Tuesday, November 29, 2016

Oxford Prep founder accused of 'laundering' charter school funds - The Orange County Register

Oxford Prep founder accused of 'laundering' charter school funds - The Orange County Register:

Oxford Prep founder accused of 'laundering' charter school funds

CHINO – A newly released audit of high-performing charter school Oxford Preparatory Academy, which has two campuses in Orange County, alleges the school’s founder set up education-related entities with the intent of “laundering” school funds for personal profit.
The 45-page audit report, released last week, was prepared by the Fiscal Crisis & Management Assistance Team, a collective that helps California school districts with financial and management advice and assistance. The audit concludes by suggesting San Bernardino County of Schools Superintendent Ted Alejandre get in touch with law enforcement.
“Notify the governing board of Oxford Preparatory Academy charter school, the governing board of the Chino Valley Unified School District, the State Controller, the Superintendent of Public Instruction, and the local district attorney that fraud, misappropriation of assets or other illegal activities may have occurred,” the report says.
In Orange County, Oxford has campuses in Mission Viejo, overseen by the Capistrano Unified School District, and in Lake Forest, overseen by the Orange County Department of Education. (The schools have no relation to Oxford Academy in the Anaheim Union High School District.)
Both agencies released statements Monday saying they take the audit results “very seriously” and are reviewing the report.
“We take reports from (the auditor) very seriously as it is their sole responsiblility to identify issues that could comprise the financial health of a school or district,” said Ian Hanigan, spokesman for the Orange County Department of Education.
AUDIT REQUESTED
The county board approved on appeal the Oxford Preparatory Academy-Saddleback Valley charter in Lake Forest in October 2015, after the Saddleback Valley Unified School District rejected a petition for the new K-8 school. Oxford Preparatory Academy-South Orange County in Mission Viejo, meanwhile, has been open since 2011.
In Chino Valley, the audit was initiated at Alejandre’s request this summer. The county school board had been considering Oxford Prep’s appeal after the Chino Valley Unified school board rejected a five-year charter extension for the school in March.
Charter schools are publicly funded and are overseen by a board of their own as well as the school districts that grant them their charter.
In rejecting Oxford Prep’s request for five more years, Chino Valley Unified staffers cited its entanglement with Oxford Prep founder Sue Roche’s private company, Edlighten Learning Solutions of Yorba Linda. Edlighten handles management services, such as human resources, for charter schools.
Founded by former Chino Valley Unified Principal Roche, Oxford Preparatory has been operating a K-8 school in Chino since 2010 and later spread to Orange County, with campuses in Mission Viejo and Lake Forest. The schools broke off relationships with Roche and Edlighten in May.
In response to the audit, Oxford distributed a letter to parents Wednesday.
“We concur that the FCMAT findings are of great concern,” Oxford Preparatory’s board chairman, Michael Delgado, writes. “OPA has already implemented numerous changes to address many of the issues that have been raised.”
DIVERTING FUNDS?
According to auditors, Roche intentionally created a system of loose oversight, a “daisy chain” of payments between for-profit companies staffed by family and friends, and obscured the financial operations from Chino Valley officials, auditors and Oxford Preparatory staff to divert public school funds to her and her associates’ bank accounts.
Oxford Preparatory, Edlighten and another spinoff, Nevada-based Educational Excellence, employed relatives and longtime friends of Roche, including two of her children and a cousin.
“Interviews indicate that following the petition renewal in 2012, the founder created a complex structure of charter management corporations that exercised significant influence over transactions and contracts between these entities, and secured considerable financial benefit through contracts that charged management service fees up to 10 percent, funneling charter school dollars from OPA schools … and charging for services that already existed,” the audit report reads in part.
To service all three campuses, Oxford Preparatory paid Edlighten $4.2 million in management fees from January 2013 to June 2016, according to the audit – $821,490 in 2013, $1.2 million in 2014, $1.3 million in 2015 and $834,522 in 2016.
They found “sufficient evidence that affiliated and/or related party organizations were intentionally created to divert and launder funds from Oxford Preparatory Academy,” the report reads.
“It’s disheartening for me and Sue to see the defamation by FCMAT of the founder of an incredible foundation and school,” Roche’s attorney, Marc Greenberg, said Friday. “They started with a conclusion and went out to prove it.”
Greenberg said the money given to Edlighten for management services wasn’t public funds because Edlighten was a vendor.
“If you hire someone to paint the school, once you pay them, what that company does with the money is up to them,” he said.
Greenberg said management companies charging Oxford Preparatory millions of dollars might look bad to a layperson and that the contracts could have been written more clearly.
“You’re always going to have people say you should have spent the money this way or that way,” Greenberg said. “It’s just the way it is.” He added that charter schools “eat a lot of funds” their first few years.
CUTTING TIES
Oxford Preparatory distanced itself from Roche in the school’s response to the audit.
“The current OPA board and administration had no knowledge of Mrs. Roche’s inappropriate expenditures and had zero authority over the way in which Edlighten spent its funds,” wrote Oxford Preparatory’s board chairman, Michael Delgado. “News of this apparent mismanagement of funds – specifically FCMAT’s allegations of money laundering by (Edlighten Learning Services) – is shocking and disappointing to all of us. The current board and administration were kept in the dark about the activities during Mrs. Roche’s tenure and outraged by the revelations in the FCMAT report.”
After Oxford Prep cut its ties to Roche and Edlighten, it is prioritizing “accuracy, transparency and efficiency,” Delgado wrote. “
Oxford Prep has regularly been one of the top-scoring schools in San Bernardino and Orange counties.
“In the classroom, our results speak for themselves,” Delgado wrote. “We’ve twice been ranked the top-performing school in San Bernardino County, and we were named a California Distinguished School the very first year we were eligible. Our students consistently outperform their district peers in California state tests, and in July, we earned initial accreditation from the Western Association of Schools and Colleges.”
Edlighten’s dealings with another Orange County charter school also are under scrutiny.
The Orange County Department of Education is looking into complaints by Anaheim educators against Epic Charter School, an online program based in Anaheim but affiliated with an Oklahoma school of the same name. Officials with two Anaheim school districts asked the county to rescind their approval of Epic, saying it provides an unsound educational program and raising concerns about predatory marketing practices, among other things.
Kelly Gaughran, the administrator for Orange County’s charter schools, asked Epic in a Sept. 26 letter to supply contracts, agreements and memorandum of understandings between Epic and various organizations and to identify the relationship they have to Epic’s cofounder, Ben Harris. Emails between Harris and Roche are quoted in the FCMAT audit, discussing moving personnel between Oxford Preparatory and the management companies to avoid legal trouble.
Harris denied the allegations in the audit in an email Monday.
“Nobody affiliated with Epic Charter School has been contacted or interviewed by FCMAT,” he wrote. “There is no relationship past or present between Oxford Preparatory Academy or Edlighten Learning Solutions and Epic Charter School. In the past, prior to starting the authorization process with the Orange County Department of Education, some individuals affiliated with Epic Charter School provided services that were mentioned in the report. Those services were discharged legally and ethically and ended more than a year ago.”
Barbara Black, executive director of Oxford, has asked to make a presentation to the Orange County board at its Dec. 14 meeting, Orange County Trustee David Boyd wrote in an email Monday.
“While the report raises very serious concerns, we should keep an open mind at this time,” Boyd wrote. “These types of reports often don’t include all relevant information.”
Alejandre has followed the FCMAT recommendation and forwarded the audit to the district attorney’s office, according to a spokesman for his office on Monday.
“Nothing they said showed ill-intent on the part of Sue,” Greenberg said. “She worked herself to death for those kids.”
Contact the writer: byarbrough@scng.com and rkopetman@scng.com
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