Monday, October 27, 2014

WE'RE GONNA MAKE THEM AN OFFER THEY CAN'T REFUSE: How An Insular, Private Fiefdom (Supported With Public Tax Dollars) Helped Enable A Multi-Million Dollar Financial Fraud Crime Wave!

Part 1-HOW THE CHARTER SCHOOL RACKET OPERATES IN MICHIGAN: Setting the table for small-town wiseguys

Over the past two decades, Michigan has become “ground zero” for the spread of for-profit charter schools. Our state ranks first in the nation in the percentage of charter schools run by “education management” or  “education service providercompanies that derive revenue from the resources siphoned from public schools. 

A whopping 78.8 percent of these schools are for-profit enterprises in Michigan. The next highest percentage is found in Missouri, having 36.6 percent of its charters for-profit. Largely unregulated and run by politically connected businessmen seeking to cash in on the half-trillion dollar year education “market,” several charter school operations around the country have been exposed as corrupt rackets. 

In July, the Detroit Free Press published the results of an exhaustive year-long study of the financing, operation, oversight and education outcomes of Michigan’s charter schools on its “Freep.com” website. The study, which includes articles, documents, PDF files and videos, is a damning indictment.

A summary of the Free Press investigation’s most significant findings, include the following:

1. Charter schools spend $1 billion per year in state taxpayer money, often with little transparency.

2. A majority of the worst-ranked charter schools in Michigan have been open 10 years or more.

3. Charter schools as a whole fare no better than traditional schools in educating students in poverty.

4. Some charter school board members were forced out after demanding financial details from management companies.

5. State law does not prevent insider dealing and self-enrichment by those who operate schools.

The Free Press, no doubt in the interest of “balance” and not offending its corporate and political benefactors in both political parties, declares there are some “innovative” charter schools that have “excellent academic outcomes.” It should be pointed out, however, that charter schools, despite their quasi-public character, are selective about the students they accept. Public schools, especially those that service specific neighborhoods and do not require testing to get in, must accept everybody, including students with severe learning disabilities.

However, even with this seeming advantage over public schools, the vast majority of charter schools have not improved the education outcomes for their students … quite the contrary. 

These schools often provide a cut-rate education for students and substandard wages and benefits for their employees, who are in constant fear for their jobs. If a particular venture proves unprofitable, a company can simply move on to greener pastures.


The Free Press report sheds an interesting light on the question of school governance. Charter schools are run by management companies, but there are also “boards of directors,” roughly analogous to school boards. However, in the case of many charter schools, these ostensibly governing bodies are mere window dressing, a rubber stamp for the appropriation of public money by the businesses in whose interest these schools serve.

The case of federally-indicted charter school management company head Steven Ingersoll has been covered in detail on this blog. In fact, some critics have even termed it excruciating detail (like that's a bad thing).

According to the government, the case began in 2009 when Ingersoll “caused another charter school that he owned or controlled—the Grand Traverse Academy—to advance him funds that needed to be repaid”. Counts 6 and 7 of the superseding indictment “relate specifically to those advances and Steven Ingersoll’s personal income tax treatment of those transactions in 2009 and 2010.” The superseding indictment alleges that Steven Ingersoll either mischaracterized or omitted the advances from his personal income tax returns.

Ingersoll, then acting in concert with Roy C. Bradley, Sr., “conspired” to “induce Chemical Bank, an FDIC insured depository institution, to approve a $1.8 million construction line of credit loan to Madison Arts L.L.C. to finance the construction work for the Bay City Academy in Bay City.”  (The shell corporation 'Madison Arts LLC' was formed on December 16, 2010 by Ingersoll.)

Rather than using the loan for the Bay City construction project, Steven Ingersoll used loan proceeds to partially repay the advances from Grand Traverse Academy. The superseding indictment alleges that all five of the defendants “conspired to a series of transactions that diverted at least part of the funds required to be used on the Bay City Academy project to the Ingersolls’ personal bank account at Fifth-Third Bank.”

In an October 22 court filing, Assistant U. S. Attorney Janet Parker outlined much of the factual background of the superseding indictment—revealing this bombshell allegation: cash advances Steven Ingersoll made to himself from the Grand Traverse Academy's publicly-funded coffers may at one point have exceeded $3.5 million dollars.

During an October 8 hearing, Judge Thomas L. Ludington asked whether the Grand Traverse Academy’s board "was aware of the advances that Steven Ingersoll had made to himself from funds belonging to the school."

In response, it was pointed out that “the Grand Traverse Academy was audited annually.”

The government responded, adding that Note 3 to the publicly available audit report for the fiscal year ending on June 30, 2012 for the Grand Traverse Academy contained an entry that stated, “Amounts receivable from related parties $3,548,319.”

And who is that “related party”?  The government alleges it’s Steven Ingersoll.

This extraordinary account is hardly typical, but it encapsulates the rapacious and criminal character of these business “overlays” on what remains of public education in the United States and the ease by which corporate vultures can plunder the public coffer.

The theft of public monies goes hand in hand with a reduction in per-pupil spending, including salaries and benefits for teachers and support staff, in addition to supplies and equipment used for instruction. During 2012-13, average charter classroom spending was $4,893 per pupil, compared with $6,985 for traditional schools.

According to the Free Press, the six largest for-profit operators of charter schools all spend less on each student, in some cases substantially so, than the statewide average. For example, CS Partners, which operates 19 Michigan charters, spent 37 percent less on each student. 

These cost savings go directly to the corporate owners who have a financial incentive to spend as little on students as possible.

Part 2-HOW THE CHARTER SCHOOL RACKET OPERATES IN MICHIGAN: Cracks in the facade (from the inception to the deception)

Unlike the Mafia, somebody was smart enough to do their dirt without anyone noticing for a very long time...even though it had been public knowledge for years.

What taxpayers didn't know couldn't hurt themlogical thinking to a sociopath. It's kind of like saying it's not infidelity if your wife never finds out. 

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