as their operator.  However, we also found an additional 17 schools run by a superintendent with an ACCEL email address, all but two under the Constellation Schools brand.  And in 2018, ACCEL bought out White Hat’s failing online charter school, OHDELA, resulting in a total of 64 schools in that state.”

Clearly, the Ohio Legislature has been unwilling, whether because of ideology or due to investments by lobbyists, to oversee the charter school sector to protect the children enrolled and the taxpayers from abuses by unscrupulous charter school operators and authorizers.

I encourage you to read all the way to the end of Burris’s critique to learn about one instance when people originally recruited by ACCEL—because they would be friendly to ACCEL— to form the board of directors of Buckeye Prep (now called Capital Collegiate Preparatory Academy) realized the school was paying more attention to profits than to the well being of its students. Board members woke up and led the board to hire Tisha Brady “to serve as a compliance officer to get a better understanding of the school’s day-to-day operations.”  In this one instance, the charter school board did its job: “Brady, a former lobbyist for School Choice Ohio and longtime supporter of charter schools” told Carol Burris: “This is simply a cash grab using disadvantaged students as ATMs to launder funds into the pockets of a private corporation.”  Subsequently, two of Capital Collegiate Preparatory Academy’s board members resigned—board president Leslie Eaves and board member, Rhonda Whitfield.

But the story doesn’t have a happy ending: “The school’s website now lists only four board members, still including Whitfield, who is gone—a violation of law that requires five board members.” In a new seventh grade added this year, “one teacher teaches all subjects on a rotating basis and out of certification. But, those seventh-graders, no matter how poorly prepared, increased the head count, which in turn increased ACCEL’s fees for both rent and management… And so, it will continue until the school’s charter is up in 2025.”

Burris concludes: “Right now, nearly half of all charter schools in Ohio are run by for-profits. Most of these charter schools are located in some of the poorest neighborhoods in the United States.”  And it turns out that the Ohio Department of Education awarded half of all the money granted to Ohio in a 2015 federal Charter Schools Program Grant to charter schools that were part of Ron Packard’s ACCEL network.

Bill Lager, David Brennan, and Ron Packard: Swindlers Stealing Tax Dollars from Ohio Public Schools

While the Ohio Department of Education and the Ohio Supreme Court have finally ended the career of William Lager, the founder of Ohio’s huge, notorious online Electronic Classroom of Tomorrow, Ohio’s legislature has never passed adequate laws to protect taxpayers and students from unscrupulous swindlers operating charter schools.  Besides Bill Lager, another notorious charter school czar has disappeared from the scene this year.  David Brennan, founder of White Hat Management, a huge and shady for-profit Education Management Organization (EMO), has sold off all of his Ohio schools.  But it seems sales of Brennan’s Ohio schools are expanding Ron Packard’s EMO—the for-profit Accel Schools. Packard founded and, until 2014, served as CEO of K12 Inc., the nation’s biggest operator of for-profit, online charter schools.

From the very beginning, Ohio’s biggest charter schools have been run by con men. They paid off  legislators to allow them to cheat the public at the expense of the public schools. This story traces all the way back to 1991, and it is helpful to be reminded of the history. David Brennan, father of Ohio school privatization, was first and foremost a business entrepreneur, reports the Akron Beacon Journal‘s Doug Livingston: “Brennan made millions buying and selling manufacturing companies in Akron.  In the 1990s, he promised to unleash the private market on what he demonized as failing government schools. His tactics included $1 million in political contributions to elected GOP officials… Then Gov. George Voinovich put Brennan in charge of crafting Ohio’s private voucher program, which would eventually bring Brennan’s private schools more state funding per pupil than was flowing to 85 percent of Ohio’s traditional public schools.”

But when Brennan realized that operating charter schools would be far more profitable—under what had become, through the lobbying maneuvers of Brennan and his friends, extremely lax oversight laws—Brennan immediately switched his empire’s mission and became a charter school operator. Livingston continues: “The Akron Beacon Journal reported that flipping the switch from private to charter school on just one White Hat operation in Akron would generate $285,000 more a year for a mere 75 students. The school, reconstituted to get around a state law that banned converting private schools to charter schools,… was called Hope University Campus.  It would be the first of dozens of K-8 schools bearing the Hope Academy moniker. Brennan’s charter schools, ranking among the lowest performers in the state, were plagued from the start with allegations of padded enrollment and skirting accountability. Amid the bad publicity, White Hat lobbyists pushed for exemptions… In 2010, fed up with not knowing how White Hat was spending 97 percent of the tax dollars sent to each academically failing school, 10 (of Brennan’s White Hat) school boards sued the operator.  White Hat fought them to keep ownership of all the desks, computers, and assets bought over the years with public money.”

Livingston explains that White Hat’s Hope Academy (K-8) schools and his Life Skills Academy dropout recovery high schools, among the worst-rated in the state, have been losing ground as charters have expanded across Ohio. Now Brennan has closed or sold off the last of White Hat Management Company’s Ohio charter schools: “By June of this year, White Hat’s once prolific presence in Ohio had shriveled to a single online school—Ohio Distance and Electronic Learning Academy (OHDELA)—and 10 ‘Life Skills’ centers, which deliver computer-based GED courses to academically faltering teens and young adults.”  Over the summer, the Life Skills Academies have either been sold to other operators or shut down.

Now that swindlers, Bill Lager and David Brennan, have left the Ohio charter school scene, one wishes Ohioans could be reassured that unscrupulous online schools and shady dropout recovery academies are gone for good.  But Ron Packard, a former banker, knows a lucrative opportunity when he sees one. The Plain Dealer‘s Patrick O’Donnell reports: “The once-mighty White Hat charter school empire continues being dismantled, with its longtime e-school—the Ohio Distance Learning Academy (OHDELA)—being turned over to the fast-growing Accel charter school network. The move puts Accel founder Ron Packard, the founder and former CEO of the giant national e-school company K12 Inc., back in the online education business after four years away… As White Hat’s presence shrinks, Packard’s is growing incredibly quickly. After resigning as K12 CEO in early 2014, Packard has been taking over operations of charter schools across Ohio, usually by negotiating to assume management of financially-struggling schools. He snagged several strong schools from the Mosaica network first, then more than a dozen low-performing White Hat schools. When Cleveland’s I Can charter network had financial trouble in early 2017, he took over those schools. And earlier this year, he added several more previously run by Cambridge Education Group, a company with White Hat ties.  Even before the OHDELA transfer, Packard and Accel were running 37 charter schools across Ohio with about 10,700– students…. OHDELA adds another 1,100 students.  Accel is also starting new schools this fall in Cincinnati, Dayton, and Lorain. That combined enrollment makes Accel bigger than all but 13 school districts in Ohio…”

In a follow-up report, O’Donnell explains that Packard claims to have learned from the problems of K12 Inc. online schools. Packard says he plans to require more in-person meetings between students at OHDELA to keep online students engaged, to reduce the kind of advertising that pushed enrollment growth at K12 over academic priorities, and to make a a greater effort to engage students who are not self-motivated.  However, as O’Donnell interviews Packard, it is clear that while Packard admits there were failings at K12 Inc., the corrections in his Accel network will be limited. Packard tells O’Donnell: “The overwhelming majority of kids were coming in way behind grade level… and they didn’t have support of households. The model needed to change to reflect that.” But O’Donnell continues, paraphrasing Packard: “Those students, he said, need far more help from the school. That’s why to have students meet with staff more often. It won’t be at the level of ‘blended’ schools, which have students take lessons in person a couple days a week, while working online other days. He envisions monthly visits or having students come to a school for tutoring and to take ongoing tests of their progress.”

As his for-profit Accel management company takes over the Ohio Distance and Electronic Learning Academy, I guess Packard expects to provide students with at least a bit more personal attention.

I hope the recent explosion of Ohio’s ECOT scandal will motivate Ohio’s legislators to enact more than just a bit of added oversight to try to reign in swindlers who continue to figure out ways to suck tax dollars out of state coffers and the budgets of Ohio’s more than 600 local public school districts.