Ohio’s Legislative Democrats Challenge ECOT’s Claims in Amicus Brief Filed with Ohio Supreme Court

At the end of last week, explains Jim Siegel of the Columbus Dispatch, all nine Democrats serving in the Ohio Senate along with 30 of the 33 House Democrats signed an amicus brief urging the Ohio Supreme Court to find for the state and against the notorious Electronic Classroom of Tomorrow (ECOT), the state’s biggest charter school. ECOT has been challenging the state all year to let it collect state per-pupil funding without documenting that students are actually attending school.

The Ohio Department of Education has been trying to claw back $60 million over-paid to ECOT for the 2015-16 school year and another $19 million for 2016-17.  ECOT has continued to claim that state law does not require the school to document that students are actually logged in for 920 hours each year—working with the curriculum the school provides—but merely that the school provides the curriculum to the students it claims are enrolled.

ECOT has challenged in court the state’s demand that the school document attendance records if it intends to collect payments from the state. ECOT’s appeal is currently being considered by the Ohio Supreme Court. Plunderbund summarizes the history of the case: “ECOT filed the lawsuit more than a year ago claiming it is not required to document how many hours its students (are) engaged in learning…  After losing in Franklin County Common Pleas Court and the 10th Circuit Court of Appeals, ECOT has appealed to the Supreme Court of Ohio.”

The amicus brief filed last week by legislative Democrats follows the filing of another amicus brief in late October. The Columbus Dispatch reported that Bill Batchelder, the now-retired Speaker of the Ohio House, and four other former Republican legislators filed their own amicus brief with the Ohio Supreme Court. They claimed that the Ohio Department of Education “is violating legislative intent by requiring ECOT to verify its enrollment with log-in duration.” If you are having trouble parsing that outrageous nonsense (which seems to mean that the legislators intended for ECOT to amass tax dollars for students the school cannot prove are enrolled full time), it may help if you remember that only months after retiring from a career in the legislature including serving as Ohio’s House Speaker, Bill Batchelder opened a lobbying firm, The Batchelder Company, which represented ECOT’s founder William Lager until July, 2017.

In the introduction to their amicus brief, Ohio’s legislative Democrats expose ECOT’s bizarre argument: “The issue… before the Court is whether the Ohio Revised Code Chapter 3314 allows the Ohio Department of Education (ODE) the ability to use durational evidence of student participation to determine funding for internet- or computer-based community schools (e-schools).  Revised Code section 3314.08 and its subsections plainly incorporate durational requirements as part of the review of student participation meant to determine the amount of funding an e-school is entitled to receive from the state.  It is incontrovertible that ODE has the right… to use a durational element in a review of e-school funding claims.  It is incontrovertible as well that the legislative history of chapter 3314… shows that the legislature routinely amended the code to make enforcement and oversight of e-schools more thorough…  Finally, the Court cannot find in favor of the Appellant.  To do so leaves an absurd hole in Ohio’s constitutional guarantee to teach its children in free, publicly funded schools.  A decision that finds for the Appellant creates a void in which to take and squander taxpayer dollars without allowing any government oversight for the stewardship of those dollars…  The Ohio Constitution demands the state educate its children.  It cannot be Ohio’s founders and successive caretakers’ hope that those children would never be brought to a classroom (electronic or otherwise) yet the school and its administrators would reap lavish financial rewards.”

Toward the end of their amicus brief, Ohio’s legislative Democrats declare: “The entire system of public school regulation is geared toward ensuring children receive an education.  The record in this case reflects that ECOT and other e-school amici failed in this obligation and are callous toward that failure.  The state should not have to withhold funding to guarantee those who purport to be educators take basic steps to teach children in their charge, but this case shows they must.  The state does not seek this level of regulation for its own sake or to target e-schools, but to avoid the tragic reality we are confronting in which thousands of students have not received education for which their alleged school was paid.”

The attorney of record on the legislative Democrats’ amicus brief is Joe Schiavoni, the former Senate minority leader and an announced candidate for governor. Schiavoni, who represents the Youngstown area, has twice introduced bills to regulate attendance reporting by ECOT and Ohio’s online charter schools. Describing his proposed legislation, which has never been brought to a vote, Schiavoni commented:  “We need to make sure that online schools are accurately reporting attendance and not collecting tax dollars for students who never log in to take classes. Online schools must be held accountable for lax attendance policies. Without strong oversight, these schools could be collecting millions of dollars while failing to educate Ohio’s school children.”

This blog has tracked the long ECOT scandal.

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Another Chapter in the Saga of Ohio’s Electronic Classroom of Tomorrow

The Columbus Dispatch reminds us where we are in the story of ECOT, Ohio’s online charter school, the Electronic Classroom of Tomorrow. Currently the Ohio Supreme Court is considering ECOT’s “lawsuit fighting the state’s requirement that the online charter school repay $60 million for unverified enrollment for the 2015-16 school year. The state says the school owes another $19 million for the same reason in 2016-17.”

In an editorial last Friday, the Dispatch describes what seems to be the unraveling of the scam William Lager has been running for years with the support of Ohio legislators to whom Lager has generously contributed: “Overall, it has been a trying year for ECOT.  What was for years a smoothly operating business plan—signing up students in droves and billing taxpayers for their education, regardless of whether the students actually logged in to get one—was interrupted by state officials demanding accountability for all that money. Instead of taking the school’s word on attendance, the Department of Education demanded to see ECOT log-in records.  That led to a finding that ECOT had overbilled taxpayers by 143 percent, and an order to repay $60 million for the 2015-16 school year.  That was just for starters; the department is auditing ECOT for other school years. In September, it said the school owes another $19 million in overpayments, for the 2016-17 school year.  As ECOT is laying off employees and slashing its budget to cope with the clawback, Yost (Dave Yost, Ohio’s state auditor) has said that a proportional share of the repayment should come from the for-profit companies, owned by ECOT founder Bill Lager, with which ECOT contracts for services.”

It appears that ECOT officials launched a new strategy last week: blame ECOT’s attendance officer, who had complained all along that the school was not providing the adequate computer software for him to do his job. The Dispatch reports that, as of last Friday, ECOT’s truancy administrator, Patrick Tingler, has resigned. Tingler had testified last year in a deposition that ECOT’s software left him unable to add up the total number of days students were absent without an excuse. He had complained that he had to compute such records manually. The Dispatch adds: “Tingler’s truancy software did track consecutive days students missed, but ECOT crafted a more-relaxed truancy rule for itself than the one called for in the Ohio Revised Code. Instead of missing five or seven consecutive days to be considered truant, ECOT used 30 days, Tingler testified. This truancy measure appears nowhere in state law… After students log in, Tingler testified, he didn’t track whether they participated in any classwork, which is at the heart of the state funding lawsuit.”

ECOT’s other recently exposed strategy has been to rally powerful friends and endorsers behind its lawsuit challenging the Ohio Department of Education’s effort to claw back overpayments to the school.  Steve Dyer of Innovation Ohio reports that five former Republican state legislators filed an amicus brief supporting ECOT’s lawsuit. Together the five “have received more than $50,000 in campaign contributions from Electronic Classroom of Tomorrow founder William Lager, and nearly $135,000 total from Lager and David Brennan—Ohio’s charter school Godfather.”

The Columbus Dispatch explains that William Batchelder is among the five: “William G. Batchelder is described in the brief as the former House speaker, and a former common pleas and appeals court judge. It does not mention that, until late July, his lobbying firm, The Batchelder Company, represented ECOT founder Bill Lager.”

Steve Dyer adds: “In fact, the lead legislator on the filing is William Batchelder—one of the longest serving state legislators in history, who was Brennan’s bag man on Ohio’s school voucher legislation in the mid-1990s. Batchelder left the legislature in 2014. Shortly after that, he fell into a new job—lobbying for Bill Lager. Makes sense. Lager had paid him $45,000 (not to mention the tens of thousands he paid to the Ohio House Republican Caucus during Batchelder’s time as Speaker of the House). Batchelder collected $67,000 from Brennan, and even more if you include Brennan’s wife, Ann.”

Ohio awaits a decision from the Ohio Supreme Court.  Will the court permit the Ohio Department of Education to claw back millions in overpayments from taxpayers to the Electronic Classroom of Tomorrow?  Or will the Court back ECOT’s claim that Ohio law was unfairly updated without enough warning when the state began demanding accurate log-in records to document student participation at the online school?  Steve Dyer reminds his readers that four of the seven justices on Ohio’s elected Supreme Court have received campaign contributions from ECOT’s William Lager.

This blog has covered the ECOT scandal extensively.

Ohio’s Failure to Oversee Online and Dropout Recovery Schools Is Even Bigger Than ECOT Scandal

ECOT, the Electronic Classroom of Tomorrow, is the symbol of a much bigger problem in Ohio and across a number of states: an out-of-control sector of cyber schools and so-called “dropout recovery schools” whose savvy operators and owners have learned how to skirt and manipulate state laws that merely assumed entrepreneurs would run schools for the purpose of benefiting their students instead of lining their own pockets.  That was an incredibly naive assumption.

In her new expose of EdisonLearning’s Capital High School in Columbus, Ohio, For-Profit Schools Get State Dollars for Dropouts Who Rarely Drop In, Heather Vogell demonstrates that Ohio’s problem is much bigger than ECOT, and explores the outrageous scandal across several states of dropout recovery schools sucking profits from the scarce dollars in state education budgets: “Such schools aggressively recruit as many students as possible, and sometimes count them even after they stop showing up, a practice that can generate hundreds of thousands of dollars in taxpayer-paid revenue for empty desks. Auditors have accused for-profit dropout recovery schools in Ohio, Illinois and Florida of improperly collecting public money for vanished students… So-called ‘dropout recovery’ schools are increasingly popular, with many setting up shop in poverty-stricken city neighborhoods. In Chicago this past year, about 8,000 students attended such schools. In Ohio in the 2014-2015 school year, more than 16,000 students did, including some who attended online-only programs.”

Vogell examines the Ohio dropout recovery schools being sponsored by EdisonLearning—Capital High School in Columbus and a chain of 8 EdisonLearning dropout recovery schools across the state, the Magic Johnson Bridgescape Academies: “For-profit school management companies like Capital’s parent, EdisonLearning, have rushed into this niche, taking advantage of the combination of public funding, an available population of students and lax oversight… For EdisonLearning, the move to dropout recovery schools signaled a remarkable downshift in ambition. When launching the Edison Project 25 years before, media executive Chris Whittle and former Yale University President Benno Schmidt held out privatization as a fix for urban schools’ ills…. At its height, Edison managed dozens of schools in cities across the country, including Philadelphia and Baltimore. Whittle and Schmidt left their administrative roles in December 2006. Money troubles and controversies over test scores, staffing and safety forced the company to scale back… By 2013, the Bridgescape program had expanded to 17 schools in six states.”  Eventually Magic Johnson severed his ties with the schools: “In the summer of 2016, EdisonLearning ended its partnership with Magic Johnson and removed his name from schools’ signs… EdisonLearning—which sold off a chunk of its business in 2013—posted a significant loss in the 2016 fiscal year and has closed Bridgscapes in Illinois, Ohio and Virginia. But it is still bullish on dropout education.”

Capital High School, the dropout recovery school featured by Vogell, occupies a storefront in Columbus, Ohio, and although its student attendance ought to be able to be documented more easily than at an online school like ECOT, confirming students’ attendance has been a huge problem for the state of Ohio which pays the tuition: “Last school year, Ohio’s cash-strapped education department paid Capital High $1.4 million in taxpayer dollars to teach students on the verge of dropping out. But on a Thursday in May, students’ workstations in the storefront charter school… resembled place settings for a dinner party where most guests never arrived. In one room, empty chairs faced 25 blank computer monitors. Just three students sat in a science lab down the hall, and nine more in an unlit classroom, including one youth who sprawled out, head down, sleeping.  Only three of the more than 170 students on Capital’s rolls attended class the required five hours that day, records obtained by ProPublica show. Almost two-thirds of the school’s students never showed up; others left early.  Nearly a third of the roster failed to attend class all week. Some stay away even longer.  ProPublica reviewed 38 days of Capital High’s records from late March to late May and found six students skipped 22 or more days with no excused absences… Though the school is largely funded on a per-student basis, the no-shows didn’t hurt the school’s revenue stream. Capital billed and received payment from the state for teaching the equivalent of 171 students full time in May.”

Vogell describes aggressive efforts to recruit students. Some states provide an incentive for high school counselors to recommend that students move to a dropout recovery school: the students no longer count against the public high schools’ graduation rate if the students drop out into an alternative “dropout recovery” school. In other cases recruiters from the for-profit dropout recovery schools take coffee and donuts to meetings with high school counselors from whom they seek referrals. Vogell describes one Midwestern city where the dropout recovery schools engaged church pastors to help with recruitment. Vogell interviewed students’ probation officers who complained that dropout recovery programs with little structure are not helpful to the students they monitor.

This blog has been tracking the scandal at Ohio’s Electronic Classroom of Tomorrow.  Now suddenly in a new development, ECOT will become a new chapter in the story Vogell exposes: Ohio has now initially approved ECOT’s changing its designation to a “dropout recovery school.”

To review: ECOT’s best known problem is that the state has accused it of theft of tax dollars for students the school claims but who are not regularly participating.  We’ll see if the Ohio Supreme Court will uphold a lower court’s demand that ECOT return enormous overpayments, money ECOT has already turned over to the two privately held, for-profit companies that provide curriculum and management services. ECOT’s founder, William Lager, owns both companies and has been collecting sizeable profits which he has shared with Ohio legislators as political campaign contributions. ECOT sued to prevent the state’s clawing back $60 million overpaid to ECOT during the 2015-16 school year, when ECOT charged the state for educating 15,300 students. The state has been able to document only 6,300 students in school at ECOT that school year. Now the state is demanding that ECOT repay $19 million for the 2016-2017 school year.  Although ECOT claimed 14,200 students last school year, the state can document only 11,600.

In the newest development, ECOT has now been initially approved by the Ohio Department of Education as a dropout recovery school.  For years ECOT has been earning an F rating from the state for its students’ test scores and deplorable graduation rate—an F rating which, under a 2015 law, now threatens the survival of its nonprofit sponsor, the Educational Service Center of Lake Erie West. In late September, the Ohio Department of Education agreed to accommodate ECOT’s request that it be declared a “dropout recovery school” instead of a regular online school.  The new designation will automatically change the school’s overall grade from F to C without any added responsibility for ECOT to better serve its students. Ohio, we learn, has lower expectations for the students at dropout recovery schools and will change the school’s overall score, even if the students’ academic performance and graduation rate remain deplorable. All ECOT has to do is prove that the majority of its students are between the ages of 16 and 21 and are in need of special services for students at-risk. The Plain Dealer‘s Patrick O’Donnell adds: “The Ohio Department of Education…. does not audit that claim and leaves it to schools and their oversight organizations known as ‘sponsors’ to make that determination.”

Ohio Senate Committee Will Finally Hold a Hearing on Joe Schiavoni’s Bill to Regulate ECOT

Ohio State Senator Joe Schiavoni ought to be a hero to public school teachers and parents—and to citizens who support responsible stewardship of tax dollars.  Except that thanks to the power of the Republican leadership in the Ohio legislature, few people are really aware of Schiavoni’s heroic effort to put a stop to Bill Lager’s massive scam—the Electronic Classroom of Tomorrow.

Schiavoni is a Democrat and his bill to regulate online charter schools has been pushed aside for over a year now.  As Schiavoni explained in testimony last February, “Senate Bill 39 is the updated version of Senate Bill 298 from the last General Assembly.”  In March of 2016, Schiavoni first introduced a version of this bill—designed to reign in Bill Lager’s giant scam. ECOT was (and still is) charging the state, which pays charter schools on a per pupil basis, for students who have enrolled at ECOT but are not regularly logging onto their computers to participate in the educational program.

Here is how Schiavoni described the bill (then Senate Bill 298) at that time: “We need to make sure that online schools are accurately reporting attendance and not collecting tax dollars for students who never log in to take classes. Online schools must be held accountable for lax attendance policies. Without strong oversight, these schools could be collecting millions of dollars while failing to educate Ohio’s school children.” Schiavoni’s bill required e-schools to keep accurate records of the number of hours student spend doing coursework. It required online schools to notify the Ohio Department of Education (ODE) if a student failed to log-in for ten consecutive days. It required that a qualified teacher check in with each student once a month to monitor active participation. In the last legislative session, the bill was never fully debated and never brought to the Senate floor for a vote.

Schiavoni re-introduced the bill in February, and this afternoon at 3:15,  Peggy Lehner, the chair of the Senate Education Committee, is finally holding a hearing on Schiavoni’s bill.  When he testified in February about the bill he was introducing, Schiavoni explained why it is needed: “Other than the requirement that e-schools provide no less than 920 hours per year of learning opportunities, there are no specific statewide standards related to the number of hours per day or week that e-school students must be engaged in learning.  In an environment where a teacher is not physically able to see students in a classroom, this lack of accountability is very concerning.”

Schiavoni believes Senate Bill 39 will address the outrageous problems at Ohio’s on-line charter schools: “Senate Bill 39 requires each e-school to keep an accurate record of how long each individual student is actively participating in learning in every 24-hour period.  This information must be reported to ODE on a monthly basis, and ODE would be required to make this report available on their website. Senate Bill 39 would also require a teacher who is licensed by the Ohio Department of Education to certify the accuracy of student participation logs… on a monthly basis.”

Senate Bill 39 has some new provisions that were not in the original SB 298. To protect local  school districts, Schiavoni has added “a provision specifying that when the Auditor issues a Finding for Recovery from an audit of a… (charter) school, that money is returned to the school district.”  Serious questions have been raised about the $60 million clawback the Ohio Department of Education is currently trying to institute against ECOT, because ECOT has been robbing not only the state, but also local school districts.  Because of the way Ohio school finance works, a significant amount of the money redirected to charter schools comes out of the budget of the school district where each student resides.

As the ECOT scam has dragged on and mushroomed, the need for improved oversight by the state has become increasingly apparent as the press has exposed how millions of tax dollars are being diverted not only to Bill Lager but also to Lager’s privately owned, for-profit companies that manage the school and provide its curriculum.  We have also learned that sponsoring agencies are collecting very significant fees without providing any real oversight.

Schiavoni describes provisions in Senate Bill 39 to address these concerns:

  • “In the event that a student’s academic performance declines, the student’s parent/guardian, teachers, and principal must evaluate the student’s continued enrollment in the school;
  • “Requires e-school sponsors to report a school’s failure to comply with online learning standards to ODE;
  • “Requires e-schools to report their student mobility rate on their report cards…
  • “Creates a bipartisan ‘E-school Funding Commission’ to study what the actual costs are to run an e-school.”

Schiavoni describes why passage of his bill is so important: “While this bill focuses on strengthening the oversight of attendance policies and the accurate accounting of tax dollars, it’s also about ensuring our children receive a quality education. Unfortunately, the evidence is growing that some online schools are failing too many of our children.”

In the meantime, the Ohio Supreme Court has agreed to hear ECOT’s case against the state. Also, Dave Yost, Ohio’s auditor has begun escrowing a portion of ECOT’s state funding for the 2017-2018 school year to ensure that, if the court finds against the school for over-reporting its enrollment and if the school should declare bankruptcy as a result, the state could recapture at least some of the money Lager has stolen.

Bill Lager has kept ECOT open and kept on collecting public funding, much of it for phantom students—by looking for and continuing to find loopholes in Ohio’s notoriously weak charter school regulations. For example, on Monday, the Ohio Department of Education granted ECOT initial approval to switch its designation and become a Dropout Recovery School. ECOT, which has been chronically awarded F ratings by the state for its students’ deplorable graduation rate and test scores, will have its F rating automatically turned into a C, without any change in its academic performance because the state will understand the school to be educating students with greater educational challenges.  Its new rating as a Dropout Recovery School will save the life of its sponsor, the Education Service Center of Lake Erie West, whose existence has been threatened due to ECOT’s deplorable record. This blog has covered the ECOT scandal here.

It is time for the legislature to begin seriously cracking down.  A good start would be for the Legislature to pass Joe Schiavoni’s sensible law to protect our children and our tax dollars by requiring that e-schools accurately report the number of students they enroll.

Ohio Auditor Moves to Recapture Profits from ECOT’s Contractors and Overpayment to Sponsor

For years in Ohio all sorts of people have been siphoning off profits from online charter schools—the giants like ECOT, smaller online schools, and private companies with which the schools contract for management and curriculum. There have also been overpayments to nonprofit charter school sponsors, the organizations that Ohio pays as a percentage of any school’s enrollment to authorize the opening of the school and subsequently to oversee its operations.  Perhaps it is more accurate to say that the state pays the sponsors to pretend to oversee charter schools while they pad their operating budgets with state money.

Now, suddenly, Dave Yost, Ohio’s state auditor, has stopped looking the other way. In a story this blog has been tracking, the state has now halted a 2003 practice of paying online charter schools a per-pupil fee merely for providing 920 hours of curriculum per year.  Beginning in 2015, the state has instead demanded that the schools prove students are actually actively engaging with the online curriculum for 920 hours per year.  In other words, the state has begun to demand accurate attendance reporting. The ensuing scandal has primarily involved the giant Electronic Classroom of Tomorrow, ECOT, which has been over-reporting enrollment by 60 percent.  The state is trying to claw back $60 million in overpayments to ECOT for the 2015-16 school year alone, and is gathering data to bill ECOT for over-reporting its enrollment during 2016-17 as well.  ECOT has responded by trying to block the claw-back in court but has lost in a series of decisions. A final decision is pending from the Ohio Supreme Court.

In the meantime, Dave Yost, Ohio’s state auditor, once an ECOT supporter, has cracked down in an effort to protect what Ohio’s major newspapers have now established is a huge theft of Ohio tax dollars. Patrick O’Donnell of the Plain Dealer recently clarified what have become the stakes involved: “With ECOT cutting staff and losing students as a result of the state’s ‘clawback’ of funding, worries are growing that the school would declare bankruptcy to avoid repaying the money.”

Last week, Yost demanded that not only a charter school—in this case ECOT—must pay back the tax dollars it has overcharged the state, but also the private management companies with which the charter school has contracted must pay back any dollars they have collected due to the charter school’s misrepresentation of its enrollment. And the sponsoring agency which authorized the school and supposedly oversees it on behalf of the state must return funds it earned from the school’s misrepresentation of its enrollment.

Even while Ohio awaits a decision from the Ohio Supreme Court in ECOT’s case, Yost and the Ohio Department of Education have begun deducting into an escrow account a percentage of ECOT’s state reimbursement for the 2017-18 school year as a way for the state to recapture what ECOT owes taxpayers.

Here is Jim Siegel of the Columbus Dispatch explaining Yost’s demand that for-profit charter management companies and nonprofit charter school sponsors must also begin returning overpayments back into state coffers: “If a charter school must repay the state for unjustified enrollment figures, state Auditor Dave Yost wants the sponsor and for-profit companies that oversee and run the school to share the burden. Charter school boards… need to recoup payments made to management companies, software developers and sponsors that are paid based on a percentage of school revenue, he said.”

Siegel quotes Yost: “I understand that this may produce significant difficulty for some… (charter) schools, and for their management companies and sponsors… But if a school was over-funded, it must not result in a windfall profit for a private company, while the school itself suffers with reduced funding.”  Yost warns schools that they are responsible for going after the dollars overpaid to their sponsors and contractors: “(Y)ou have an obligation to go and retrieve a portion of that revenue… This isn’t an option, in our view.  You are a public entity, a public school.  You owe this to taxpayers, the state and to children to retrieve those resources.”  He continues: “I’m sure the private companies are not voluntarily going to write a check for several million dollars and send it back.”

Siegel adds that William Lager’s privately held companies, IQ Innovations (which provides curriculum for ECOT) and Altair Management (which operates the school), have profited, just as ECOT’s nonprofit sponsor has also over-collected from ECOT: “The state Board of Education this year, following a department attendance audit and a ruling from a state hearing officer, ordered ECOT to repay $60 million to the state after the school was unable to verify roughly 60 percent of its enrollment for 2015-16.  Yost said that means ECOT should recoup $9.6 million from IQ, $2.4 million from Altair and about $900,000 from the Educational Service Center of Lake Erie West in Toledo, the school’s sponsor, which gets 1.5 percent of its revenue each year.”

Is there reason to fear that ECOT will declare bankruptcy to avoid paying back the tax dollars the state has overpaid?  Siegel reports that in late July, “ECOT”s board voted to slash spending by $56 million for the coming school year, including the layoff of 250 employees.”  Then last Friday, ECOT’s superintendent, Rick Teeters announced that he will resign next month to spend more time with his family.  Dave Yost worries that William Lager, the owner of the private, for-profit companies that run ECOT, will try to protect his profits by having ECOT declare bankruptcy.  In the Plain Dealer, Patrick O’Donnell reports, “Yost… questioned whether ECOT has the ability to declare bankruptcy.  He called it a public entity subject to different bankruptcy rules that individuals or companies and said it would need permission from the state tax commissioner to do so.” O’Donnell speculates as well that, “Yost’s stance may give other boards legal cover to demand re-payment from contractors, since they have now been ordered to do it.”

Overpayments by the state to ECOT for the school’s apparent gross inflation of its enrollment figures are much larger than for smaller online charters, but Jim Siegel reported on Saturday that, “(O)ther online charter schools also face repayments, and a few others have shut down. One school, TRECA Digital Academy, recently reached a tentative settlement to repay $5 million, to be deducted over five years… The Department of Education also reached a smaller settlement with the Massillon Digital Academy… Akron Digital Academy is awaiting a decision from the hearing officer. Appeals are ongoing for Buckeye Online School for Success, Findlay Digital Academy, Quaker Digital Academy and Reynoldsburg-based Virtual Community School, which was just taken over by the state.”  Three online schools have closed—Provost Academy (which paid back the state in full), Marion Digital Academy, and Southwest Licking Digital Academy, which still owes $140,500 to the state for inflated enrollment figures it submitted.

The state’s overpayment to the Educational Service Center of Lake Erie West in Toledo—ECOT’s nonprofit sponsor—is only a tiny piece of the ECOT scandal. But Ohio’s reliance on nonprofit organizations as charter school sponsors—agencies often located across the state from the schools they supposedly oversee—agencies that frequently lack any experience in education—agencies poorly regulated by the state—is an enormous problem. In ECOT’s case, one can only imagine the sort of lax oversight imposed by the Educational Service Center of Lake Erie West when one observes the massive theft of state dollars paid to ECOT for phantom students. Last week this blog covered other serious problems with Ohio’s nonprofit charter school sponsors.

No Shame: ECOT Continues to Cheat Ohio Taxpayers Even While Awaiting Final Court Decision

Two prominent and long-experienced national organizations, the NAACP and the National Education Association, have passed resolutions demanding a moratorium on the authorization of new charter schools until some kind of oversight can be put in place to protect students and the investment of tax dollars. Charter schools are being authorized under the laws of 43 states, with an outrageous lack of public oversight in some states.

Ohio and the Electronic Classroom of Tomorrow provide the very definition of the problem. ECOT, as the giant online school is known, awaits a final decision from the Ohio Supreme Court that would permit the state to claw back $60 million in overpayments from the taxpayers to the school for the 2015-16 school year alone. During that school year, ECOT claimed it was serving 15,322 full-time students, but the state has been able to verify only 6,800.

Thanks to Ohio’s major newspapers, the scandal continues to be exposed as each new chapter unfolds.

Here is how the Columbus Dispatch began its editorial on Sunday: “ECOT’s brazen plundering of the Ohio treasury continues to set a new bottom for shameless. The state’s largest online school, told to repay $60.4 million overbilled in a previous school year for students who were MIA, appears to be inflating current enrollment—overcharging the state to raise money to repay its debt. The fear is that Ohio taxpayers will never see a dime of what ECOT owes. The enterprise is employing the time-honored strategy of ‘extend and pretend’: Ignore state orders on how to properly count enrollment for reimbursement.  Appeal the Ohio Department of Education’s orders, upheld by a succession of Ohio courts, while continuing to claim that the state has no right to document that students actually are logging in and getting educated. Drag out the legal fight, a no brainer since the school is paying its legal bills with taxpayer dollars.  And before the Ohio Supreme Court rules, grab as much state cash as possible.”

In Cleveland, the Plain Dealer also editorialized on Sunday: “Ohio Auditor Dave Yost recently sent a letter to the Ohio Department of Education advising it to ‘impound a significant portion of any further funding’ to the Electronic Classroom of Tomorrow until the state can verify the online charter school’s student attendance numbers for the upcoming school year. There are good reasons for this: ECOT has not repaid Ohio the $60 million in reimbursements it owes for what the state determined was ECOT’s 59 percent overstatement of student attendance figures for the 2015-16 school year.  ECOT is arguing its student numbers were correct but, so far, the courts have sided with ODE.  ECOT’s appeal to the Ohio Supreme Court is pending… Yost is right. ECOT claimed 15,300 online students two years ago but could only provide evidence to verify 6,300, according to ODE.  Why take at face value its estimate of 14,000 students this coming academic year?”

On Sunday, the Dispatch also published an extraordinary investigation—by reporters Catherine Candisky and Jim Siegel—of ECOT’s history.  They remind us that besides donating huge political contributions that have endeared ECOT to Ohio’s legislators, William Lager, ECOT’s founder and the owner of the two privately held companies that provide the school’s curriculum and its operations, has featured those with political influence as the school’s annual commencement speakers including Ohio Auditor Dave Yost at three commencements, Governor John Kasich, and even Jeb Bush, a national leader promoting school privatization.

But Yost has now come to understand that Lager and ECOT are trying to cheat Ohio’s taxpayers.  On July 21, Patrick O’Donnell reported for the Plain Dealer: “The state needs to send less money to the Electronic Classroom of Tomorrow… state Auditor Dave Yost says, or it may never recover the $60 million the school already owes.”  In a letter to state education superintendent Paolo DeMaria, Yost asked the state to escrow part of the state’s funding for ECOT for the upcoming school year until ECOT’s enrollment figures can be verified. According to Yost’s request, the state has begun deducting $2.5 million each month from ongoing payments for 2017-18. “Instead of receiving a little over $8.1 million in state tax dollars toward opening the school again this fall, ECOT received just under $5.6 million earlier this month. But that 5.6 million may be too much, Yost said. ECOT is claiming 14,000 students again, Yost noted, so the per-student payments to the school are possibly too high…”  Yost explains: “It is virtually the same number of students ECOT claimed for the 2016-17 school year, and far in excess of the audited number your department found supported for the 2015-16 school year.”  “I am concerned that ECOT is overstating its FTE (attendance) for cash-flow purposes, and the state may not be able to claw back any funds that are improperly distributed to ECOT.”

Yesterday O’Donnell added that the Department of Education has decided to withhold 12 percent of ECOT’s funding for the upcoming school year until the state’s audit of active participation by ECOT’s students is complete: “These cuts would be added to the $2.5 million monthly deductions the state is already taking from the school’s funding to cover the school’s past attendance issues.”

From Candisky and Siegel’s investigation we also learn that ECOT was always envisioned primarily as a money-making scheme, not an experiment in education reform. The idea was not hatched by people with a background in pedagogy, school psychology or educational philosophy: “After making and losing his first fortune in the office supply business, William Lager hatched a plan for Ohio’s first online charter school on the back of napkins over countless cups of coffee at a West Side (Columbus) Waffle House. ‘He was flat busted broke, worse than we were. He would sit there all day long drawing on napkins,’  said Chandra Filichia, a former waitress at the Waffle House on Wilson Road who was tapped to help recruit Electronic Classroom of Tomorrow’s first class of students and worked 16 years for Lager… Lager, Filichia recalled, would photocopy $5 coffee cards—each good for 10 cups of coffee—to save money while working on his business plan with longtime friend and ECOT co-founder Kim Hardy.  The two of them attended state-run classes on how to start a charter school, where they met Coletta Musick.  The former principal brought an actual education background to the team.  Lager already had connections for obtaining computers and office equipment. David Brailsford, a Toledo ticket broker, provided the early financing… But once Lager inked… (the) deal, his financial woes didn’t last long.  ECOT—and his affiliated for-profit companies that provide instructional materials, services and marketing—have brought Lager a fortune.”

Here is what ECOT has amassed—all from tax dollars: “From 2001 to 2016, ECOT took in more than $1 billion from Ohio taxpayers, and of that total paid more than $170 million to Lager’s companies to run the day-to-day operations of the school and provide it with educational software.”

In the fifteen years from 2001-2016, Lager bought a $300,000 condo in downtown Columbus, a $433,500 vacation house on a lake, a $995,000 house in a Columbus suburb, and a $3.7 million house in Key West, Florida. He has also donated $2.1 million in political contributions to Ohio Republicans.

In 2015 the Ohio legislature strengthened the charter school law to prevent conflicts of interest and double dealing, but by that time, ECOT was well established.  In 2001, report Candisky and Siegel, “Lager and Hardy hand-picked the ECOT board that employed their company. In fact, the man who signed the school’s agreement with Lager’s Altair management, ECOT’s board chairman Donald Wihl, was a friend who owned the condo where Lager was staying.  Wihl’s daughter was employed as the ECOT board’s secretary.”  Once then-state auditor Jim Petro began investigating the school back in 2001, three board members resigned along with the director of educational services, and the director of academic affairs. In that same year, Lager’s partner Hardy also resigned.

Petro discovered that the state had, in 2001, paid ECOT $1.9 million during a two month period for students for whom the school could not document any hours of instruction: “An April 2002 audit said the school was overpaid $1.7 million in 2001 after ECOT ‘did not utilize an internal audit function to monitor the hours of educational opportunity. Petro also found the school had no procedures for withdrawing students and no policy on how enrollment would be counted, nor was information available on whether all students got appropriate computer equipment.”

Candisky and Siegel continue: “Petro, who later became a Lager ally and spoke at ECOT’s 2006 commencement, wrote to the Department of Education in March 2000 that… (charter) school boards are made up primarily of employees and board members from management companies and are not representative of the particular community.’… But the legislature wouldn’t take action to significantly limit conflicts of interest and provide stricter oversight of school operations and sponsors for 13 more years.  Meanwhile, two things grew: Ohio’s poor reputation among national education experts as the Wild West of charter schools, and political contributions from for-profit school operators, particularly Lager and David Brennan, founder of another charter school operation, White Hat Management.”

Once a charter school scam is well established—especially an operation where profits are involved and are being strategically invested in campaign contributions to the legislators who would have to do the regulating, it is virtually impossible to protect the taxpayers and the children. Ohio’s ECOT perfectly exemplifies why a national moratorium is needed on the authorization of new charter schools until oversight can be imposed.

Ohio’s Notorious E-Charters Evade Regulation: ECOT Saga Drags On and On and On

Ohio’s biggest charter school, the notorious e-school, the Electronic Classroom of Tomorrow (ECOT), held a big rally in Columbus early this week. Rick Teeters, ECOT’s superintendent, told all the school’s teachers and students to show up, even though the rally happened in the middle of the school day. Maybe everybody was expected to go home afterwards and study online until midnight.

ECOT’s founder, William Lager, made an emotional speech bragging that his school has provided more choices for those who have few. Lager didn’t mention, of course, the hundreds of millions of tax dollars the school has been receiving year after year from the state on a per-student basis. Neither did he say anything about the $60 million from last year alone that the Ohio Department of Education says ECOT fraudulently charged the state for students who did not really attend school at ECOT last year. ECOT is trying to avoid paying back the money.

In Ohio, pretty much everybody knows that ECOT is a huge scam, but because Ohio is an all-Republican state without any checks and balances at all, and because William Lager keeps on contributing to the campaign coffers of members of the legislature, no strong law has been passed to stop the ripoff.  And now, in the biennial budget bill the House passed on May 2, nobody will even claim the language that mysteriously appeared to undermine oversight of Ohio’s charter school sector.

Under enormous pressure from the press last year, the legislature did tighten the regulatory process to demand that the online academies must now provide documentation that students are at their computers doing 20 hours per week of work in order to be counted.  ECOT has continued to maintain that it has, as the law has specified for years, been providing 920 hours of curriculum for its students each year. But, says ECOT, the state never asked for attendance records in the past, and the state changed its demands suddenly and illegally.

ECOT has been in court trying to block the new regulations. However a Common Pleas Court rejected ECOT’s demand that the court block the state’s effort to claw back two-thirds of what ECOT was paid last year, when ECOT was able to document the participation of only 6,300 of the 15,300 students the school claimed were enrolled. After ECOT lost its case in Common Pleas Court, ECOT appealed the case.

Working assiduously to bog down the court proceedings, ECOT demanded the removal of appeals court Judge Gary Tyack because he made the mistake of telling the truth in a comment he made about ECOT.  Here’s what Tyack said: “The General Assembly cares more about what Mr. Lager (founder of ECOT) and David Brennan (founder of other large e-schools) think than about what I think, frankly.” “It’s hard to ignore the fact that between the two of them they’ve probably gotten a billion dollars worth of State funds that would have gone to public schools because of their clout. In Russia we call them oligarchs. Here, we don’t call them anything. We call them influential donors.”  Maureen O’Connor, the Chief Justice of the Ohio Supreme Court, refused this week to capitulate to ECOT’s demand that Judge Tyack be removed from the case. The case now moves forward; we must await the final decision of the Court of Appeals.

ECOT not only tried in court to block the state’s crackdown on e-school attendance reporting; it also filed an administrative appeal in the Ohio Department of Education itself. But this week ECOT lost that administrative appeal. On Wednesday, the Ohio Department of Education denied ECOT’s administrative appeal and demanded that that ECOT pay back $60 million in fees it overcharged the state last year. The decision of the Department of Education’s hearing officer is not final; the state school board  still needs to vote to seek recovery of the money. We’ll see how that goes; after all, the Ohio state board of education is dominated by a coalition of elected Republicans and members who have been appointed by Republican Governor John Kasich.

Then there are the mystery amendments that appeared in the fine print of the budget bill passed by the Ohio House on May 2.  Most of these last-minute amendments would weaken state oversight of the organizations that sponsor charter schools—sponsors who are paid by the state to provide oversight but who have no incentive to close the huge e-schools they supposedly oversee. The amendments are  pro-ECOT and anti-regulation.

Andrew Brenner, the chair of the House Education Committee, inserted a last minute amendment to change the way sponsors are rated. The state currently judges charter school sponsoring organizations by the quality of the schools they are supposed to oversee, but it weights the schools according to the number of students they serve. Here is the Akron Beacon Journal’s editorial board commenting on the change proposed by Andy Brenner to weight every school—no matter its size—equally in a sponsor’s evaluation: “For instance, ECOT has 15,000 students, or nearly one-half of those enrolled in the 59 schools sponsored by the Educational Service Center of Lake Erie West. Treat the academically challenged ECOT as one school, and it would rate as a tiny fraction of its sponsor’s portfolio.  The sponsor would receive a higher rating, assuming its other schools perform well enough… In the case of ECOT…. with those numbers in mind, the re-weighting, as proposed by Andy Brenner, diminishes the commitment to students, or what charter schools claim as their first purpose. ECOT would be better off. So would the sponsor.”

Nobody knows who added other language to the House budget to protect the organizations that sponsor the huge and notorious online charter schools. Some legislators are even blaming the Legislative Service Commission, the agency that crafts the language of bills, for adding the language that favors ECOT and its sponsor. The mysterious amendment to the House budget, explains Patrick O’Donnell of the Plain Dealer, “would prevent certain ESCs that take on online charter schools from losing oversight and income from the schools, regardless of their (the schools’) ratings in the future.”

Doug Livingston of the Akron Beacon Journal provides important background about the incentive the Ohio’s legislature has provided for  years encouraging the Education Service Centers to sponsor the giant online academies: “Sponsoring large e-schools is a money-maker for educational service centers….  For each student enrolled in one of their charter schools, the sponsor gets 3 percent of the state funding that follows the students from the local school district where he or she would otherwise attend. At e-schools with more than $100 million (every year) in state revenue, the sponsor fee can be worth millions.” Now the mysterious new budget amendment further protects the Education Service Centers—letting them off the hook when the schools, which they are being paid huge sums to oversee, fail to perform.

Even the pro-charter Thomas B. Fordham Institute wants better oversight of Ohio’s e-charters and wants the mystery amendment removed from the fine print of the state budget.  Livingston quotes Chad Aldis of the Fordham Institute explaining what is wrong with the mystery amendment: “The change would allow an educational service center that sponsors charter schools to bring on a statewide online charter school and maintain sponsorship of it even if the academic outcomes were poor… Essentially, the sponsor would have an exemption from the academic accountability portion of the state’s sponsor evaluation system.”

The ECOT saga drags on and on in Ohio, where it would seem money and state politics make charter school regulation impossible.  Here, summarizing the current operation of Ohio’s super-majority, one-party, Republican legislature, is Columbus Dispatch columnist Darrel Rowland: “They didn’t teach this in ‘How a Bill Becomes a Law.’ A mysterious amendment makes its way into a state budget bill. One by one, lawmakers, including the speaker of the House, express surprise that the three-paragraph provision was part of the measure they just approved, and all deny knowing how it got there. A Legislative Service Commission staffer eventually gets the blame.”

This blog has covered the long-running ECOT saga here.