Good News: U.S. Dept. of Ed. Strengthens Needed Regulation of Federal Charter Schools Program

Quietly on Friday afternoon before the July 4th holiday weekend, the U.S. Department of Education announced it has finalized rules to strengthen oversight of the federal Charter Schools Program (CSP). The new rules are just the sort of sensible regulation that ought to have been part of the program when it was established back in 1994.

For Education Week, Libby Stanford reports: “Incoming charter schools will have to gather community input and prove they aren’t managed by a for-profit company to receive federal funding under the Biden administration’s finalized Charter Schools Program rules published Friday. The U.S. Department of Education’s final notice on the new regulations is the latest development in the controversy surrounding charter school rules… The administration’s goal in issuing the new rules is to prevent private companies from using federal dollars to open charter schools and to curb premature closures.  Fifteen percent of the charter schools that receive funding from the program either never open or close before the three-year grant period is over, department officials told Education Week.”

In a Fact Sheet about its new rules, the Department declares that it will no longer award our federal tax dollars to supposedly nonprofit charter schools which are operated under sweeps contracts by huge for-profit charter management organizations (CMOs): “Given the significant risks to public funds that fall under the purview of for-profit charter school operators, the Department’s rulemaking is in alignment with federal statute that expressly prohibits for-profit organizations from applying for grants or subgrants under CSP.”

The Department also now requires that charter school authorizers applying for grants to start up new schools must explore and document the impact of the new school on the traditional public schools and the community. The Fact Sheet explains: “Supporting high-quality charter school options in the interest of students and families requires CSP applicants to demonstrate the need for the school and the benefits to the community—for example, increasing the number of high-quality seats available to students. It also means that school plans, including enrollment projections, inclusive practices and academic goals, are well-conceived and evidence-based.” The Department adds that new charter schools must “not be used to increase racial or socio-economic segregation and isolation.”

The Network for Public Education reports some of the details of the new regulations. Charter schools operated by for-profit CMOs need not apply. White flight charter schools will not qualify for Charter Schools Program (CSP) grants.  The new rules bar the use of CSP implementation funds until the school has not only a charter but has also acquired a building in which it will operate. Applicants for CSP grants must hold or participate in a public hearing on the proposed charter school’s expected impact. The new rules require added transparency: within 120 days, all schools with CSP funds, CMOs and states with charter school state grants must post on a website detailed information about all grantees, including peer reviews and management contracts.

Background

In March, the U.S. Department  of Education posted the proposed rules in the Federal Register and requested public comments. Supporters of the new rules and opponents of charter school regulation submitted over 5,000 unique comments including many readers of this blog who submitted comments supporting the proposed regulations. The charter school lobby, led by the National Alliance of Public Charter Schools, also mounted an enormous effort including a D.C. rally and TV ads to oppose stronger oversight of this federal grant program.

Some History and Context

Those of us who follow the news about charter schools know there is a need for better oversight of this education sector. The Network for Public Education tracks the myriad financial and educational charter school scandals reported in the local news across the states. Just in the month of June three of the most sensational and most expensive charter school scandals once again popped up:

• Oklahoma’s Epic Charter School Scandal — On June 23, The Oklahoman reported: “The co-founders of Epic Charter Schools have been arrested on charges of financial crimes… Ben Harris, David Chaney and the chief financial officer for their company, Josh Brock were…. booked into the Oklahoma County jail on a $250,000 bond. Harris, Chaney and Brock were arrested on charges of embezzlement of state funds, racketeering, obtaining money by false pretense, conspiracy to commit a felony, violations of the state computer crimes act, submitting false documents to the state and unlawful proceeds… The charges stem from a nine-year investigation into the defendants’ management of Epic Charter Schools, a public virtual charter school system. On top of establishing Epic, Harris… and Chaney… founded a private company that operated the school system and earned 10% of its yearly education funding.  Epic severed all ties with the co-founders, Brock and their business in May 2021.”
• California’s A3 Charter School Scandal — In early June, the San Diego Union Tribune reported California’s collection of additional restitution as part of the punishment for perpetrators of an enormous online charter school fraud: “An additional $18.8 million has been paid to San Diego County as restitution for the statewide A3 charter school scam in which the state was defrauded of hundreds of millions of school dollars…. Sean McManus of Australia, along with Jason Schrock of Long Beach, led a statewide charter school scheme from 2016 to 2019 in which they used a network of mostly online charter schools to defraud the state of approximately $400 million and used $50 million of that amount for personal use. They did so by falsely enrolling students and manipulating enrollment and attendance reporting across their schools to get more money per student than schools are supposed to, prosecutors said. In total, about $240 million of the $400 million has been recovered.”
• Ohio’s ECOT (Electronic Classroom of Tomorrow) Scandal — The Columbus Dispatch’s Laura Bischoff reported on Tuesday of last week that the state of Ohio is still owed $117 million by the operators of ECOT, which was shut down over four years ago for charging the state for students who were never enrolled: “The Electronic Classroom of Tomorrow—an online charter school that abruptly closed in January 2018—owes the state more than $117 million, a newly released state audit found.  Ohio Auditor Keith Faber on Tuesday said the school owes $106.6 million to the state Department of Education and another $10.6 million to the Attorney General’s office. Faber’s auditors found that ECOT wasn’t entitled to some of the state money it received in 2016 and 2017 and none of the cash it received in 2018.  William Lager founded ECOT in 2000 and built it into the largest online charter school in Ohio. Lager also operated Altair Learning Management Inc. and IQ Innovations LLC, which contracted with ECOT to provide support services.”  The two companies were the source of enormous profits collected by Bill Lager.

In June, we also had an opportunity to read an updated assessment of the years-long impact of the 2005 experiment which radically expanded charter schools in New Orleans following Hurricane Katrina. New Orleans educator, Michael Deshotels describes what happened during 2005 and 2006 and the condition of education in New Orleans today:

“In 2005, as Hurricane Katrina physically destroyed much of the Orleans public school system, the Louisiana legislature passed a law allowing the State Department of Education to take over approximately three-fourths of New Orleans public schools. According to the new state law, school takeover (only in New Orleans) became automatic for any school producing less than the state average score on state tests… The (Louisiana) Department of Education was authorized to turn such schools over to charter school management organizations in an agreement that removed many state requirements and standards in exchange for greatly improved academic results… The majority of charter management organizations came into the Orleans system starting with the 2006-07 school year.  State officials had fired almost 7,000 experienced teachers and staff as a way of cleaning house and allowing the new managers a fresh start, unhampered by previous teacher contracts.  Most charter groups began by hiring new—mostly younger teachers…. Most new teachers were provided by Teach for America. Also, many of the charter school managers had no education credentials.”

Deshotels updates the story, based on a new (2022) report from the Louisiana Pelican Policy Institute. “The recent study shows that taken as a whole, the New Orleans all charter system is still ranking in the bottom quartile of all public-school systems in the state. This is in a state that performs near the bottom of all states on national testing and college preparedness… In the key subjects of math and reading, Orleans performs at the 24th percentile compared to all other state school systems.  This is approximately the same as the Orleans school system performed before Katrina! … Did the increased funding allow the reformed Orleans school system to hire a better quality of teachers? The state auditor recently found that more than half of Orleans teachers are not certified as teachers. In addition, most of the teachers now employed in Orleans are Caucasian, while 90% of the students are African American.”

The New Federal Rules Won’t Entirely Clean Up Charter School Abuses.

After examining the new rules, the Network for Public Education’s Carol Burris concludes: “These new regulations are an essential first step in making sure that fewer tax dollars go to schools that never open, schools that quickly close, and for-profit operators. Unscrupulous individuals who used the program for their enrichment will find it more difficult to do so. State Entities that have pushed money out the door will now be forced to provide more oversight and supervision. And so they should. State Entities get 10 percent of every grant, representing millions of federal dollars, to use for such supervision.”

The new federal  regulations cannot themselves prevent many of the fraudulent schemes like the ones described in Oklahoma, California and Ohio.  Neither will the new regulations prevent state legislators from introducing wild experiments exemplified by the 2005 New Orleans state takeover and transformation to charter schools. Charter schools are established by law in 45 of the states and the District of Columbia, and they are regulated largely by state law. If the new regulations are well enforced, they will ensure that unscrupulous charter school operators can no longer qualify for federal grants under the Charter Schools Program.

The federal Charter Schools Program, begun in 1994, was envisioned by promoters who sold charter schools as an innovative alternative to traditional public schools operating in a bureaucratic straight jacket of regulations. Ironically the experiment has instead proven the urgent need for careful government oversight. The federal Charter Schools Program rules adopted last Friday will better protect our federal tax dollars and set an example of the kind of regulations state legislators should themselves begin to undertake. Charter school operators like those described in the examples here have flagrantly demonstrated the urgent need for better stewardship of tax dollars flowing to charter schools.

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Eliminating Federal Charter Schools Program Would Curb Academic and Financial Abuses by Charter Operators

Charter schools are a form of private contracting, but across the 45 states which have authorized charter schools, the state laws that created these schools are different. Some states let school districts themselves authorize charter schools; other states override local authorization through state authority or permit other outside authorizers.  And the amount of and quality of oversight varies. The original goal was to stimulate innovation by reducing what charter proponents alleged was the bureaucratic regulatory straitjacket that, they claimed, constrains traditional public schools.

This blog will take Memorial Day off.  Look for a new post on Wednesday, June 2.

Charter schools originated in the early 1990s, and now, nearly three decades later as the charter school sector has matured, we discover what might have been predicted in an education sector paid for with public tax dollars but at the same time operated privately with little oversight. The Network for Public Education has set up a web page to track the hundreds of scandals reported year after year across the United States in local newspapers.

But there are also the stories of larger and more shocking scandals, often involving mismanagement by the chains of charter schools, some of them operated by charter management organizations (CMOs).  Here are four examples reported just this spring.  Three of the scandals are financial; one involves the violation of students’ rights in a CMO that made its reputation with zero-tolerance discipline.

• In early March, the Columbus Dispatch reported that the Electronic Classroom of Tomorrow (ECOT), a giant, online charter school put out of business in the winter of 2018 after years of charging the state per-pupil fees for, it turns out, students who were not participating in its online program, was still in court trying to block the state of Ohio from recovering $80 million, only a portion of the money the enterprise had ripped off over nearly two decades of operation: “ECOT appealed… (a lower court) decision to the Ohio Supreme Court, and justices heard oral arguments from both sides on Tuesday (March 2)….  It could take several months for the court to issue an opinion.” ECOT was technically a nonprofit, but its owner, William Lager, owned the two for-profit companies that operated the school and provided its curriculum.  Lager is still trying to protect his profits.
• Also in March, a prominent New York City chain of charter schools was fined $2.4 million in a federal district court case, this time for violating students’ rights: “Charter school network Success Academy, which touts its commitment to children ‘from all backgrounds,’ has been ordered to pay over $2.4 million on a Judgment in a case brought by families of five young Black students with learning and other disabilities who sued after the children were pushed out of a Success Academy school in Brooklyn.  Success Academy’s efforts to oust the children even included the creation of a ‘Got to Go’ list, as reported by the New York Times in October 2015, which singled out the students they wanted to push out, including the five child plaintiffs.” New York City’s Success Academy Charter Schools have established a reputation for a regimented school culture. For years, however, parents have complained that instead of helping students thrive, the school has established a pattern—for children who don’t fit the school’s culture or for children whose test scores will likely bring down the school’s overall average—of severely punishing the students or repeatedly suspending them until their parents pull them out of the school.
• In late April, CNBC’s Dan Mangan reported that Seth Andrew, who founded the Democracy Prep charter schools in New York City’s Harlem and later worked as an education adviser in the Obama administration, was arrested for trying to steal $218,005 from the charter network: “Seth Andrew, who served as an education advisor in the Obama White House, was arrested Tuesday morning on charges of scheming to steal $218,005 from a public charter school network that he founded, federal authorities said. Andrew, 42, was busted in New York City, where he and his wife, CBS News anchor Lana Zak, have a residence valued at more than $2 million. The founder of Democracy Prep Public Schools is accused of using more than half of the allegedly stolen money from that network to maintain a bank account minimum that gave him a more favorable interest rate for a mortgage on his and Zak’s Manhattan residence.  Zak was not charged in the case. Prosecutors said Andrew, in 2019—more than two years after severing ties with Democracy Prep—looted  a series of escrow accounts he had previously set up for individual schools within Democracy Prep’s network, and then used their funds to open a business account in the name of one of the schools at a bank.”  A Washington Post‘s report adds: “Andrew’s career straddled the education field and government. In 2013, he joined the (Arne Duncan) Education Department. He later became a senior adviser in the Office of Educational Technology, a position at the (Obama) White House.”
• Finally, just this week, we can read about the latest scandal at the huge IDEA charter school chain which, Diane Ravitch reported a year ago, had 49,500 students in 91 schools across Texas and in Louisiana. The co-founder and CEO at that time, Tom Torkelson resigned when the media learned he had purchased a private jet with IDEA dollars for the use of its executives and their families and after it was reported that he had used $400,000 annually of IDEA’s money (collected from public tax dollars) on luxury sky boxes for sporting events for the schools’ employees. Now a year later, the Houston Chronicle reports that the woman who replaced Torkelson as CEO, JoAnn Gama, and IDEA’s Chief Operating Officer, Irma Munoz, “have been fired after a forensic review found ‘substantial evidence’ that top leaders at the state’s largest charter network misused money and staff for personal gain… The firings followed an anonymous tip received after the departures last year of two other high-ranking IDEA leaders, former CEO Tom Torkelson and former CFO Wyatt Truseheit… IDEA board members chose Gama, who co-founded IDEA in the late 1990s with Torkelson, as the organization’s next CEO. Around the same time, IDEA’s board members promised to make several financial and governance reforms, such as banning private air travel, curbing executive benefits, and ending business deals with leaders and their family members.”

It is mind boggling to try to imagine reining in a publicly funded but privately operated education sector whose oversight depends on the actions of 45 different state legislatures, whose members are are the targets of well-paid lobbyists hired by charter school advocates and school operators. One possible source of public leverage, however, is the federal Charter Schools Program, which the Network for Public Education’s Asleep at the Wheel report shows has awarded $4 billion in federal tax dollars to start or expand charter schools across the states and the District of Columbia. NPE reports that this federal program dating back to 1994 has provided some funding for 40 percent of all the charter schools across the United States. The Clinton, Bush, Obama, and Trump administrations have treated this program as a kind of venture capital fund created and administered by the Department’s Office of Innovation and Improvement to stimulate social entrepreneurship by individuals or big nonprofits or huge for-profits as a substitute for public operation of public schools.  NPE’s report documents the U.S. Department of Education’s chronic failure to oversee this program—created and sustained by people who believe in innovation but who lack commitment to careful public stewardship.

Just a year ago, for example, the IDEA charter school network received a large federal Charter Schools Program grant in a special category of grants for large multi-school operators. Commenting on the release of the names of 2020 Charter Schools Program grants, Chalkbeat‘s Matt Barnum reported: “The U.S. Department of Education awarded more than $200 million in grants to help 13 charter school networks from across the country expand. The largest grant, $72 million over five years, went to IDEA charter network, which has been rapidly growing throughout Texas and into other states and has already netted over $200 million in federal awards.” Less than a month after the 2020 Charter Schools Program awards were announced, Tom Torkelson resigned as CEO, and a year later his replacement and her CFO have been fired—all for financial mismanagement.

President Joe Biden and Education Secretary Miguel Cardona should work with Congress to eliminate the federal Charter Schools Program.

Now an Ohio Election Issue: Who Allowed ECOT to Scam Ohio Taxpayers for 17 Years?

The Electronic Classroom of Tomorrow (ECOT) has been shut down, but fortunately in this election season there may be more accountability than anybody who has been watching this long, long story unfold might have expected.  In a new investigation, Columbus Dispatch reporter Jim Siegel revisits the ECOT saga and then looks at the role of four Ohio politicians, all Republicans, who are running for state office again in November: Jon Husted, the Republican candidate for lieutenant governor; Keith Faber, the Republican candidate for state auditor; Mike DeWine, the Republican candidate for governor; and Dave Yost, the Republican candidate for attorney general.  Siegel begins: “About $200 million was paid to two private companies owned by school founder Bill Lager, who also made $2.5 million in political donations—92 percent of it to Republicans.”

Ohio Secretary of State, Jon Husted, is currently the Republican nominee for lieutenant governor. According to Siegel, he has been around Ohio politics through much of ECOT’s history, though he has done little to impose meaningful regulation. Siegel reminds us that, in 2000, soon after Bill Lager set up ECOT—a scheme he devised to overcome personal bankruptcy—several of the school’s appointed board members quit with complaints that the school was poorly managed and its agreement with Lager’s for-profit Altair Management was problematic. Kim Hardy, who partnered with Lager to found ECOT, disassociated himself from the school and urged members of the Ohio Legislature to examine problems with legislative oversight.  Jon Husted was elected to the Ohio House in 2001.  In 2002, then-State Auditor Jim Petro, discovered that the state had overpaid ECOT $1.7 million for students whose attendance could not be verified.  Husted helped rewrite Ohio’s charter school law in 2002, but, explains Siegel: “(The law) made a number of changes but did little to impact ECOT’s operation, despite that the Ohio Department of Education had requested improved regulation of online charter schools.” Husted also opposed proposed legislation to require teachers at online schools to meet in person with their students. In 2005, the year he became Speaker of the Ohio House, Husted was instrumental in closing the Legislative Office of Education Oversight: “The move came not long after its study of online school spending.”  Siegel adds that like many other Ohio politicians, Husted spoke at an ECOT graduation. It has become commonplace for Ohio politicians to shed any ECOT contributions by donating the money to charity.  Husted received $36,000 in contributions over the years from ECOT, which his campaign committee has not donated to other causes.

Keith Faber, currently a state representative and the Republican candidate for state auditor, was the Ohio Senate President for two terms—from January of 2013 through December of 2016.  Faber has served in the legislature, according to Siegel, for 15 years. Siegel quotes Faber from an interview with the Dispatch: “I was a big supporter of ECOT and I was a big supporter of school choice… The details of how ECOT was run were not something that came before us in the legislature… until we found out there were questions to be asked.”  It is interesting how long it took Faber to notice that questions were being asked.  Siegel explains: “The Dispatch reported in 2006 that ECOT was claiming 100 percent attendance despite expelling 1,946 students for chronic truancy.” Siegel also reminds readers that in 2015, Democratic Senator Joe Schiavoni sponsored a bill outlining a procedure by which ECOT and other online charter schools would be required carefully to track and report computer log-ins by their students.  However, Senate President Keith Faber killed the bill by assigning it to the Finance Committee which never scheduled a hearing, instead of assigning it to the Education Committee, where a more sympathetic chair might have moved the bill forward for consideration.  Siegel quotes Faber bragging in 2018 that once the legislature did learn about problems at ECOT—several years after everybody else realized there were problems—a 2016 charter school law passed during his tenure as senate president became instrumental: “Thanks to the strong charter school reforms put in place while I was Senate president, and the diligent work of Auditor Yost and his staff, ECOT was caught and is out of business.” Faber took $36,500 in ECOT political contributions, reports Siegel, but Faber has donated the money to charity.

Mike DeWine, currently Ohio Attorney General, and the Republican candidate for governor, has made his efforts to crack down on ECOT a central part of his campaign to be Ohio’s next governor. Siegel quotes a DeWine spokesperson telling a West Virginia newspaper that, because DeWine hired the special counsel to represent the state against ECOT’s lawsuit trying to block the state from demanding log-in data, “Mike DeWine is the only elected official who has made real progress in this case.” Siegel, however, reminds readers: “To be clear, as attorney general, DeWine is required to provide representation for the Department of Education.”  Siegel does give Mike DeWine credit for hiring a skilled litigator for this position.  Now that DeWine is actively running for governor and now that ECOT is in bankruptcy, Attorney General DeWine is taking credit for suing Bill Lager and his companies to try to recover as much as possible of the over $60 million the state calculates ECOT still owes in tax dollars overpaid by the state to the school for students who were not actively in school. Siegel reports that many who know the issues believe that as Attorney General, DeWine might have filed his lawsuits years earlier.  DeWine has donated to charity $12,533 in political contributions he received from Bill Lager.

Dave Yost, currently Ohio State Auditor and the Republican candidate for attorney general, has, in the past year-and-a-half, very actively pursued efforts to stop Bill Lager’s theft of Ohio tax dollars. Siegel reports that Yost issued a cease-and-desist letter to stop ECOT from using tax dollars for television ads attacking the Ohio Department of Education; issued a finding for recovery when Yost learned that Lager had used tax dollars to pay his daughter’s media production company to create the ads; released a full audit that accused the online school of filing padded attendance figures to the Department of Education in order to inflate the state’s per-pupil payments to the school; and referred ECOT’s faulty attendance reporting to the U.S attorney’s office and the Franklin County prosecutor for possible criminal charges. However, Siegel adds: “But Yost also audited ECOT’s financial records each year since taking office in 2011 and gave the school awards for clean financial records, most recently in January 2016.” Siegel explains further: “In 2014, Yost’s office investigated ECOT after the school’s director of social services alleged that school officials were cooking the attendance books, removing students before state testing cycles and forging signatures to bolster enrollment.  Yost did not conduct a formal audit, but instead did an ‘agreed upon procedures engagement,’ where his office and ECOT officials agreed on how to limit the scope of the probe.”  Siegel reports that Yost spoke at ECOT commencement ceremonies in 2013, 2014, and 2015 and that he accepted campaign contributions of $29,000, which has has now donated to charity.

The headline on Jim Siegel’s story is, “Which Side is Right in Political Battle Over ECOT Blame?”  Siegel doesn’t draw any definitive conclusion at the end of his in depth report. He leaves it up to the reader to examine the history and the facts.

In his Sunday column on August 26, however, the retired editorial page director of the Cleveland Plain Dealer, Brent Larkin draws what ought to be the inevitable conclusion: “Over a 17-year period, state officials reached into your pockets, removed $1 billion, and allowed much of it to be poured down a rat hole formerly known as the Electronic Classroom of Tomorrow. Consider it another way.  While state officials were underfunding local school districts, they were sending upwards of $100 million a year to a charter school that will be forever remembered as an epic failure. As a result, mothers and fathers across Ohio had to raise their own property taxes to provide children they love with an adequate education. Nothing about what happened is forgivable. Nevertheless, as of this writing, here’s the ECOT report card:  Number of people sent to prison: Zero.  Number charged with a crime: Zero.  If a price is ever to be paid for the biggest scandal in Ohio history, it will happen November 6, when voters elect an entirely new lineup of state officeholders.”

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.

Electronic Classroom of Tomorrow (ECOT) Reaches the End of the Line

This post is an obituary, but it will not celebrate the life of the deceased.  Ohio’s Electronic Classroom of Tomorrow (ECOT) finally died yesterday morning when it exhausted its final appeal—this time in a 4-2 decision by the Ohio Supreme Court.

The Plain Dealer‘s Patrick O’Donnell describes the decision: “The ECOT online charter school has lost its appeal to the Ohio Supreme Court and its main chance at avoiding having to pay back $80 million it received for students it couldn’t prove had participated enough in their online classes.  With a 4-2 vote, the court backed the state school board and Ohio Department of Education’s decision to require e-schools to show student participation in classes to justify state funding, not just student enrollment. The ruling reinforces findings that the Electronic Classroom of Tomorrow (ECOT) was overpaid $60 million one year and $20 the next and leaves the now-closed school—and potentially ECOT founder William Lager—still on the hook for the overpayments.”

The school has not been providing services for any students since it was shut down by its sponsor, the Educational Service Center of Lake Erie West, on January 18th. Its assets were all sold off at auction during May and June. But William Lager, its founder and the man who profited grandly from the companies he owned that provided all of ECOT’s services, said he would resurrect the school if the Ohio Supreme Court ruled in his favor. Fortunately yesterday, four of the justices ruled to uphold the state’s effort to recoup $60 million, which the state has not yet been able to recover.

There is a lesson to be learned from ECOT’s survival for nearly two decades—from 2001-2018:  In Ohio, it is virtually impossible to regulate charter schools to protect their students and the public’s investment of tax dollars. Money speaks in a state where profits are to be made even from not-for-profit charter schools—because the nonprofit schools can hire for-profit companies owned by school officials. Then the people making all the money off the charters can invest their profits right back into campaign contributions to the legislators and gubernatorial candidates and elected state supreme court justices who then neglect to impose oversight. In these conditions, it is virtually impossible to protect the public.

The ECOT lesson also involves noticing today’s absence of checks and balances in Ohio’s government. Ohio is a super-SUPER-majority Republican state. The Ohio Senate and House are controlled by two-thirds Republican majorities; Governor John Kasich is a Republican; and the elected Ohio Supreme Court is all-Republican.

The problem is perfectly clear in yesterday’s 4-2 decision of the Ohio Supreme Court. During oral arguments in February, when ECOT’s attorney argued that Ohio law requires online charter schools to document a student’s enrollment in a school but the law does not require the school to document the student’s active participation, Chief Justice Maureen O’Connor rose to the occasion.  Noticing something was wrong with the logic, she wondered aloud, “How is that not absurd?” Yesterday, O’Connor and three other justices upheld the state’s right to crack down on faulty attendance reporting by the online school.

But two of the Court’s justices decided against the state and for ECOT. One of the dissenters is Terrence O’Donnell, who had been reported to have a conflict of interest due to political contributions from ECOT. The Toledo Blade‘s Mark Reiter explained in February, just before oral arguments in the case: “Two groups are seeking the removal of Ohio Supreme Court Justice Terrence O’Donnell from hearing a case involving the Electronic Classroom of Tomorrow because of political contributions he received from the founder of the defunct charter school. Common Cause Ohio and Progress Ohio filed a complaint with the Office of Disciplinary Counsel to investigate Justice O’Donnell’s relationship with ECOT’s founder William Lager and his ability to remain impartial. The complaint calls into question Mr. Lager’s campaign donation of $3,450 in 2012 to Justice O’Donnell and the speech he gave for the online charter school’s commencement in June, 2013.”

Sure enough, the dissent parrots the argument of ECOT’s attorney. The Columbus Dispatch‘s Catherine Candisky and Jim Siegel report: “The dissenting O’Donnell and Kennedy wrote that no law ties online-school funding to student participation… ECOT attorneys (had) argued that the state illegally changed the rules on how to count students in the middle of a school year, and that state law did not require students to participate in class work in order to be counted for funding purposes.”

The school was finally shut down in January when the Ohio Department of Education documented $80 million the state had paid ECOT for students ECOT claimed were enrolled, but who were not participating for the required 20 hours per week (or 920 hours per year) in the online school’s program and curriculum. The state legislature began to strengthen charter school oversight in 2015, and the $80 million overpayment the state has been trying to claw back is for only the 2015-16 and 2016-17 school years.

In this 2018 election season, when current Attorney General Mike DeWine is running for governor and when current State Auditor Dave Yost is running for attorney general, there have been attempts to make it appear as though entrenched Republicans weren’t looking the other way for all these years since 2001.  Attorney General Mike DeWine has suddenly found a legal precedent to recover profits from ECOT founder William Lager’s privately held companies.

On July 27, the Plain Dealer‘s Patrick O’Donnell reported: “The school closed early this year with little money remaining, but about $60 million not recovered. Today’s filing expands DeWine’s… argument that ECOT profits for Lager and the two companies are forfeit because Lager, as an ECOT official, could not have the school hire companies he also owns. That’s a conflict of interest, DeWine says, and legally ‘corrupt.’  Combined, IQ Innovations and Altair Learning Management did about $200 million in business with the now-closed school over multiple years.”  O’Donnell adds: “ECOT founder William Lager’s multiple homes are in the crosshairs of the state, as it tries to recover $60 million in state aid overpayments the school still owes. Among them, a Key West vacation home Lager purchased for $3.7 million in 2014 and a waterside home on Seneca Lake he bought for $433,500.”

It will be interesting to see if DeWine’s recent filings against Lager are only election-year hype, or whether—after the November election—the state will continue seriously pursuing recovery of money stolen by ECOT.  Remember that Lager operated his scam for 17 years, and the state is merely trying to recover overpayments for the 2015-16 and the 2016-17 school years.

There is a second and more encouraging lesson from the ECOT scandal, however. Week after week, month after month, Ohio’s major newspapers have shamed the legislature and the Ohio Department of Education and have relentlessly demanded that someone hold William Lager and his e-school accountable. Those responsible for the demise of ECOT include the Cleveland Plain Dealer‘s Patrick O’Donnell, the Columbus Dispatch‘s Jim Siegel, Catherine Candisky, Randy Ludlow, and Darrel Rowland—and reporters at the state’s other newspapers. Finally we owe thanks to former Plain Dealer editorial page director, Brent Larkin, now a Sunday columnist who has penned a series of the most scathing columns I’ve ever read—month after month and year after year.

Most recently in early June, Larkin complained: “Legislators in Ohio have long stood accused of serving not their constituents, but the people who fund their campaigns. But in the last eight years, House Republicans seem to have reached new lows in their ethical depravity… In April, House Speaker Cliff Rosenberger resigned in the wake of revelations he may be the target of an FBI probe… including ties involving the insidious payday lending industry. Before that, the House was ruled by Bill Batchelder, who spent four years protecting some of the most unprincipled bottom-feeders ever to prowl Statehouse corridors. Then, lo and behold, some of those who received favorable treatment, including the now-shuttered Electronic Classroom of Tomorrow online charter school, became clients of the Batchelder lobbying firm… ECOT was once the nation’s largest online charter school. And arguably its worst… From 2001 to 2016, ECOT raked in more than $1 billion in taxpayer money.  In return, ECOT founder Bill Lager and his flunkies contributed more than $2 million to campaigns of Ohio politicians, a huge majority of that going to Republicans. That money seemed to buy protection from a legislature that required only token policing of online charters.”

This blog has tracked Ohio’s ECOT scandal here.

Ohio’s ECOT Mess—Like a Sink Full of Dirty Dishes

Exactly five months ago today, on February 13, 2018, the Ohio Supreme Court heard the final legal appeal by the Electronic Classroom of Tomorrow (ECOT) trying to keep itself in business.

• You may remember that ECOT, perhaps the nation’s largest online charter school—at least according to what we now know were its inflated attendance numbers—had already been shut down (on January 18, 2018) by its sponsor, the Education Service Center of Lake Erie West, and the Ohio Department of Education because it hadn’t enough money to pay its teachers in upcoming months along with what it owed the state.
• And you may remember that the state has been trying to recapture money ECOT had collected in public tax dollars—$80 million overpaid to ECOT for only the two most recent school years after the state strengthened its oversight procedures in 2015— despite that everyone knows ECOT has been cheating the state since its founding in 2001.
• And you may remember that William Lager, ECOT’s founder, has been milking profits out of the nonprofit school via his own two for-profit companies—IQ Innovations that provided the curriculum—and Altair Management that ran the operations.

Here is how the Ohio Supreme Court hearing—five months ago today—concluded, according to the Columbus Dispatch‘s Jim Siegel:  “As ECOT attorney Marion Little finished his arguments for why, under the law, the online school should get full funding for students even if they only log in once a month and do no work, Chief Justice Maureen O’Connor interjected. ‘How is that not absurd?’”

Now, you would think that by now the Ohio Supreme Court could have arrived at a decision on ECOT’s final appeal to stay in business—a case in which lower courts had found against ECOT at every level.  But as citizens of Ohio, we await ECOT’s death without any kind of closure even though we all know that the school has already been shut down—totally. The school’s assets have been sold off in a widely publicized auction and it no longer provides services for students.  The Supreme Court decision matters, because ECOT’s officials hope—if the Supreme Court finds for ECOT—the school wouldn’t be required to repay as many tax dollars and because the same officials say they hope to resurrect the school.

In just the past month, as we await the high court’s decision, and the state remains mired in the ECOT scandal: here are some things we’ve been learning.

For the Associated Press, Kantele Franko reports that 2,300 of ECOT’s supposed students are apparently unaccounted for.  Nobody knows whether they have dropped out or left the state or perhaps re-enrolled someplace else.  Franko explains that a thousand of the students were likely 18 years of age or older, but that 1,300 were school-age youngsters who ought to be considered truant if they are not re-enrolled.  Franko quotes Peggy Lehner, chair of the Ohio Senate Education Committee: “I think this just illustrates the whole problem that we’ve had with ECOT… You not only can’t tell how long the students signed on, you can’t even tell for sure if they even exist, so I am not surprised that there are students that they can’t track.”  So far, however, the Ohio Legislature hasn’t passed any new laws to better regulate attendance at Ohio’s e-schools.

***

The Ohio Legislature has taken steps, however, to protect schools where ECOT’s former students are known to have enrolled—giving them safe harbor from stringent oversight because ECOT’s former students were known to be so far behind. The Plain Dealer‘s Patrick O’Donnell reports: “Leaders of both houses said it wouldn’t be fair to punish schools that absorbed the 12,000 students left without a school after budget problems forced ECOT, once Ohio’s largest charter school, to close mid year. The primary beneficiary of ECOT’s closure and of this new law is Ohio Virtual Academy, a for-profit online school that took in 4,000 ECOT students mid-year. That boosted its enrollment more than 40 percent, along with its income and potential profit.  With 12,000 students, the school is now Ohio’s online giant, replacing the mammoth ECOT.”  Ohio Virtual Academy is the state’s affiliate of the notorious K12, Inc., a national, for-profit, online-charter empire.  The legislation to protect schools serving students abandoned when ECOT closed was added quietly as an amendment to another bill just before the Legislature adjourned for summer break, and was opposed by several prominent Democrats. O’Donnell quotes Toledo Representative Teresa Fedor, the ranking Democrat on the House Education Committee: “Children move in and out of schools because of choice every day.  It’s outrageous that Ohio taxpayers have to foot more profits for e-schools and then give them safe harbor.”

***

Now the ECOT scandal is creating political trouble for the Ohio State Attorney General Mike DeWine, who has suddenly filed in court to recover money from ECOT’s founder, William Lager under Ohio’s Corrupt Practices Act.  The Dispatch‘s Jim Siegel explains: “ECOT founder Bill Lager could be forced to personally pay back millions of dollars to the state, which plans to go after him for some or all of the $200 million in taxpayer money paid to his for-profit companies. Lager, who went from broke businessman to multimillionaire after opening the state’s largest online charter school, could face claims of breach of fiduciary duty, conflicts of interest in public contracts, and civil claims under Ohio’s Corrupt Practices Act.”

In other words, suddenly the Attorney General has noticed that Lager, who founded and served as an agent for a publicly funded online charter school, had a conflict of interest as he steered contracts to his own for-profit businesses. The Plain Dealer‘s Patrick O’Donnell explains: “Lager, as a legal agent of ECOT, has a fiduciary duty to the school, DeWine and his staff say, which was violated by contracting with companies he owns for key services.”

What everybody wonders is why DeWine, who has been Ohio Attorney General since 2011, only decided to go after ECOT now in the summer of 2018—as he, Ohio’s 2018 Republican candidate for governor, actively campaigns. DeWine claims to have waited until another case set a precedent for cracking down on such conflicts of interest involving a charter school—this time a smaller charter school in Cincinnati. Now, says Mike DeWine, he can be assured that as the State Attorney General he has standing to crack down on charter school fraud.

Clearly, the ECOT scandal has become a hot potato for Republican candidates seeking state office in the November 2018 election.  Democrats across the state, reminding the public of William Lager’s huge political investments in Republican campaigns over the years, are also reminding voters that key Republicans including Mike DeWine—currently attorney general and Ohio’s Republican gubernatorial candidate in November, and Dave Yost—currently state auditor and Ohio’s Republican candidate for attorney general in November, have been ignoring for years Lager’s compromised position as the founder and agent of nonprofit ECOT who is also making huge profits by steering business to his own for-profit contractors.  And, as Patrick O’Donnell explains, Democrats are finding clever ways to use years of sordid Republican support for Lager to undermine DeWine’s bid for Governor.  When ECOT’s assets were auctioned online, the liquidator offered a costume worn by Eddy the Eagle, ECOT’s mascot—a giant Big Bird sort of character sporting an ECOT t-shirt. A still-mysterious purchaser acquired the costume for $153 plus taxes and fees.  Now Eddy the Eagle has been appearing at political rallies—still wearing his ECOT t-shirt, but now carrying a sign that reads, “Ask Me about Mike DeWine.”

***

The Akron Beacon-Journal, The Toledo Blade, and the Columbus Dispatch have editorialized against ECOT and Lager this week, noting that while Attorney General Mike DeWine’s court action may seem timed politically to distract voters from the years when Republicans did nothing to crack down on ECOT, it remains a good thing DeWine is taking action, however belatedly. The Dispatch is clearest in defining the importance of DeWine’s recent action. Ohio’s ECOT scandal symbolizes a much larger problem that remains unaddressed by the Ohio legislature:

“Lager might have been among the most brazen, but he’s not the only charter school founder to abuse the process to enrich his companies and himself.  While all Ohio charter schools are by law nonprofit, many, like ECOT, contract with for-profit companies to operate them, and in many cases the for-profit companies are controlled by the founders of the schools. Ohio lawmakers have failed to change charter school law to explicitly ban these clear conflicts of interest. Having a court rule on them would be a welcome push in the right direction.”

Despite ECOT’s Death, Ohio’s Unscrupulous Charter Schools Gobble Up State and Local Tax Dollars

Despite the death last January of the notorious Electronic Classroom of Tomorrow, Ohio’s charter schools continue to suck money out of their host school districts, and, at the same time, many fail to educate the students for whom they are responsible.

The giant Electronic Classroom of Tomorrow (ECOT) was finally shut down after the state tried to collect $80 million the Department of Education calculated ECOT had overcharged taxpayers for the past two school years alone.  ECOT, which had been billing taxpayers (on a per-pupil basis) for thousands of phantom students the school had enrolled but who were not logging on to use the school’s curriculum, couldn’t pay the bill when the state demanded that the school return the money.  ECOT descended into bankruptcy.

Because of the way Ohio funds charter schools, not only the state but also the local school district loses money when a student leaves for a charter school. In Ohio the money follows the child to the charter right out of the general fund of the school district in which the child resides.  Many districts lose more money to charters than they receive in state aid.  As the Columbus Dispatch‘s Jim Siegel reports: “Ohio does not directly fund charter schools, instead subtracting the money from individual districts based on where a charter student lives. Traditional public school officials and advocates have complained for years that the system also diverts local tax revenue to charter schools along with state funding. Siegel quotes Columbus, Ohio school board member Dominic Paretti, who says ECOT gobbled up enough funds to have used up several local school property tax levies: “If you add up all that local share of dollars that has flowed to ECOT from Columbus schools’ taxpayers, it would erase the need for us to possibly ever have to go to those levies.”

The Electronic Classroom of Tomorrow remains in the news because it will take years to wind up its affairs. Also Ohio waits for a final decision by the Ohio Supreme Court on the matter of ECOT’s final legal appeal to stay in business. In the meantime, Innovation Ohio has now calculated the total amount ECOT sucked out of  local school districts’ funds between 2012 and 2018.  During the six year period, for example, Columbus lost $62,897,188 to ECOT; Cleveland lost $39,405,981; and Dayton lost $20,200,830. Over the six year period, ECOT drained a total of $590,954,999 from Ohio’s school districts.

Many people push back with the argument that the money should follow the child; after all, the school district no longer has to pay expenses for that student. In a new report published by In the Public Interest, however, political economist Gordon Lafer dissects the stranded costs the child’s public school district must continue to cover: “To the casual observer, it may not be obvious why charter schools should create any net costs at all for their home districts. To grasp why they do, it is necessary to understand the structural differences between the challenge of operating a single school—or even a local chain of schools—and that of a district-wide system operating tens or hundreds of schools and charged with the legal responsibility to serve all students in the community.  When a new charter school opens, it typically fills its classrooms by drawing students away from existing schools in the district.” “If, for instance, a given school loses five percent of its student body—and that loss is spread across multiple grade levels, the school may be unable to lay off even a single teacher… Plus, the costs of maintaining school buildings cannot be reduced…. Unless the enrollment falloff is so steep as to force school closures, the expense of heating and cooling schools, running cafeterias, maintaining digital and wireless technologies, and paving parking lots—all of this is unchanged by modest declines in enrollment. In addition, both individual schools and school districts bear significant administrative responsibilities that cannot be cut in response to falling enrollment. These include planning bus routes and operating transportation systems; developing and auditing budgets; managing teacher training and employee benefits; applying for grants and certifying compliance with federal and state regulations; and the everyday work of principals, librarians and guidance counselors.”

The Ohio State Board of Education, which has been increasingly proactive, voted last Tuesday to toughen the rules that regulate another of the state’s notorious charter school sectors: the Dropout Recovery Charter Schools—schools which have been held to far more lax academic standards than traditional public schools or other charter schools because they are said to serve students in trouble.

The Plain Dealer‘s Patrick O’Donnell reports: “The state school board on Tuesday passed higher standards for… the nearly 90 dropout intervention charter schools statewide, as Ohio continues refining how to measure schools that help the most struggling and at-risk students earn diplomas. The tougher rules—covering graduation rates and which schools qualify for the easier dropout school report cards—continue Ohio’s gradual crackdown on charter schools that have skated by for years despite poor results.”  Until last week, the state required Dropout Recovery Charters to graduate 8 percent of their students in 4 years; as of last week, the State Board will now require 25 percent to graduate in 4 years, or the school will be held accountable.

To qualify as a dropout recovery school, the old rules said that a school must enroll at least 50 percent of its students who are far behind their peers and in danger of dropping out. Last week the State Board changed the rules to demand that Dropout Recovery Charters will need to prove (in 2019-2020) that 65 percent of their students are in real academic danger and need special services. In 2020-2021 that requirement will increase to 75 percent of the school’s students.  In other words, these schools won’t be able to pad their graduation rates and average test scores with students who don’t fit their mission as schools for “dropout recovery.”

Schools that fail to comply with the new standards will be in danger of closure, and their sponsors’ ratings will also be at risk.  Is there an urgent need for such reforms?  O’Donnell explains: “Invictus High School of Cleveland barely graduates 12 percent of its students in four years.” And yet there have been no penalties, and public funding (combined state and local dollars) have flowed freely to this deplorable school until now.

In what has become a series of scathing columns, retired editorial page director for the Plain Dealer, Brent Larkin describes the legislative corruption that has fed the growth of a poorly regulated charter school sector in an all-Red state without any kind of checks and balances: “Legislators in Ohio have long stood accused of serving not their constituents, but the people who fund their campaigns. But in the last eight years, House Republicans seem to have reached new lows in their ethical depravity… In April, House Speaker Cliff Rosenberger resigned in the wake of revelations he may be the target of an FBI probe… including ties involving the insidious payday lending industry. Before that, the House was ruled by Bill Batchelder, who spent four years protecting some of the most unprincipled bottom-feeders ever to prowl Statehouse corridors. Then, lo and behold, some of those who received favorable treatment, including the now-shuttered Electronic Classroom of Tomorrow online charter school, became clients of the Batchelder lobbying firm… ECOT was once the nation’s largest online charter school.  And arguably its worst… From 2001 to 2016, ECOT raked in more than $1 billion in taxpayer money.  In return, ECOT founder Bill Lager and his flunkies contributed more than $2 million to campaigns of Ohio politicians, a huge majority of that going to Republicans.  That money seemed to buy protection from a legislature that required only token policing of online charters.”

What’s clear in Ohio is that cleaning up this mess will require a long time and some very significant political change.

News Continues to Seep Out About How ECOT Cheated Ohio Taxpayers

Presumably now that yesterday’s primary election has occurred, Ohio State Auditor Dave Yost will release his long-awaited audit of the now-defunct, mega-online-charter school, the Electronic Classroom of Tomorrow (ECOT).  In yesterday’s primary election, Yost ran unopposed for the Republican nomination for Attorney General, and Mike DeWine, the current Attorney General, became the Republican nominee for Governor. Some time will pass before the November general election—time perhaps for voters to forget about what they learn in the audit about the way Ohio’s trifecta (House, Senate, Governor) Republican supermajority has handled the outrageous ECOT scandal.

Here are some of the revelations about ECOT that have recently seeped out.

We learned on Monday that, when ECOT was caught using a quarter of a million tax dollars to pay for television ads attacking the Ohio Department of Education for trying to crack down on ECOT for grossly inflating its attendance figures, ECOT quickly had one of its for-profit contractors pay the bill. Of course, ECOT’s only source of revenue—and the only source of revenue for the privately held for-profit corporations that managed ECOT and the communications company that handled its public relations—was the tax money paid to the school from the state as part of the school’s per-pupil tuition.

The attack ads represented an illegal use of tax dollars. As the Columbus Dispatch‘s Jim Siegel reports, “Although charter schools can legally run ads in an effort to recruit students, no public school—charter or traditional—is allowed to spend taxpayer money on political–type ads….”  You will remember that ECOT launched the television advertising campaign after the state began trying to claw back $60 million the state calculated it had overpaid ECOT in the 2015-16 school year because the online school had over-reported its enrollment by 60 percent. Here is how Siegel characterizes the television ads : “ECOT took to the airwaves, launching a string of television ads attacking the Department of Education, urging it to keep ECOT open and accusing it of wanting to end school choice and not caring about ECOT students.”

Siegel describes the transaction: “Using private companies owned by Electronic Classroom of Tomorrow school founder Bill Lager, plus a media-production company run by his daughter, ECOT tried to hide the source of payment for nearly $250,000 worth of TV attack ads aimed at the Ohio Department of Education.  That is the conclusion reached by the office of state Auditor Dave Yost, who, in a draft finding for recovery obtained by The Dispatch, lays out details of a plan designed to avoid the appearance that ECOT illegally used taxpayer money to pay for political ads.  As a result, Yost is ordering a pair of Lager’s ECOT-affiliated for-profit companies, Altair Learning Management and IQ Innovations, along with Third Wave Communications, where Lager’s daughter Jessica Harris is an owner, to repay ECOT a total of nearly $250,000 for illegally spending public money.”

ECOT was shut down by its sponsor, the Educational Service Center of Lake Erie West, in January, and a receiver is using the school’s assets to repay ECOT’S creditors including the state, which has not yet been able to recapture the tens of millions of tax dollars overpaid to ECOT for the 2015-16 and 2016-17 school years alone.

We learned this week that an auction has been scheduled for Friday.  Among the items scheduled to be auctioned off were ECOT’s administrative computers, although the Dispatch reported late yesterday that the Columbus City attorney is trying to block the sale of computers, in case they may contain evidence needed in a future trial.  Earlier in the week, State Auditor Dave Yost sent investigators to copy data from the computers to be kept potentially as evidence if criminal charges are ultimately filed against the school and William Lager, who owns Altair Management and IQ Innovations, the for-profit operators of the school.  The Plain Dealer‘s Jackie Borchardt reported:  “A Franklin County judge last week ordered Ohio Auditor Dave Yost to issue a subpoena for the information. A Yost spokesman confirmed Monday that the unit that deals with cyber technology and fraud was onsite ‘mirroring’ data from computers and information ahead of the sale.”

Last week we learned that ECOT paid hush money as severance bonuses to several ECOT employees if they would sign a non-disclosure agreement promising not to compromise ECOT by sharing information that might be used to prove that the school was intentionally fraudulent in its over-reporting of student enrollment.  Ohio’s Plunderbund reported: “Stormy Daniels isn’t the only one who has been offered hush money.  Some past employees of ECOT were offered some, too…. News that several past employees were offered public money in exchange for agreeing not to disparage the Electronic Classroom of Tomorrow (ECOT) follows an Associated Press story that quoted a whistleblower saying the Department of Education was informed last August that ECOT manipulated software to garner unearned money from the state… The whistleblower turned down two weeks of severance pay by refusing to sign the agreement—a decision that freed him to tell the public about ECOT’s attendance padding.”

WCMH-TV reporter Jason Aubry adds: “According to Sandy Theis, a member of Ohio’s Charter School Accountability Project, six individuals have confirmed with her they were provided non-disclosure agreements… to sign when they parted ways with the charter school.  At least two of the six individuals signed the NDA as part of their severance package where they were provided some money as part of a layoff.”

The Toledo Blade recently editorialized about the ECOT scandal: “The Electronic Classroom of Tomorrow, an online charter school now shuttered, is becoming a millstone around Republican necks this election year. And rightly so. The online school, chartered for nearly the last two decades in Lucas County but based in Franklin County, was forced into bankruptcy when state officials, after dragging their feet for years, went after ECOT’s exaggerated attendance claims… It sits in the lap of Republicans who accepted large donations from ECOT’s founder, William Lager, and then looked the other way for years as ECOT’s founder and chief vendor became rich with the state’s per-pupil funds… From the start, anyone could have known that an online charter school would not require the same level of per-pupil reimbursement that a regular bricks-and-mortar school would need.  And yet, ECOT received that money, and Ohio’s lawmakers went along with this baloney… The state of Ohio failed miserably…  and the children of Ohio are the victims.”

Ohio’s Electronic Classroom of Tomorrow Has Its Day in Court; Chief Justice Calls ECOT’s Claim Absurd

After a lengthy legal case in which Ohio’s biggest charter school, the Electronic Classroom of Tomorrow (ECOT) has challenged the Ohio Department of Education’s attempt to crack down on what appears to be ECOT’s outrageous over-reporting of student attendance, ECOT had its final day in court. The Ohio Supreme Court heard ECOT’s appeal yesterday morning.

For about an hour the attorneys for ECOT and for the Ohio Department of Education presented their arguments, and the justices peppered them with questions.  ECOT’s attorney, Marion Little argued that Ohio law requires only that online e-schools document students’ formal enrollment and provide 920 hours of curriculum annually. Whether or not students actually participate in the school’s online education is, according to Little, not covered by Ohio law as a condition for the state’s per pupil funding of the school. Chief Justice Maureen O’Connor expressed skepticism.

Here is the Plain Dealer‘s Patrick O’Donnell on the argument made by the attorney for the Ohio Department of Education: “Department lawyer Douglas Cole repeatedly blasted ECOT’s position that it should be paid for every student enrolled at the school, regardless of how long they spend working on their online classes. ‘The department says that’s an absurd result and the court should be leery about reading that intent (into the law),’ Cole said.”

The Columbus Dispatch‘s Jim Siegel describes the final interchange between ECOT’s attorney and Chief Justice O’Connor:  “As ECOT attorney Marion Little finished his arguments for why, under the law, the online school should get full funding for students even if they only log in once a month and do no work, Chief Justice Maureen O’Connor interjected. ‘How is that not absurd?’ she asked.”

Verification of e-school attendance has become a serious issue in Ohio, particularly for ECOT—Ohio’s largest charter school, which has been collecting tens of millions of tax dollars every year in per-pupil reimbursements. The Plain Dealer‘s Patrick O’Donnell explained in a background piece in Sunday’s Plain Dealer: “ECOT is the biggest charter school in Ohio—bigger than all but 13 school districts in the state—and was once the largest online school in the nation. ECOT received more than $100 million in state tax dollars each year until the recent funding dispute, while drawing students and funding from 95 percent of the school districts in Ohio.  Those include more than 800 from Cleveland, more than 200 from Akron and about 120 from districts like Parma and Elyria.”

In the 2015-16 school year when the state instituted a requirement for more rigorous documentation that students were actually participating in the school’s electronic program, there was a gaping disparity between the number of students ECOT claimed were enrolled and the number of students whose active participation the state could verify.  The Columbus Dispatch‘s Siegel reminds us that, “The department found ECOT was unable to verify about 60 percent of its enrollment for the 2015-16 school year, and more than 18 percent of its enrollment for the 2016-17 year.”

Here are the exact numbers, according to the Plain Dealer’s O’Donnell: “Under the new requirements, ECOT could document class participation of only 6,300 of its 15,300 students for the 2015-16 school year—a 59% gap—leading the state school board to demand that ECOT repay $60 million.  Then again last September, the state found that for the 2016-17 school year, ECOT can properly document about 11,700 of the 14,200 students it claims.”  Based on the disparity in enrollment figures, the state school board last week voted to recover $19.2 million for the 2016-17 school year. For these two school years the state is now trying to recover a total of $80 million.

The Ohio Supreme Court’s decision on ECOT’s appeal is vitally important to ECOT’s founder William Lager and supporters of the school.  The Dispatch‘s  Siegel reminds us: “Electronic Classroom of Tomorrow’s attorneys were literally fighting for the school’s life in front of the Ohio Supreme Court… The state’s largest charter school shut its doors three weeks ago when its sponsor, the Educational Service Center of Lake Erie West, suspended operations because the school was set to run out of money in March… It appears the only way those doors reopen next year is through a favorable Ohio Supreme Court ruling that says the department illegally imposed a retroactive rule change that led to the ECOT owing the state about $80 million for unverified enrollment… The Department of Education in 2016 beefed up its oversight and started requiring online schools to show through log-in durations and offline documentation that students were actually participating in minimum hours of ‘educational opportunities.'”

In an article written on Monday, prior to ECOT’s hearing at the Ohio Supreme Court, the Dispatch‘s Catherine Candisky and Jim Siegel described the history of the case: “(T)he two-year fight between ECOT and the Department of Education has been unusually ugly.  Using television ads (which the state auditor is investigating for possible illegal use of state funds) and media spokesman Neil Clark, a grizzled Statehouse lobbyist, ECOT harshly attacked the department, its leadership, and more recently through an affiliated blog, Gov. John Kasich… Clark accused the department of ‘trying to eliminate school choice in Ohio through illegal actions,’ and he also has accused the courts of playing politics. Publicly, the Department of Education did not swing back much until a few weeks ago, when, in the wake of ECOT’s closure, a spokeswoman said, ‘The department has no confidence that ECOT intends to follow the law… We’re disappointed that ECOT and its for-profit vendors, IQ Innovations and Altair Learning Management, continue to prioritize their monetary gain over the best interests of 12,000 students.’ Since 2000, these companies, run by ECOT founder Bill Lager, have collected about $200 million in state funding.”

A huge issue prior to yesterday’s Supreme Court hearing was whether justices on the Ohio Supreme Court with a potential conflict of interest in the case ought to recuse themselves.  Ohio’s justices are elected and, therefore, depend on political contributions. Justice Terrence O’Donnell, for example, has been closely tied to ECOT and William Lager, ECOT’s founder and the owner of the two for-profit companies that provide ECOT’s curriculum and management. Here is the Plain Dealer‘s editorial, published yesterday to coincide with the Supreme Court’s hearing on the ECOT case: “In 2012, the last time O’Donnell ran for re-election, his campaign received $3,450 from Lager, as well as another $4,450 from employees of Lager’s Altair Management. O’Donnell then agreed after receiving a personal call from Lager, to speak at the 2013 ECOT graduation.”

When the Plain Dealer‘s O’Donnell described the Court proceedings yesterday morning, he confirmed that Justice Terrence O’Donnell’s questioning helped ECOT’s attorney Marion Little by leading Little to lay out ECOT’s justification for its theory of counting student attendance: “Justice Terrence O’Donnell had a different approach in his questions for Little and Cole. One sequence of questions allowed Little to affirm key points of the school’s argument that charter schools were always paid on the number of  students (who enroll without considering their participation) until the state changed its method in 2016.”

I encourage you to watch the archived footage of the February 13, Ohio Supreme Court hearing on ECOT’s case. Having watched the hearing myself, I’ll guess that the decision of the Ohio Supreme Court will fall on the side of Chief Justice Maureen O’Connor’s point that ECOT’s argument is absurd. I am assuming the court majority will decide not to to protect William Lager and his outrageous profits based on charging Ohio’s taxpayers tens of millions of dollars for students who have not really been actively engaging with ECOT’s curriculum despite that the students may have formally enrolled and received a laptop computer.

ECOT’s Sponsor Asks Judge to Appoint Receiver for the School, But ECOT Presents Plan to Keep Going

Well… today is the day the Educational Service Center of Lake Erie West has said it will terminate its sponsorship and end the operation of Ohio’s giant, notorious online charter school scam, the Electronic Classroom of Tomorrow.

Last night the Columbus Dispatch reported that ECOT held an emergency board meeting yesterday, after which the school announced it had made a “final offer” to the Ohio Department of Education, that would include an agreement that William Lager, ECOT’s founder, would step down from Altair Learning, the private company he owns that manages ECOT. The plan would also, according to the Dispatch, “allow the state to continue recouping $80 million in overpayments of state aid,” and would allow the school to remain open through graduation this spring. Brittny Pierson, ECOT’s superintendent announced: “While we would have liked to remain open indefinitely, it’s clear the department will not accept a payback plan that would allow for that. Thus, we are left fighting to remain open until the end of the year to allow our students the opportunity to finish their school year….”

A final decision about the school’s future will perhaps be decided late this afternoon at a board meeting of the Educational Service Center of Lake Erie West, ECOT’s sponsor.

A Plain Dealer report added further detail about the school’s proposal:  if the Ohio Department of Education accepts the school’s offer, William Lager will no longer have any operational control of Altair Management, and no further fees will be paid to Altair Management. Neil Clark, ECOT’s lobbyist and spokesperson is quoted: “In negotiations with the Department, it became clear that they wanted concessions from Bill Lager personally… So we gave them what they wanted in order to stay open a few more months and not close our doors on our students suddenly.”

ECOT is one of the nation’s largest online schools, and a school with a terrible academic record along with the financial scam that has dominated its operation. Yesterday an Associated Press wire story described the possible closure of ECOT is a tragedy: “Many of the roughly 12,000 students turned to the Electronic Classroom of Tomorrow because of illnesses, disabilities, bullying or other struggles that made traditional school environments challenging or impossible.  The uncertainty over the school’s future amid a dispute with the state has added adversity as students, parents and teachers try to make backup plans halfway through the school year… The state of Ohio says ECOT didn’t sufficiently document student participation, but ECOT says officials wrongly changed criteria to adjust funding.”

But before you worry too much about the potential closure of the school, consider a contrasting point of view in this in-depth May 2016 report from Motoko Rich in the NY Times:  “(M)ore students drop out of the Electronic Classroom or fail to finish high school within four years than at any other school in the country… For every 100 students who graduate on time, 80 do not… When students enroll in the Electronic Classroom or in other online charters, a proportion of the state money allotted for each pupil is redirected from traditional school districts to the cyberschools. At the Electronic Classroom, which Mr. Lager founded in 2000, the money has been used to help enrich for-profit companies he leads. Those companies provide school services, including instructional materials and public relations.”  Rich quoted Ohio State Senator Peggy Lehner, a Republican who chairs the Senate Education Committee: “When you take on a difficult student, you’re basically saying, ‘We feel that our model can help this child be successful.’… And if you can’t help them be successful, at some point you have to say your model isn’t working, and if your model is not working, perhaps public dollars shouldn’t be going to pay for it.”

People in-the-know in Columbus have warned ECOT’s critics not to be overly hopeful about ECOT’s pending demise.  They have suggested that Bill Lager is so powerful that he’ll pull some kind of rabbit out of a hat. Lager is ECOT’s founder and the owner of the privately held, for-profit corporations that oversee ECOT’s operations (Altair Management) and create its online curriculum (IQ Innovations).

The two companies have been paid hundreds of millions in tax dollars since the school opened in 2000. Over that time, the state and local school districts have together paid ECOT $1 billion in per-pupil reimbursements for the students ECOT has claimed it has served. ECOT has insisted that a 2003 agreement meant it had only to document the school was providing 920 hours of curriculum annually for the students it has claimed without providing evidence they were logging in to use the materials.

Although many have predicted William Lager will still find a way to save ECOT, a Tuesday evening report by the Columbus Dispatch‘s Catherine Candisky made ECOT’s end appear increasingly likely. On Tuesday, ECOT’s sponsor, the Educational Service Center of Lake Erie West asked a Franklin County judge to appoint a receiver to take over the school. Judge Michael Holbrook has scheduled a hearing tomorrow in Franklin County Common Pleas Court.

In the affidavit filed with the court, ECOT’s sponsoring agency declared: “Given the lack of bond of the fiscal officer and ECOT’s financial position, there are no remedies ECOT will propose that will be adequate to Educational Service Center and it intends to suspend the operation of ECOT as soon as permitted.” “Because of requirements imposed on ECOT and the necessity to transition ECOT’s students to new schools forthwith, it is imperative that a receiver be immediately appointed to take control of ECOT, including its operations, records, assets and finances. If a receiver is not immediately appointed, it is unlikely ECOT will be able to comply with the statutory requirements, causing irreparable harm to ECOT’s ability to comply with winding up requirements.”

Apryl Morin, Director of Community Schools for the Educational Service Center of Lake Erie West, is reported to have explained: “State law… allows a sponsor to suspend operations of a community school and terminate its contract if the school fails to meet generally accepted standards of fiscal management, or violates terms of the contract or state or federal laws.” Under Ohio law, “community school” is the term the state uses for what is known elsewhere as a “charter school.”

Whether or not the school is permitted to remain open through the spring semester, what will undoubtedly drag on will be fighting about money paid to ECOT for students the school said were enrolled.  ECOT has not been able to document the attendance of thousands of students because the school has refused to maintain comprehensive log-in data. A 2015 law by which the legislature increased oversight of charter schools made it possible—beginning that year—for the state to demand documentation of student participation and to begin clawing back $60 million the state says was overpaid to ECOT for the 2015-16 school year and $20 million more for the 2016-17 school year.  In 2015, the state has alleged, ECOT over-reported its enrollment by nearly 60 percent.

A big question in Ohio is whether Lager can protect the money already paid to his private companies and thereby protect his personal profits.  In a second Dispatch story late Tuesday, Jim Siegel reported that Steve Dettelbach, the Democratic candidate for Ohio Attorney General and formerly the U.S. Attorney for the Northern District of Ohio, says the Ohio Attorney General must go after Lager’s companies: “There clearly, in this case, are facts that seem on their face to indicate there was misrepresentation, deceit and fraud.”

Last July, Dave Yost, Ohio’s state auditor and currently the Republican candidate for Ohio Attorney General, began escrowing $2.5 million every month from the funds being paid by the state for ECOT’s 2017-2018 operations because Yost said he worried about the eventuality we are watching this week: that ECOT would face bankruptcy and be let off the hook for paying back the money it is expected to return to state coffers.  Yost has said he believes ECOT should be held accountable, and his comments to the Dispatch indicate that he believes Lager may unscrupulously have used his private corporations “to limit the liability that stems from doing business.” Yost has expressed hope for recovering some if the money because, he explains, in 2008 the Ohio Supreme Court expanded the standard by which corporations can be held accountable.

The Dispatch reported that according to State Auditor Yost, “The state cannot go after the money it is owed until the Oho Supreme Court rules in ECOT’s ongoing legal challenge of the Education Department’s actions.”  Oral arguments in the case are scheduled for February 13. Yost added that based on a series of lower-court decisions against ECOT, he does not expect the Ohio Supreme Court to rule in ECOT’s favor.  “A very significant portion of the money that passed through ECOT ended up with Bill Lager… The Supreme Court ruling allows at least the potential for him to be personally liable for it.”

We’ll see if Bill Lager is ever held fully accountable. It will be a surprise if the state of Ohio and the local school districts from which charter tuition for ECOT has been extracted ever see much of the money.  The state’s attempt to recapture and protect tax dollars—at a rate of $2.5 million escrowed every month, has been going on for only six or seven months, which adds up to less than $20 million.

It is time Ohio’s taxpayers stop generating private profits for Bill Lager via the online Electronic Classroom of Tomorrow. (This blog has tracked the ECOT scandal here.)