Private Equity Partnership with Ron Packard’s Accel Charter Schools Supercharges the Profit Motive

Charter school management in Ohio was, for a long time, a flamboyant affair.  For nearly two decades, until the state finally put him out of business, William Lager ran the Electronic Classroom of Tomorrow—charging the state, year-after-year, for students who were not really enrolled and making contributions to the legislators who then neglected to regulate online charter schools.

Even more notorious was David Brennan, who wore a ten gallon hat and dubbed his charter company White Hat Management. He had an empire of Life Skills and Hope Academy charter schools and an online virtual school, the Ohio Distance and Electronic Learning Academy (OHDELA).

In 2018, the same year that Bill Lager’s ECOT was shut down, Brennan sold off his charter school holdings and later died. Charter school management quieted down after that, but the quality didn’t improve, and the profits continued to flow to the man (and his partner investors) who bought off much of David Brennan’s empire—Ron Packard. Packard was the founder of the for-profit online giant, K-12, but he left K-12, when it was under a cloud for misleading investors and poorly educating its students. By 2014, Packard had founded Accel Schools, another for-profit chain of charter schools, which was owned and operated by something called Pansophic Learning.

In a stunning new Alternet report, Jeff Bryant traces how Packard and Pansophic Learning expanded rapidly—27 charter schools across Colorado, Illinois, Michigan,  Minnesota and Ohio.  Pansophic Learning bought up not only Brennan’s charter schools but also the financially struggling Mosaica network of charters and a small local chain of I Can schools in Cleveland, along with Brennan’s statewide electronic school, OHDELA.

Packard’s finances are complicated by private equity investment intended quickly to produce significant profit. Investors in Accel and Pansophic Learning include a Saudi private equity firm, Safanad, whose CEO Kamal Bahamdan, leads Bahamdan Investment Group.

Bryant explores the role of private equity ownership not only of charter schools but also of private prisons and nursing homes.  He cites a study which “distinguished private equity for-profit ownership from ‘generic’ for-profit ownership because ‘private equity ownership confers distinct incentives to quickly and substantially increase the value of their portfolio firms.’  It is this form of intense, high-powered profit-maximizing incentives, the authors asserted, ‘that characterizes private equity… and could lead to detrimental implications for consumer welfare.'”

Bryant describes Accel’s use of a sweeps contract to operate the Broadway Academy charter school in Cleveland.  With a sweeps contract, an Accel charter school collects per-pupil charter school funding from the state of Ohio and then turns over more than 90 percent of the funding to Pansophic which then manages the school with virtually no oversight from the appointed charter school board but with a strong incentive to maximize profit by reducing services for students.

Bryant identifies an additional source of profit for Packard and his partners: “While Accel’s contract with Broadway Academy doesn’t include real estate, the authors of (a recent) Network for Public Education report searched the database of Ohio charter school contracts… and found that ‘Global School Properties Ohio, LLC holds the leases for many Accel charter schools. The… landlord is at the same 1650 Tysons Blvd. address in McLean, Virginia, as Pansophic Learning.'” Hence we learn that Pansophic not only collects virtually all the state per-pupil charter school funding, but it also very likely makes a profit by charging inflated rent to lease the building that it secretly owns back to its own school.

Bryant unearths the complicated financial dealings of Pansophic Learning, Safanad, and the Bahamdan Investment Group. His report details the troubling financial web underneath Accel and the Ohio Distance and Electronic Learning Academy (OHDELA).  For the Washington Post, Steve Yoder describes how all this affects a Conneaut, Ohio mother and her children. Amanda Nemergut wanted to move her children to online learning as an alternative to in-person schooling during COVID-19.  Wooed by fancy online advertising, Nemergut enrolled her children in OHDELA: “Soon Nemergut and her kids… noticed problems. OHDELA’s model relies on parents to help supervise their children’s instruction, and Nemergut did, stepping in throughout the day to aid with technical glitches and questions on assignments. But there were issues she couldn’t fix.  The homework didn’t match the material teachers covered in class. When teachers gave live instruction—no more than 20 minutes per class… students couldn’t ask questions because chats were blocked. When her daughters sent questions by email, they got no answer. Teachers didn’t give credit for work her kids had turned in and marked them absent for classes they attended.”

One must acknowledge that the test-score-based Ohio state school report cards are flawed measurements of school quality, but even recognizing the inadequacy of the report cards, Jeff Bryant writes that Ron Packard’s Accel Schools in Cleveland area are not breaking any records for academic quality: “Accel Schools in the Cleveland area, where the management company has its highest density of schools, has no schools with A or B ratings from the 2018-2019 school year, the last one measured due to the pandemic. There are three C rated schools, including Broadway Academy.  Eleven others are D and F rated schools.”