San Diego Charter Leaders Found Guilty for Massive Fraud
A California court found Sean McManus and Jason Schrock, the two founders of the A3 charter management company and its network of online charter schools, guilty of scamming the state out of $400 million from 2015 to 2019 and funneling $80 million of that sum into companies they controlled, The Voice of San Diegoreported.
Nine others, including key subordinates as well as two former superintendents, were also charged in this massive scheme, one of the largest ever cases of charter school fraud, which involved enrolling students—who never actually took any classes—in A3’s 19 online charter schools and after-school programs.
According to The Voice of San Diego, there were two components to A3’s scheme. First, company officials targeted summer athletic programs, enrolling each student in the program into an A3 school for the summer and temporarily unenrolling them from their normal school. Each summer student whom A3 enrolled would bring in $1,600 of state funding. Schrock and McManus then paid out a commission to each of the “enrollment workers” whom they hired to help boost enrollment in their 19 charter schools as well as a donation to each athletic program, based on the number of players who signed up. The rest, sometimes as much as $1,550 per student, was funneled to companies controlled by the two ringleaders.
The second part of the scheme involved targeting struggling private schools, enrolling their students, and paying out the majority of A3’s funding allotment to the schools themselves while skimming as much as $1,000, according to The Voice of San Diego.
A3 would get a foothold in counties by opening charters in small cash-strapped districts, which were incentivized to authorize these charters because they could keep between 1 and 3 percent of charter school revenue. Once established, A3’s charters could draw students from the entire county in which they were authorized as well as adjoining counties.
The scheme exposed a loophole in how California awards money for a student’s average daily attendance. With a 180-day school year, a student with perfect attendance is supposed to be worth one full unit of funding, with schools losing a share of that funding based on the percentage of days the student misses. But A3 was able to extract more than a full share of state funding from each student by including enrollment in summer school, which conferred another 20 percent in funding.
Furthermore, since A3 ran multiple charter schools in most of the districts where it was authorized to operate, they could switch students between different charter schools without their knowledge so that, to the state, it looked like the child never had any academic holidays; this method could allow the school to collect as much as 40 percent more funding than a student is supposed to be allocated, according to The Voice of San Diego.
Through such aggressive duplicitous enrollment, A3 charter network was able to reap substantial sums.
In 2016 alone, according to The Voice of San Diego, A3 reported $14.2 million in revenue and only $3.6 million in spending, $855,796 of which went to salaries for McManus and Schrock.
Yet, The Voice reported, “despite such an unprecedented theft, not a single person involved in the A3 case will spend a day behind bars.” McManus and Schrock each paid about $19 million in fines, and both will both get credit for time served. Several other key players had their felonies reduced to misdemeanors for cooperating with the investigation.
This case highlights the various loopholes that exist in state’s per-student funding formulas that allow even non-profit charters to become cash cows for for-profit charter management companies like A3. The state is in the process of recouping as much of the forfeited $400 million as it can.
- A. Thomas