Story of ECOT Fraud Becoming Political Issue for Ohio’s May 8 Primary Election

This week here in Ohio we had one more confirmation that the notorious Electronic Classroom of Tomorrow (ECOT), which was shut down by the state at the end of January, has been intentionally defrauding the state of hundreds of millions of dollars by inflating its attendance figures.

The Associated Press‘s Julie Carr Smyth reported: “Education regulators are reviewing a whistleblower’s claim that Ohio’s then-largest online charter school intentionally inflated attendance figures tied to its state funding using software it purchased after previous allegations of attendance inflation… A former technology employee of the now-shuttered Electronic Classroom of Tomorrow said he told the Ohio Department of Education last year that school officials ordered staff to manipulate student data with software obtained following the state’s demand that it return $60 million in overpayments for the 2015-2016 school year… His concerns were first raised in an Aug. 3, e-mail to the state….”

It isn’t as though ECOT’s fraudulent ripoff of tax dollars is new information, and it isn’t as though anybody imagined ECOT’s  overinflated attendance figures were anything but fraudulently manipulated. We have all been aware that  ECOT’s ripoff of public education dollars was not accidental, after all.  For the 2015-16 school year alone, the state found ECOT over-reported its attendance by 60 percent. The state paid ECOT on a per-pupil basis, and for two years the Ohio Department of Education has been trying to claw back $60 million for that school year alone—and now an additional $20 million overpaid by the state for the 2016-2017 school year.

My clipping file on the Electronic Classroom of Tomorrow is two and a half inches thick.  For years, the state did not even require careful record keeping of student attendance by the state’s online charter schools.  But when the legislature strengthened the law to clamp down on suspected fraud in 2015, the Electronic Classroom of Tomorrow fought back against any kind of reasonable oversight. The press has been tracking the ongoing fight ever since with relentless reporting by the Cleveland Plain Dealer‘s Patrick O’Donnell and the Columbus Dispatch‘s Jim Siegel and Catherine Candisky. These people deserve credit for the fact that ECOT has now been put out of business.

The most significant story was Catherine Candisky and Jim Siegel’s July 30, 2017, interview with a waitress at a Columbus Waffle House where Bill Lager and a business partner cooked up the idea of ECOT as a business venture to try to help Lager recover from a personal bankruptcy. Candisky and Siegel traced ECOT’s fraudulent exaggeration of student attendance way back to 2001, at the end of the school’s first year of operation, when then state Auditor Jim Petro, “found the school in its first year had no policies for processing student enrollment or withdrawals, and the state paid $1.9 million over two months for students with no documented hours of instruction.”

The editorial boards of the state’s major newspapers have relentlessly traced a narrative of fraud by ECOT along with massive payoffs to Ohio’s mostly Republican politicians by William Lager, owner of the two for-profit companies that ran the online school and provided its curriculum.  Ohio’s newspapers have persisted all the while ECOT and Bill Lager tied up any state crackdown on the school’s fraud by filing lawsuits against the state along with masses of appeals when lower courts denied ECOT’s claims. Here is a sampling of editorial condemnation of ECOT’s fight to continue ripping off the state:

• Back in September of 2016, the retired editorial page director of the Plain Dealer, Brent Larkin began his column: “The biggest scandal in Ohio history is knocking on the Statehouse door. This isn’t about then-Gov. Bob Taft failing to disclose a few rounds of golf. It’s about pouring hundreds of millions of dollars a year down a rat hole and selling out tens of thousands of children… The villains who want to perpetuate this swindle are the Republicans who run the Ohio General Assembly… In March, an initial ODE review of ECOT’s records determined that most students log into ECOT’s online platform only about an hour a day…  So when the state asked a Franklin County court to order ECOT to turn over attendance records as part of an effort to determine whether students are actually receiving the 920 annual hours of education that the state requires, ECOT fought back—with a vengeance.”
• In October of 2016, the Akron Beacon Journal editorialized: “What is the misspending of hundreds of millions of public dollars?  The word ‘scandal’ comes to mind, and it describes the misdeeds of the Electronic Classroom of Tomorrow and its many Republican enablers at the statehouse.”
• A year ago, the Columbus Dispatch commented: “For sheer audacity, there is no precedent for the claims to Ohio taxpayer money being made by the Electronic Classroom of Tomorrow. The state’s largest online school, ECOT demands more than $100 million per year from the treasury, while claiming the state—on behalf of taxpayers—has no right to document that students are actually logging in.  ECOT argues its contract with the Ohio Department of Education allows it to teach to an empty classroom, while continuing annual collections of hundreds of millions of taxpayer dollars.”
• In late January of this year as the state shut ECOT down, the Plain Dealer‘s editorial board spoke out: “While the debate continues over the way in which the online charter school Electronic Classroom of Tomorrow squandered Ohio taxpayer money and failed the young Ohioans it was supposed to be teaching, there can’t be any debate over what the ECOT mess has taught Ohio’s taxpayers: Money talks at the Statehouse. At every turn in the regulatory road, ECOT’s mainly Republican enablers looked the other way because, in effect, that’s what they were paid to do—legally, through campaign donations.”

Although this week’s new Associated Press report about the ECOT whistleblower doesn’t say anything really new about ECOT’s failure accurately to count its students, and even though nobody has imagined that ECOT mis-reported student attendance by accident, the new story is accomplishing something important. Suddenly politicians in the race for governor, state auditor, and state attorney general are accusing incumbents of failure to pay attention and to respond immediately last summer to a whistleblower’s  account of what was surely criminal fraud on ECOT’s part.  And the incumbents are all scurrying around saying that they paid more attention than anybody knew.  Suddenly the ECOT scandal—which died down for a couple of months after the school was shut down in January—is a major topic in the political campaigns for statewide offices in the May 8, primary election.

In Ohio, where the Governor is a Republican and the state House of Representatives is dominated by a 66:33 Republican majority and the state Senate by a 33:9 Republican majority, we don’t have any checks and balances.  It is essential that the over-fifteen-year ECOT ripoff  will remain in the news and that candidates running for office demand that voters hold Ohio’s politicians accountable.

ECOT is now closed, a school in bankruptcy with its affairs being managed by a receiver, but ECOT’s owners are still trying to resurrect the school through the appeal of its case against the state, a case heard finally in February by the Ohio Supreme Court. We await the Court’s decision. Once again, during oral arguments, the press played its essential role.  The Dispatch‘s Jim Siegel described the final interchange between ECOT’s attorney and Ohio’s Chief Justice Maureen 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 long in once a month and do no work, Chief Justice Maureen O’Connor interjected. ‘How is that not absurd?’ she asked.”

We shall see how the Ohio Supreme Court eventually decides the case. Ohio’s supreme court is elected, and like the legislature, it is majority-Republican. But the persistent coverage by the press has kept pressure on the Court just as it has on the staff at the Ohio Department of Education and on ECOT’s sponsor, The Educational Service Center of Lake Erie West.  After all, unless the Supreme Court saves it, ECOT is now closed.  It is no longer receiving Ohio tax dollars, even though it still owes the state millions of dollars that had not yet been clawed back prior to the date of its closure.

Advertisement

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.