By Gail Fry and Mark Gutglueck
With a little more than a month remaining in Mike Ramos’s sixteen years as District Attorney, one of the most high-profile cases of his tenure as prosecutor inexplicably has yet to go to trial some fourteen years after the alleged crimes occurred and more than eleven years after the case was filed.
In the meantime, some $23 million in public money that was intended for educational purposes which was diverted by the defendants has been spent, invested or whisked into offshore bank accounts, while both of the accused have recreated separate models of their original deceit and converted at least $3.2 million more in public education money to their own use and that of their associates.
The California Charter Academy fraud case materialized as what was represented as being, and is yet believed to be, the most extensive misuse of public education money in the history of California. Moreover, what emerged from the examination of the academy’s operations was an illustration of what opponents of the charter school concept said were weaknesses and a fatal lack of regulation and accountability in the creation of an educational approach that entrusted the education of select students to formulated entities functioning outside the strict parameters of the public public school system.
Charter schools exist as efforts in public asset privatization, and are semi-autonomous public schools that operate using public funds with only minimal oversight by the state school system. They are granted operating permits or are “chartered” under a written contract with a state, a school district or county school superintendent, which are referred to as the authorizers or sponsors. Such a contract – or charter – details how the school will be organized and managed. The ostensible justification for charter schools is that charter schools can function outside the normal parameters of normal schools and can offer a curriculum and educational smorgasbord unavailable in traditional public schools while meeting the requirements of both special needs students and accelerated scholars.
Offering gullible parents the promise of an educational alternative that would allow their children to be educated in a wholesome and Christian environment free of the liberal claptrap espoused by teachers under the sway of the state’s teachers’ unions, Charles Steven Cox founded the ostensibly non-profit California Charter Academy in 1999. Using parent support and enthusiasm for his undertaking, Cox convinced the school board with the Snowline Joint Unified School District, consisting of 11 schools including two high schools, three middle schools, five elementary schools and one kindergarten through eighth grade school, to sponsor one charter school. The Snowline district exists in the San Bernardino County Victor Valley, Mojave Desert and northeastern San Gabriel Mountain communities of Victorville, Phelan, Pinon Hills and Wrightwood. Cox then utilized the enthusiasm garnered from that formation to get Snowline to charter another academy. Thereafter, based on expressions of parent confidence in the educational model he had developed, he obtained two more charter sponsorships, one from the Orange School District in Orange County, and one from the Oro Grande School District further north in the desert of San Bernardino County, to expand the academy into the largest charter school operation in California, with 51 campuses located throughout the state, including one as far removed from Southern California as San Joaquin County.
Simultaneous to his founding of the non-profit California Charter Academy, Cox created Educational Administrative Services Corporation, a for-profit company which was then hired by all four charter schools to manage the day-to-day operations of the charter schools and provide academic supplies such as books, paper, pens, pencils, chalkboards, desks, chairs, projectors, computers, etc. Cox inspired Tad Honeycutt, who in 2000 successfully ran for a position on the Hesperia City Council and in time acceded to the position of mayor, to work with the California Charter Academy as well and create his own set of companies, Maniaque Enterprises and Everything For Schools, which like Educational Administrative Services Corporation delivered educational materials and services to the non-profit charter schools at a profit.
Those for-profit companies greatly inflated the prices they charged for delivering those services and supplies. In some cases, educational materials that were paid for by the charter schools were never delivered. Instead, the money was used for a host of purchases that had no conceivable connection to the operation of schools.
By 2003, teachers at several of the schools were going public with accounts of how students’ educations were being neglected and books and other educational materials were not being provided. According to some of those teachers, Cox and Honeycutt, emboldened by the political connections they had in San Bernardino County, which was the base of operations for the California Charter Academy, Educational Administrative Services, Everything For Schools and Maniaque Enterprises, went so far as to take financial advantage of the teachers themselves in keeping the academy functioning while pocketing the state education system money being provided by the various sponsoring school districts.
According to Christopher Casey, who had been hired by Cox to run one of the academy’s vocational schools, “Steven Cox started out as if he was interested in improving education. Tad talked up the charter school idea to get more students and more schools, telling everyone charter schools were dedicated to better education. But when it turned into just a money-making venture, Tad didn’t have the personality or character to handle it and he just went along with everything Cox was doing.”
The California Charter Academy fell crucially short in the provision of key educational materials, Casey said.
Casey said, “With my own money – my credit card – I set up a home builders school in San Bernardino. I had thirty or forty students signed up. We had the class schedule set and I couldn’t get books. I was working with Jim Melton. I asked for the materials. We never got one book. I pleaded for the books. I didn’t see any results. I couldn’t get books. They weren’t focused on that. I said to them, ‘These are the texts I need.’ I asked them to provide resources. They never did. They just prolonged it and prolonged it and put it off. I started the school hoping they would be seriously focused on education, but when I found out what they were really doing, I lost heart and got out of it.”
Melton was one of then-San Bernardino County Supervisor Bill Postmus’s associates.
It was dishonest and reprehensible, Casey said. “A lot of money went into it,” he said. “They had a tremendous opportunity and instead they just used it to take money out of it. They had some outstanding people who wanted to do the job but their hands were tied.” Part of Cox’s formula, Casey said, was to “get heavy into politics. [Former California Assemblyman] Keith Olberg went to work for the California Charter Academy. Bill Postmus was their major political asset.”
Very early on, political angles with regard to the California Charter Academy manifested. In 2001, Bill K. Postmus, the father of Bill Postmus, who had been elected county supervisor the previous year, went to work for Cox as the director of/lead instructor in the academy’s criminal justice and leadership program.
In 2004, the superintendent of the California Department of Education, Jack O’Connell, suspecting financial irregularities, launched an investigative audit into California Charter Academy. The preliminary findings from that audit created sufficient concern for state education officials to signal to the sponsoring school districts that the California Charter Academy appeared to be grossly out of compliance with the regulations relating to charter schools.
In June of 2004 as the state was withdrawing funding from the California Charter Academy, Supervisor Postmus’s father was in danger of being thrown out of work. At that point, Postmus induced his colleagues on the board of supervisors to vote with him to have the county forward a $77,000 Workforce Investment Grant to the California Charter Academy in an effort to keep the school where the older Bill Postmus was the principal in session.
It was also at Supervisor Postmus’s insistence that Cox had previously hired former California Assemblyman Keith Olberg and had the Charter Academy and Educational Administrative Services Corporation pay him more than $375,000 over three years, ostensibly to develop an “honors program” for the academy’s schools. Olberg, however, did virtually nothing on that project and the so-called honors program was never instituted.
Postmus similarly insisted that Cox endow political action committees he and his chief of staff, Brad Mitzelfelt, controlled with money to support Mitzelfelt’s future political candidacies as well as those of another Postmus ally, Anthony Adams, who served two terms in the California Assembly.
In August 2004, four years after California Charter Academy’s creation, it ceased operations abruptly, throwing teachers out of work and forcing students to hurriedly matriculate back into public schools.
O’Connell intensified and broadened the audit, obtaining search warrants to seize the available financial books kept by the California Charter Academy, Educational Administrative Services, Everything For Schools and Maniaque Enterprises, and detailing investigators to speak with those involved in the academy, administrators, teachers, students and parents. The state’s Fiscal Crisis and Management Team, augmented by an auditing firm hired by the California Department of Education, MGT of America, pored over the documents obtained.
On April 14, 2005, MGT of America and the California Fiscal Crisis and Management Team released their joint financial audit of the California Charter Academy, showing $23 million in taxpayer money paid to the private management companies Educational Administrative Services Corporation, Maniaque Enterprises and Everything For Schools was misappropriated. Among the findings were that Cox had hired several of his family members into what were essentially do-nothing clerical and non-productive administrative positions, that Cox, his family members, other Educational Administrative Services Corporation and Charter Academy employees and Honeycutt were provided with luxury automobiles, and that among the expenses accumulated by the Charter Academy were accommodations in Las Vegas, at Disneyland and the Disneyland Hotel, studio musical recording equipment, spa visits, fishing trips and jet skis.
Cox made $5.5 million in payments to Honeycutt’s for-profit subsidiary without a vote by the academy board to approve the disbursements. Cox’s take was more substantial, around $17.5 million.
The audit detailed multiple conflict-of-interest violations, the improper conversion of private schools to public charter schools, and the falsification of documents and claims to receive public funds.
“The magnitude of waste of precious education funds outlined in the audit was appalling,” said O’Connell.
In late July 2007, a grand jury was impaneled and began inquiries into the California Charter Academy’s operations. On September 4, 2007, Honeycutt and Cox were arrested after being indicted by that special grand jury for their alleged roles in the collapse of the California Charter Academy. Cox and Honeycutt were indicted on a total of 117 counts, including fraud, misappropriation of public funds and grand theft. Cox’s bail was set at $1 million, while Honeycutt’s was logged at $500,000. Both were able to post bail. Law enforcement officials froze their domestic assets, but little of the missing money that officials thought might be recovered was present in their accounts in local banking institutions. It is known that Honeycutt had made multiple trips to Vanuatu, Spain and Argentina in the early and mid-2000s. Some of the taxpayer money provided to the California Charter Academy was used to fund lawsuits brought by Cox and Educational Administrative Services Corporation against public entities. In one case, Cox and Educational Administrative Services Corporation filed suit against the California Department of Education, contending the state had illegally withheld funding from the California Charter Academy. Cox and Educational Administrative Services Corporation did not prevail in that suit. Cox brought another unsuccessful lawsuit alleging impropriety and political motivation on the part of public officials whose actions led to the closure of the California Charter Academy.
A series of miscues, procedural and judicial, along with the corrosive pull of political influence prevented the criminal case against Cox and Honeycutt from being fast tracked from the start.
Honeycutt, through his parental connections as well as his affiliation with Bill Postmus, was active in Republican politics, and was involved in raising money that was used by a number of officials, including judges, to get into office. Honeycutt’s father, Theron, was Hesperia’s mayor in the 1990s. His mother, Kathleen, was California Assemblywoman from 1992 until 1994. Several judges at the Victorville Courthouse declined to hear the case involving Honeycutt or any of Postmus’ political allies, recusing themselves.
Cox and Honeycutt came before Judge Margaret Powers for arraignment. The case was then handed over to Judge Eric Nakata. An effort to recuse Nakata ensued, however, and at the intervention of then-Presiding Judge Larry Allen, the case was transferred back to Powers. Subsequently the case was heard by judges Miriam Morton, John Tomberlin, Jules Fleuret and Arthur Harrison. Eventually the case went to Judge Jon Ferguson in Rancho Cucamonga. In more recent years, motions have been ruled upon and proceedings overseen by Judge Ferguson, before whom it is anticipated the trial will take place, as well as judges Charles Umeda and Ingrid Uhler.
The trial timetable suffered a setback in November 2010 when Cox’s attorney, Earl Wade Shinder, committed suicide. That was more than eight years ago, however, and the delays continued. Attorney Grover Porter, who has represented Honeycutt for more than ten years, and Geoff Newman, Cox’s fifth lawyer, are sufficiently up to speed on the case to proceed to trial. More than four years ago, Porter made a motion to withdraw as Honeycutt’s attorney of record. That motion was denied by Judge Jon Ferguson, who said there was no legal basis for the withdrawal.
There are roughly 52,000 pages of discovery and 459 anticipated trial exhibits. Some 80 witnesses testified before the grand jury, including Postmus, his successor as supervisor Brad Mitzelfelt, Hesperia School Board Member Eric Swanson, and then-Victorville Councilwoman Joanne Almond.
Based upon multiple witness statements and the documentation in the MGT of America/California Fiscal Crisis and Management Team audit, the case against Cox and Honeycutt is a strong one, with bank records, receipts, hotel and resort registrations, airline ticket records and vehicle registrations demonstrating that millions of dollars in funding intended for educational purposes was diverted to pay for vacations, vehicles, recording and video equipment, jet skis, leases on or payments for real estate or to cover political campaign expenses.
The prosecutor on the case is Michael Fermin, who was a deputy district attorney when he was assigned to carry it forward in 2007. After the retirements of former assistant district attorneys Dennis Christy and James Hackleman, Fermin was elevated to the position of assistant district attorney overseeing a major portion of the office’s administrative duties, including its budget and human resources. Today, the case involving the California Charter Academy against Cox and Honeycutt is Fermin’s only remaining prosecutorial assignment. Indeed, the California Charter Academy case, involving allegations of $23 million intended for educational purposes being diverted to unauthorized, improper or illegal use, is one of the most important cases, if not the most important one, in Fermin’s career as a prosecutor. Similarly, it stands among the most intensive of the white collar criminal cases taken up by the district attorney’s office during Mike Ramos’s tenure. Fermin has deferred a number of the district attorney’s office’s appearances in the case to deputy district attorney John Thomas.
For reasons the district attorney’s office has chosen not to clarify, it has delayed again and again and again and again in moving the case to trial, despite its potential for boosting Fermin into the legal stratosphere and serving as a resplendent feather in Ramos’s cap. Among various and sundry other motions and in-court actions, there have been 61 pretrial hearings scheduled and begun, abbreviated, postponed, suspended, partially held or delayed, without the matter coming to trial.
The case originated at a time when there was a much different political lay of the land than exists now. The shift in the political pecking order, and the degree to which the district attorney’s office shielded the now-defunct political dynasty that ruled the roost in 2007 when the case was filed, explicates at least in part the cause for the delay.
By 2004, Bill Postmus had acceded to the position of chairman of the San Bernardino County Board of Supervisors. Almost simultaneously, he had become the chairman of the San Bernardino County Republican Central Committee, exercising control over Republican Party endorsements and the delivery of GOP money to local Republican candidates for political campaigning purposes. In 2006, with two years left on his second term as supervisor, Postmus ran successfully for county assessor against the incumbent, Donald Williamson. Postmus thus acceded to the position of the highest ranking tax official in San Bernardino County, with virtual autonomy over how property and assets were to be assessed throughout the entire San Beranrdino County jurisdiction.
In 2007, while Postmus was yet one of the most powerful political figures in the county, Fermin made a politically-driven decision to leave Postmus out of the indictment. Since that time, information implicating Postmus that was then available to the district attorney’s office has become widely known to the public, information which shows Postmus was embroiled in the California Charter Academy Scandal at multiple levels.
Cox emerged as one of Postmus’ major early political supporters, having contributed $25,450 to his political war chest when Postmus was running for supervisor in 2000, utilizing California Charter Academy money to make those donations.
Early on, Postmus was appointed by Cox to serve as a member of two of the boards of the charter schools functioning under the aegis of the California Charter Academy. Postmus then used his status as a charter school board member as a feature in his resumé when he first ran for supervisor.
Action Postmus took, based upon his actual authority as a board member or carry-over authority as a former board member and close affiliate of Cox, became the focus of the grand jury that was impaneled in 2007 and which indicted Cox and Honeycutt. Irrefutable evidence emerged to show Postmus made efforts to ensure that members of his family as well as his political supporters were rewarded with jobs or contracts at or with the California Charter Academy.
Evidence was produced to show that Postmus directed Cox or otherwise arranged, both while he was a charter academy board member and afterward, for money to be diverted to Brad Mitzelfelt, who was Postmus’ chief of staff when he was supervisor, and Keith Olberg, a former state assemblyman who was a key Postmus political ally, in the form of questionable or illegal payments. Postmus worked as district director in Assemblyman Keith Olberg’s High Desert office from 1995 until 1999.
In 2002, Postmus was provided with an all-expenses paid trip to Florida by Cox, who used California Charter School funds to pay for the trip, accommodations and spending cash, which totaled more than $17,000. No explanation of what the trip was for was ever provided.
In 2001, Bill K. Postmus, Bill Postmus’s father, was given a lucrative position as the principal/director/lead instructor in the academy’s criminal justice and leadership program.
Ten years ago, Postmus fell from grace, having been downed by drug use, extortion and bribery scandals. In 2011, he pleaded guilty to 14 felony corruption-in-public office charges unrelated to the California Charter School case, along with a single misdemeanor narcotics violation. Earlier this month the court considered and rejected a motion made on his behalf by his attorney Jeffrey Lawrence to vacate that plea. Thereafter, he was sentenced to three years in state prison and this morning reported to serve that sentence. An element in the more than seven-year delay between the time Postmus entered his guilty pleas and the initiation of his sentence was that part of his plea arrangement was for him to serve as a primary witness in two separate political corruption cases, one relating to his misuse of the assessor’s office and another pertaining to allegations of extortion and bribery involving a vote he made in the final weeks of his tenure as supervisor in 2006 to approve a $102 million payout by the county to settle a lawsuit brought against it in 2002 by the Colonies Partners development consortium over flood water drainage issues at the Colonies at San Antonio residential and Colonies Crossroads commercial subdivisions in north Upland. Prosecutors alleged he had been extorted prior to and bribed after making that vote. He testified at length last year in the trial of the Colonies Partners managing principal, Jeff Burum, who was accused of providing that bribe, and the political operative and one-time president of the sheriff’s deputies’ union, Jim Erwin, who was accused of extorting Postmus, as well as their codefendants, Postmus’ one-time board of supervisors colleague Paul Biane and Mark Kirk, the chief of staff of former Supervisor Gary Ovitt.
There have been longstanding reports that the district attorney’s office originally delayed the prosecution of Cox and Honeycutt because of then-emerging questions about Postmus’s involvement in that scandal and indications that political considerations rather than a cold hard analysis of guilt or innocence entered into the prosecutor’s office’s decision about who would be charged in the California Charter Academy matter. Since that time, there have been reports that the delay of the prosecution of Cox and Honeycutt was subsequently extended because prosecutors were reluctant to initiate the trial in the California Charter Academy case until after the trial for Burum, Erwin, Biane and Kirk had concluded because of the possibility that defense attorneys in that matter would make an attack on Postmus’ credibility, word of which might reach the jurors in the Colonies case, and impact their deliberations and ultimate verdict. An eight-month-long trial on the charges relating to the Colonies Partners lawsuit settlement with the county last year ended in acquittals/a hung jury. The district attorney’s office has declined to comment on why the prosecution in the California Charter Academy Case has been delayed.
Of note is that as the California Charter Academy prosecution languished, both Cox and Honeycutt replicated what they had carried off with the California Charter Academy, albeit on a less grand scale.
In 2009, the Postmus Political Machine was in its last throes, its leader having been exposed as a drug addict, a revelation which resulted in his February 2009 resignation as county assessor. But those who had manned his political machine were yet angling for money, even as political power was slipping from their grasp.
Cox, working as a quiet adviser functioning from the shadows, put together another charter proposal, this time selling the idea to the Adelanto School District. Participating in the free-for-all were Cox; Postmus; Postmus’ one-time chief of staff, Brad Mitzelfelt, who had succeeded him and at that point remained as First District supervisor; Dino DeFazio, a friend of Postmus and the owner of D & D Real Estate and other real estate businesses, including Tri-Land, Inc, in which he was a partner with Postmus; Jessie Flores, a former field representative for Postmus and a then-field representative for Mitzelfelt; Adam Aleman, who was formerly one of Postmus’s field representatives and later one of Postmus’s assistant assessors; Hesperia Unified School District Trustee Anthony Riley, a Postmus political ally; Sentry Home Loans owner and Adelanto Boys and Girls Club President Helene Harris and her husband Hendon Harris; Mitchel E. Pullman, a principal in Arrowhead Properties, IV, LLC; and Peggy Baker, Charles Steven Cox’s sister-in-law.
After Cox prepared the articles of incorporation, the Adelanto Charter Academy was chartered by the Adelanto School District on August 19, 2009. Functioning on a model not very different from that used by the California Charter Academy but on a smaller scale, Cox, Postmus, Mitzelfelt, DeFazio, Flores, Aleman, the Harrises, Pullman and Baker utilized the position of trust they had been vouchsafed to funnel money to themselves or the companies they controlled. In the roughly 15 months the academy was running without any oversight, they managed to loot the operation of more than $2 million that should otherwise have gone toward the education of students but instead was diverted to activities, purchases and disbursements having no conceivable academic application, such as the provision of limousines to the participants by Flores, the owner of Diamond Limousine. The Adelanto Charter Academy contracted with Professional Charter Management, Inc. to have the latter perform administrative services in return for 15 percent of all Adelanto Charter Academy revenues.
According to the California Secretary of State, Professional Charter Management, Inc. was a corporation with Jessie Flores as its chief executive officer and Dino DeFazio in the capacities of chief financial officer and secretary and Kari Murdock as agent for service of process. Kari Murdock is the niece of Charles Steven Cox.
In December 2010, Jessie Flores filed, under penalty of perjury, a certificate of dissolution for Professional Charter Management, Inc. Records, however, show that Professional Charter Management, Inc. continued to receive payments from the Adelanto Charter Academy after that dissolution.
According to records obtained by the Sentinel, the Adelanto Charter Academy contracted with Educational Development, Inc. to perform administrative services in return for 5 percent of all Adelanto Charter Academy income from September 1, 2009 until June 30, 2014. It is not clear whether or how the administrative activities carried out by Educational Development, Inc. either meshed, or conflicted, with the administrative services provided by Professional Charter Management, Inc.
In November 2010, an audit cataloging significant shortcomings in the school’s operations was released, showing the academy had diverted some $2.2 million from educational purposes to the coterie of Postmus’ one-time political hangers-on. On May 17, 2011, the Adelanto School District revoked the charter it had granted to the Adelanto Charter Academy. The Adelanto Charter Academy immediately appealed the decision to the San Bernardino County Superintendent of Schools, who upheld the Adelanto School District’s decision on August 1, 2011. The Adelanto Charter Academy appealed that decision to the California Department of Education and continued to operate until notified on April 17, 2012, that “your administrative remedies are exhausted” and “any further appeal of revocation must be sought in a court of local jurisdiction.”
Recognizing that moving the matter into such a forum might well lead to indictments, those behind the operation threw in the towel, having diverted somewhere in the neighborhood of $3.1 million to their own pockets and bank accounts.
The brazenness with which those involved acted is further illustrated by Honeycutt’s seemingly nonchalant behavior in the aftermath of the indictment, as well.
In 2012, a half decade after his indictment but with the case remaining in interminable limbo, Honeycutt sought to again exploit the loopholes in California’s charter school regulations to recreate what had been the most lucrative run of his life. Changing the vowel in his first name from a to e, and adopting his mother’s maiden name, Viera, Honeycutt founded Innovative Academies, billing it as “a learning network platform for private schools in the USA to globalize and connect to students throughout the world.”
Under the guise of “Ted Viera,” and assuming the modest titles of manager and then director of field operations, Honeycutt did not hesitate to think big and go beyond the confines of California to cash in.
“We are actively seeking key ‘Sister School’ partnerships globally with schools, tutoring centers, student recruitment firms, and other education organizations,” he wrote in making his pitch.
The company had 17 employees and was actively pursuing partnerships with schools in mainland China and Taiwan, arranging to accredit students for classes taken in venues outside of the country where the academic institution they were attending was located.
The company offered, Viera told his prospective clients, specialized academic services such as a “dual diploma program, globalization, education management, and English learning.”
Students signing up with Innovative Academies could access the institution’s “Learning Network Platform,” its website claimed, and through it students could earn “a second high school diploma from an elite private school in the United States.”
The company’s website, InnovativeAcadamies.org, is no longer functional.
When California authorities learned of the operation, Honeycutt shut it down.
Repeated and concerted efforts to reach Assistant District Attorney Michael Fermin with regard to the issues pertaining to the case were unsuccessful.
The next pretrial hearing on the matter is scheduled before Judge Jon Ferguson on December 7.
By Gail Fry and Mark Gutglueck