Over the last several years, Innovation Ohio has been leading the fight to expose Ohio’s failing charter school system and sounding the alarm bells around expanding voucher programs.
New developments in the court battle between the State of Ohio and former online chart school ECOT suggest the state’s top law enforcement official may have trouble effectively pursuing the case. Last month, Attorney General Mike DeWine filed a lawsuit against ECOT founder William Lager and other ECOT officials seeking to recover tens of millions in overpayments for students who did not participate in coursework. At the time, DeWine was criticized for waiting until just before an election to go after ECOT, when questions had been raised about the school for years.
Two weeks later, two school districts — Dayton and Logan Hocking Schools asked a court to intervene in the lawsuit, claiming it should be school districts, and not Attorney General DeWine who should seek repayment from Lager. (See: “DeWine Opposes Districts’ Intervention In Case Against ECOT Founder) They argue that because DeWine– currently running for Governor–and his running mate, Jon Husted, jointly collected tens thousands of dollars in political contribution from Lager and associates, they woud not be effective in pursuing repayment from their former contributor.
As the school districts argued, “There is no question that the AG is a friend of theses institutions … (and) is not an adequate representative of the School Districts’ interests.”
In response to the lawsuit, DeWine argued that he, and not the school districts, could lead the case against Bill Lager, denying any conflict of interest.
But last week, the schools’ argument that DeWine’s past relationship with Lager make him less likely to effectively pursue the case was unexpectedly bolstered by Lager himself.
Lager, the defendant in the lawsuit, argued in an October 9 court filing that he agreed with DeWine, stating a preference to go up against the Attorney General in court: “Leaving aside arguments dealing with the ability of the Ohio Attorney General to protect constituent interests and the conflict of interest issues … [Mr. Lager and his companies] incorporate and rely on the balance of the arguments advanced by the Ohio Attorney General,” in effect agreeing that Mr. DeWine should handle the case.
This week, Innovation Ohio sent a memo to every school district leader requesting that they take immediate action to protect their taxpayers and kids because it was clear that Lager felt more comfortable facing DeWine in court than the districts who had been hurt financially. (See “…Groups Want More Districts In ECOT Suit”)
On Tuesday, the school districts made another filing arguing that Lager’s filing simply proved their point: Mike DeWine was not best positioned to fight for a recovery from Lager. As the districts put it, “It appears that even some of the Defendants do not believe the AG will be as zealous an advocate for the School Districts as the Districts will be for themselves. “
The filing further reveals that DeWine hasn’t yet revoked any educator licenses related to ECOT, as has been done in prior cases of charter school wrongdoing. As the suit puts it: “If the AG was truly out to help the School Districts, he would already be in the process of revoking professional licenses of educators associated with ECOT’s misappropriations. Despite the fact that ECOT’s overbilling totaled more than $79,640,000 and that it has been closed since January 18, 2018, not a single ECOT-related educator license is the subject of revocation proceedings.”
The school districts argue that “the AG’s professed zeal on behalf of public schools in this state for misappropriations of the School Districts’ monies to ECOT is not genuine.”
The ECOT scandal–at $189 million, easily the state’s largest ever involving taxpayer dollars–is far from resolved. Innovation Ohio strongly urges school districts to take note and be mindful of the potential conflicts inherent in the relationship between DeWine and Lager. It appears more clear every day that it’s going to be up to districts to lead the fight to get their kids’ money back from Lager.
The Ohio 12th Congressional District is not immune to the effects of the ECOT scandal. Plagued with allegations of improper campaign contributions, enrollment fraud, poor academic performance, and an outsized influence over state government – the now defunct school has become a pariah within the state.
With voters in 7 counties headed to the polls on August 7th to elect their next representative to Congress, we put together a fact sheet about the impacts of the scandal on schools in the 12th district.
- Overall, Ohio schools lost $590 million in funding to ECOT since 2012. In District 12, $105.8 million was diverted from traditional public schools to ECOT over the same period.
- To make up for lost funding, schools in the 12th District were forced to raise $7.1 million in local property tax dollars to subsidize losses to ECOT since 2012.
- GOP candidate for OH-12, Troy Balderson has taken $10,850 in campaign contributions from ECOT founder Bill Lager and ECOT lobbyists.
- Danny O’Connor has not received campaign contributions from individuals related to ECOT.
District by District Funding Losses
Below are the amounts transferred to ECOT from traditional public school districts within Congressional District 12 in the six years beginning in 2012. Only districts with 10% or more of their area within the district are shown.
|School District||Six-Year Total|
|LOUDONVILLE-PERRYSVILLE EX VILL SCHOOL DISTRICT||$290,498|
|BIG WALNUT LOCAL SCHOOL DISTRICT||$699,803|
|COLONEL CRAWFORD LOCAL SCHOOL DISTRICT||$146,901|
|BUCKEYE VALLEY LOCAL SCHOOL DISTRICT||$755,548|
|CARDINGTON-LINCOLN LOCAL SCHOOL DISTRICT||$377,539|
|CENTERBURG LOCAL SCHOOL DISTRICT||$234,120|
|CLEAR FORK VALLEY LOCAL SCHOOL DISTRICT||$322,874|
|COLUMBUS CITY SCHOOL DISTRICT||$62,897,188|
|PICKERINGTON LOCAL SCHOOL DISTRICT||$1,893,354|
|WALNUT TOWNSHIP LOCAL SCHOOL DISTRICT||$377,070|
|DELAWARE CITY SCHOOL DISTRICT||$2,235,565|
|DUBLIN CITY SCHOOL DISTRICT||$1,034,643|
|EAST MUSKINGUM LOCAL SCHOOL DISTRICT||$408,464|
|ELGIN LOCAL SCHOOL DISTRICT||$153,210|
|FRANKLIN LOCAL SCHOOL DISTRICT||$548,100|
|GAHANNA-JEFFERSON CITY SCHOOL DISTRICT||$1,673,660|
|GALION CITY SCHOOL DISTRICT||$976,680|
|GRANVILLE EX VILL SCHOOL DISTRICT||$85,791|
|HEATH CITY SCHOOL DISTRICT||$580,128|
|FREDERICKTOWN LOCAL SCHOOL DISTRICT||$342,909|
|MOUNT VERNON CITY SCHOOL DISTRICT||$2,590,207|
|HIGHLAND LOCAL SCHOOL DISTRICT||$456,297|
|HILLIARD CITY SCHOOL DISTRICT||$2,691,660|
|JOHNSTOWN-MONROE LOCAL SCHOOL DISTRICT||$364,019|
|LAKEWOOD LOCAL SCHOOL DISTRICT||$419,091|
|LEXINGTON LOCAL SCHOOL DISTRICT||$643,067|
|LICKING HEIGHTS LOCAL SCHOOL DISTRICT||$1,896,324|
|LICKING VALLEY LOCAL SCHOOL DISTRICT||$177,765|
|JONATHAN ALDER LOCAL SCHOOL DISTRICT||$376,032|
|MADISON LOCAL SCHOOL DISTRICT||$1,602,237|
|MANSFIELD CITY SCHOOL DISTRICT||$4,054,484|
|MAYSVILLE LOCAL SCHOOL DISTRICT||$241,282|
|MORGAN LOCAL SCHOOL DISTRICT||$1,250,852|
|MOUNT GILEAD EX VILL SCHOOL DISTRICT||$402,196|
|NEWARK CITY SCHOOL DISTRICT||$2,862,686|
|NORTH FORK LOCAL SCHOOL DISTRICT||$423,721|
|NORTHERN LOCAL SCHOOL DISTRICT||$455,142|
|NORTHMOR LOCAL SCHOOL DISTRICT||$315,768|
|NORTHRIDGE LOCAL SCHOOL DISTRICT||$234,170|
|OLENTANGY LOCAL SCHOOL DISTRICT||$603,908|
|TRI-VALLEY LOCAL SCHOOL DISTRICT||$638,633|
|PLAIN LOCAL SCHOOL DISTRICT||$267,510|
|PLEASANT LOCAL SCHOOL DISTRICT||$150,513|
|NOBLE LOCAL SCHOOL DISTRICT||$242,395|
|NEW LEXINGTON CITY SCHOOL DISTRICT||$1,102,135|
|REYNOLDSBURG CITY SCHOOL DISTRICT||$2,220,537|
|RIVER VALLEY LOCAL SCHOOL DISTRICT||$295,346|
|SOUTHWEST LICKING LOCAL SCHOOL DISTRICT||$1,374,364|
|WEST MUSKINGUM LOCAL SCHOOL DISTRICT||$409,038|
|WESTERVILLE CITY SCHOOL DISTRICT||$3,997,740|
|WORTHINGTON CITY SCHOOL DISTRICT||$2,176,859|
|ZANESVILLE CITY SCHOOL DISTRICT||$1,303,256|
|ONTARIO LOCAL SCHOOL DISTRICT||$389,266|
|FAIRBANKS LOCAL SCHOOL DISTRICT||$127,720|
|MARYSVILLE EX VILL SCHOOL DISTRICT||$1,556,007|
There’s been a lot of talk lately about why, all of a sudden, officials are declaring the relationship between ECOT founder and political super donor Bill Lager’s for-profit companies “corrupt” when we’ve known they existed for a long time.
Perhaps a little context would help illuminate the debate here.
The relationship of concern at the moment is self dealing between Altair Management — Lager’s for-profit company that ran the nation’s largest dropout factory — and IQ Innovations — Lager’s for-profit firm hired to provide the software for ECOT. So when did this relationship begin?
That’s where things get interesting.
According to an audit released Dec. 22, 2009 by then State Auditor Mary Taylor, IQ Innovations started doing the software work for ECOT Jan. 1, 2009. But it wasn’t until Taylor also mentioned in the Dec. 22 audit that “IQ Innovations, LLC and Altair Learning Management I, Inc. have the same principal owner” that it became publicly known that Lager ran both firms — a relationship now called “corrupt”.
Importantly, though, you would have had to know to look at ECOT’s audits. The only people that would have clearly and directly known about this relationship early on most likely would have been Auditors of State Mary Taylor and David Yost.
The first widely dispersed mention of IQ Innovations was in a June 12, 2010 Columbus Dispatch story about Jeb Bush speaking at ECOT’s 2010 graduation where it was passingly mentioned that “Lager … (also) founded the online learning company” IQ Innovations. However, the additional founding wasn’t referring to Altair and IQ’s now “corrupt” relationship; it was referring to ECOT and IQ’s relationship.
The first media mention that Altair and IQ Innovations were affiliated was in a July 30, 2012 story about a new CEO taking over Altair. According to the three-sentence note in the Columbus Dispatch, the new CEO “will direct daily operations of Altair and its associated companies, including IQ Innovations and ECOT, the state’s largest online K-12 charter school, the company announced last week.”
So the only way to know about the “corrupt” relationship prior to July 30, 2012 would have been to know to read ECOT’s audits from 2009 on, or know the inner workings of the company. Of course the five-alarm fire was rung May 18, 2016, when the New York Times wrote a huge ECOT expose whose headline read “Online School Enriches Affiliated Companies if Not Its Students.”
New Analysis: ECOT Stole Nearly $200 Million from State
Estimate shows ECOT scandal is largest in state history
Columbus, OH – Today, Innovation Ohio Education Policy Fellow Stephen Dyer released a new analysis of the Electronic Classroom of Tomorrow (ECOT) scandal, finding that the shuttered charter school defrauded the state by at least $189 million since 2000. This is the first published estimate of the total amount stolen by ECOT.
When ECOT was caught billing the state a total of $80 million in 2015-2016 and 2016-2017 for students they couldn’t prove they actually educated, the immediate question arose: how much more did they potentially rip off taxpayers during their entire 18 years in operation?
In 9 of the 18 years of ECOT’s existence, the Department of Education found and documented overpayments of various sizes. Based on these findings, Dyer took the percentage overpayment in each of those years, calculated an average percentage of overpayment during those FTE reviews, then applied that to the years in which ECOT’s enrollment wasn’t scrutinized. The estimated overpayment was combined with the previously reported overpayments, and the result is that approximately $189 million was overbilled during the school’s time in operation.
“This is easily the largest scandal in Ohio history,” said Dyer. “ECOT stole nearly $200 million in taxpayer money that should have gone to educate our children. Instead, this money enriched ECOT’s founder and his political allies.”
In terms of scale, the infamous Tom Noe “Coingate” scandal in 2006 involved $50 million in unemployment insurance money (technically not taxpayer money). Even with this relatively conservative estimate, the ECOT scandal could be four times larger than Coingate – likely even more.
Tom Noe was given more than 20 years in prison for his scandal. Will this much larger, taxpayer funded scandal produce similar results?
“While it is important to have this number and understand the scope of this scandal, this also raises many more questions that must be answered. The Department of Education and state Auditor owe us a full explanation of how they allowed this to happen for 18 years,” Dyer continued.
Despite the size and scope of this scandal, lawmakers have yet to address the underlying issues that allowed this to occur.
KEY NUMBERS IN THE ECOT SCANDAL
Total taxpayer dollars diverted to ECOT since 2000 – More than $1,000,000,000
Total diverted since 2012 that we can document by each school district – $591,000,000
Estimate for the total amount stolen – $189,000,000
For more information:
All of Innovation Ohio’s ECOT research can be found here: innovationohio.org/ecot
Ohio Taxpayers Forced to Pay $588,000 in ECOT Hush Money
Columbus, OH– The Electronic School of Tomorrow (ECOT) paid $588,000 in hush money to 201 former employees, according to records that the now-shuttered online charter school provided in response to a public records request.
Because ECOT was a public charter school, these severance packages were paid for with taxpayer dollars.
Filed by Common Cause Ohio and Innovation Ohio, the request came after a whistleblower refused to take the money, then told reporters that ECOT purchased and manipulated new software to extract millions of dollars from the state that it did not deserve. Ohio officials are attempting to recover more than $80 million from ECOT, and ECOT is in court, insisting it owes taxpayers no money at all.
All the money was paid out in 2017 as part of a “severance and release agreement,’’ the records show. In addition to “non-disclosure” clauses, the agreements also contained “non-disparagement” clauses.
“Public funds should never be used to pay hush money,’’ said Common Cause Ohio Executive Director Catherine Turcer. “A severance package is supposed to give employees a cushion when they leave – not hide problems from elected officials, administrators, the press and the public.’’
ECOT’s attendance padding has been referred to the FBI and Franklin County Prosecutor for further review, and the scandal has emerged as a central issue in this year’s statewide elections.
The agreement’s “non-disparagement” clauses stipulate that former employees receive severance packages only if they agree that they “have not and will not make statements to anyone that are in any way disparaging or negative towards ECOT, including disparaging remarks about individuals associated with ECOT or the service it provides.”
Stephen Dyer, a lawyer and Education Policy Fellow for Innovation Ohio, said the agreements are not standard.
“The agreements ban employees from making statements to ‘anyone that are in any way disparaging or negative toward ECOT, including disparaging remarks about individuals associated with ECOT or the services it provides,’” Dyer said. “ECOT’s lawyer notes that employees are free to talk with law enforcement. What he does not tell you is that these types of agreements cannot legally prevent people from cooperating with law enforcement.’’
The records request asked for the amount of hush money paid over a five-year period.
While ECOT said it fully complied with the request, charter school researcher Sandy Theis said she is aware of other former employees who signed non-disparagement agreements in exchange for money who are not included in the information that ECOT provided.
The documents turned over by ECOT are online here:
There were warning signs about the Electronic Classroom of Tomorrow (ECOT) from the very start. Some examples:
“Based on its review of the first-year annual reports, LOEO (Legislative Office of Education Oversight) found that community schools did not provide the information necessary for accountability purposes. Although schools claimed that they met their educational goals, few schools provided supporting evidence or even described how they evaluated student and school performance.’’
“The biggest threat to the state’s experiment with charter schools is not the teachers’ unions, school boards and related special- interest groups that have launched a lawsuit to kill the program in its infancy,’’ according to the Columbus Dispatch editorial page. “A far worse threat is that the charter- school concept will be discredited because of mismanagement and poor oversight by the state officials in charge of it.’’
“… generally, when things go wrong with charter schools, they go enormously wrong,” said Ohio Auditor and GOP gubernatorial candidate Betty Montgomery, calling for greater fiscal oversight of charter schools and a separate commission to review new charter schools’ contracts before they’re allowed to open.
“We think a lot of them (charters) need to be closed, because they’re not doing a good job…. We think charters have a role in the education base, but we also think most of the charters in Ohio stink,’’ Greg Harris, director of pro-charter group StudentsFirst Ohio, told the Dispatch.
“Ohio has a real quality control problem. Ohio’s more broken than the Wild West,” said Alex Medler of the National Association of Charter School Authorizers.
‘’… more students drop out of the Electronic Classroom or fail to finish high school within four years than at any other school in the country,’’ according to The New York Times.
Now that we’ve released district-by-district deductions to the scandal-ridden and potentially criminal enterprise that was the Electronic Classroom of Tomorrow, it’s helpful to examine what types of districts lost money and students to the scammy school. The state has nine categories of districts it tracks. Within those categories the state classifies them based on location (urban, suburban, rural, small town) and poverty from very low to very high.
About 1/2 of the $591 million came from urban districts, but not just large ones like Cleveland and Columbus, but smaller urbans like Mansfield and Lima. Surprisingly, the next largest category of losses to ECOT — about $200 million — came from small town and rural districts which tend to be much smaller sizes.
Even large, wealthier suburban districts lost money and students to ECOT to the tune of about $100 million.
Looking at just the districts’ poverty classification, ECOT received about 2/3 of its money from poor or very poor Ohio school districts. No surprise there. However, the next largest category of funding came from low poverty districts. More money came from Ohio’s wealthiest districts than school districts with average poverty.
What does all this mean? It means that ECOT’s largest impact was on Ohio’s poorest districts and students — areas and populations that have traditionally suffered outsized portions of public scandals like ECOT. However, the scale of ECOT’s scam was so large that even Ohio’s wealthiest school districts were not immune from this school’s politically connected tentacles.
On Wednesday, June 6, Innovation Ohio was joined by local school officials to discuss the multi-year impact of state funding transfers to the Electronic Classroom of Tomorrow (ECOT), the former largest, now-closed online charter school found to have been vastly overstating its enrollment at taxpayer expense.