Morongo Academy Latest Charter School To Implode In Financial Scandal

By Mark Gutglueck
YUCCA VALLEY—In what appears to be a recurring pattern with San Bernardino County’s charter schools, state auditors have found what they say is evidence that the former executive director of the Hope Academy Charter School exploited the trust of the parents of students in the district and misappropriated more than $900,000 in public money.
The results of an audit into the Hope Academy Charter School completed by the State Fiscal Crisis and Management Assistance Team at the behest of the California Superintendent of Schools became available this month, 13 months after the former director, Jared Mecham, resigned from Hope Academy on April 14, 2015.
Following suspicions expressed by the top administrator with the Morongo Valley Unified School District relating to multiple fiscal irregularities, questionable expenditures, nepotistic arrangements and inappropriate related-party transactions at the charter school, the San Bernardino County Superintendent of Schools requested the audit.
After three Morongo Valley Unified School District teachers developed the concept of a school devoted to underserved at-risk students in the Yucca Valley region and they originated a petition to create a charter school, Hope Academy, Inc. was incorporated on April 6, 2011. The Morongo Unified School District approved the petition to operate as a charter school for five years starting July 1, 2011 and running through June 30, 2016. More than three years later, on December 3, 2014, Hope Academy was granted status as a nonprofit public benefit corporation, a 501 (c)(3) in the state of California.
Red flags had been raised from the outset, when Hope Academy commenced operations during the 2011-12 fiscal year as “a non-classroom-based learning environment” serving students in the Morongo Basin, revolving around a resource center which opened in Yucca Valley in August 2011.
Once comfortably established, Hope Academy expanded operations in several adjacent counties and districts located in San Bernardino, Kern and Riverside counties without the district’s express permission or knowledge, despite a requirement that any proposed expansion for a new independent study resource center outside the district’s boundaries would be explicitly communicated to the Morongo Valley District. In 2013, two of the original founders resigned from the charter school.
The academy has several resource centers, supporting the Structured Time Enrichment Program (STEP) for students in transitional kindergarten through eighth grade, operating from 9 a.m. to 2:30 p.m. daily as well as independent study programs in several counties for students in grades kindergarten through 12. Resource centers opened in fiscal year 2013-14 in Beaumont, Bloomington, Indio, Palm Desert and Victorville and in fiscal year 2014-15 in Apple Valley, Big Bear, Bakersfield and Tehachapi. The Apple Valley resource center closed during the current fiscal year.
On November 23, 2015, the Morongo Unified School District superintendent wrote a letter to the superintendent of the San Bernardino County Superintendent of Schools expressing concerns regarding conflict of interest. The concern focused on the involvement of the former superintendent/executive director of Hope Academy serving as a majority owner in SavantCo Education, the charter school’s back-office service provider. The master services agreement with the academy called for SavantCo Education providing finance, accounting and payroll services, business consulting, board meeting support, attendance and student information system management, charter development, grant administration, as well as financing support.
According to the auditors with the Fiscal Crisis and Management Assistance Team, Mecham, while yet serving as charter school superintendent, used Hope Academy’s relationship with SavantCo Education to reap hundreds of thousands of dollars in profit for himself and his wife.
According to the audit, “At Hope Academy, the lack of internal controls and integral relationship between the founder superintendent/executive director and related family members particularly between the founder, his spouse and extended family and his private businesses, created an environment that allowed the essential elements of fraud to occur, including motivation and opportunity.”
It appears that Mecham made these questionable payments without the authorization of the academy’s board of directors. Mecham’s exploitation of the trust placed in him was immediate and brazen. As the superintendent/executive director of the 1,744-student Hope Academy, Mecham arranged a $220,275 annual compensation for himself. This contrasted favorably or dwarfed the pay provided to the superintendent in the 8,905-student Morongo Unified School District, who received $157,278; the superintendent in the 23,735-student Hesperia Unified School District, who received $156,260 annually; and the superintendent with the 3,789-student Oro Grande Elementary School District, who receives an annual salary of $159,497.
Mecham’s wife, Christine, who was originally hired as a teacher, was promoted from teacher to senior director of programs in August 2013. In that position, she was paid $159,583 during the 2014-15 school year. Her salary was increased during the 2015-16 school year to $195,666 but she only received half that, $97,833, through December 2015, when her tenure with the school was terminated.
Mecham did not stop at securing comfortable salaries for himself and his wife. According to the audit, he also set up three companies that existed essentially to provide services to Hope Academy: SavantCo Financial, Inc. for automobile lease agreements; SavantCo Education, Inc. as a “back-office service” provider; and Savantech, Inc. for technology services.
According to the audit, “Until July 2014, the academy contracted with EdTec Inc., a back-office service provider, for accounting, finance, payroll, and attendance, grant administration, human resources, governance support, board presentation, compliance and accountability and facilities services. The monthly fee was $9,771.25. On March 11, 2014 the Hope Academy governing board approved a master services agreement with SavantCo Education effective July 1, 2014 through June 30, 2015 for a monthly fee of $58,000, almost six times the amount previously paid to EdTec for similar services. The fiscal crisis management and assistance team found invoices from SavantCo Education to Hope Academy from as early as January 2014, before the board authorized a master services agreement, totaling $130,890.40 in addition to the EdTec monthly charges of approximately $10,000. These invoices include several charges that should not have been charged to Hope Academy.”
The charges included $103,440 for what was referred to as a “monthly retained fee,” an apparent bonus for just showing up.
According to the audit, “On June 25, 2014, the founder signed the master services contract in his capacity as superintendent/executive director of Hope Academy while he was also a principal officer in SavantCo Education, Inc. His partner, another officer of SavantCo Education, countersigned this agreement. The Fiscal Crisis and Management Assistance Team could not locate disclosure documentation or a reference in board minutes that publicly discloses the relationship of the founder as a principal officer in SavantCo before board approval of the master services agreement. The contract was terminated December 2015, and a new back-office vendor was approved as of January 2016 to provide equivalent services for $22,000 per month with a $20,000 initial set up fee.”
The audit also found that Mecham “recommended to the governing board the purchase of a 2004 Bounder 27’ Class A motor home as a mobile web lab to fulfill the Western Association of Schools and Colleges (WASC) requirements for science. According to the founder, the intent was to remodel the motor home into a mobile lab that would provide hands on science to students at the various resource centers for academy students in order to be compliant with WASC. The governing board approved the purchase for $60,855.34 at the June 9, 2015 board meeting. According to the new superintendent/executive director, the founder did not disclose that the motor home was registered to his parents-in-law in Montana and that the amount of the purchase was the exact amount of the payoff from Commerce Bank. The founder’s spouse signed the check dated June 15, 2015 for the payoff to her parents from academy’s general bank account. Renovation costs to convert the motor home into a mobile wet lab were prohibitive, causing the board to declare the motor home surplus property at the October 13, 2015 board meeting in conformance with Board Policy 3011.1. The motor home was sold for $9,000 at public auction, a loss of $51,855 four months after the original purchase.”
According to the audit, Hope Academy skirted state regulations pertaining to state funding for nonclassroom-based instruction by fudging on its facility expenditures and miscoding the management service fees, which were actually bonuses paid to staff, legal fees, audit fees and other fees as direct educational services to meet requirement criteria the California Department of Education used in calculating reimbursement for instructional services, books and supplies.
In addition, according to the audit, Hope Academy misrepresented, through documents filed by its accounting firm, that the Hope operations involved no conflicts of interest, specifically that the academy had no business transactions with a current or former officer, director, trustee, or key employee, a family member of a current or former officer, director, trustee, or key employee or an entity of which a current or former officer, director, trustee or key employee was an officer, director, trustee, or direct or indirect owner.
In fact, such transactions had occurred, according to the audit. Moreover, the San Diego-based accounting firm, Hosaka, Rotherham & Company Certified Public Accountants, according to the state audit, “supported the inaccurate filings prepared by the academy and failed to properly reclassify expenditures in the correct categories” and falsely certified that Hope Academy had a written conflict of interest policy requiring its officers, directors or trustees and key employees to disclose annually interests that could give rise to conflicts. Mecham signed under the penalty of perjury the misleading documents prepared by Hosaka, Rotherham & Company. Subsequently, two Hosaka, Rotherham & Company employees who were responsible for the Hope Academy accounting were hired as employees of Hope Academy.
Hope Academy paid $108,577 to Mecham’s uncle and his legal firm, in Royal Oak, Minnesota, for legal services in 2015. Christina Mecham signed three of the checks to the law firm, totaling $23,316. The district was billed by the law firm after Mecham resigned. Its bill related to research into the California Political Reform Act and other provisions of state conflict-of-interest law, an indication Mecham recognized he had run afoul of the law.
Efforts by the Sentinel to reach Mecham included efforts to reach him by phone and track him down at his home in Yucca Valley. His residence at 58437 Campanula Street in Yucca Valley appeared to be uninhabited and his phone – (760) 365-5423 – was disconnected. His Apple Valley phone – (760) 810-0501 – had been augmented with a mechanism that terminated all incoming calls upon reception.
On April 7, the Morongo Valley Unified School District, citing poor academic testing performance on the part of Hope Academy students and the unauthorized expansion of the academy beyond the district, elected not to renew Hope Academy’s charter.
In the 2015 state assessments, 19 percent of the students at Hope Academy met or exceeded the English standards and 9 percent met or exceeded standards in math, contrasting unfavorably with Morongo Unified students in general, among whom 44 percent met or exceeded English standards and 32 percent who met or exceeded math standards. Just 53 percent of Hope Academy’s students graduated, compared to an 84 percent graduation rate in Morongo Unified overall. A partial explanation of the disparity in those statistics is that Hope Academy caters to academically challenged students.
In further justifying not renewing the charter, district officials said the Hope Academy had branched out into a geographical area some three times the size of the district and that its operations therefore could not be reasonably monitored.
Kyle Hannah, Mecham’s successor as superintendent, told the Sentinel, “Unfortunately, what has occurred has cast us in a negative light. That was all in the past and this was something that occurred under the founder and previous superintendent. We are actually glad its out in the open. If the story is fully told, people will see that we worked with the Fiscal Crisis and Management Assistance Team in helping to bring this information out. We had a big part in that. We hope to move forward from that situation and continue to do what we do for kids.”
Hannah said Hope Academy is seeking to undo the Morongo School District’s rejection of the academy’s petition for rechartering. “We are appealing the Morongo School District’s decision through the San Bernardino County Department of Education,” Hannah said. “We are hopeful we can get them to see that we have responsible and dedicated people who are doing tremendous things for underserved students who, for whatever reason, are disenfranchised from the school district. We want to show them that it was the students who were the ones hurt by what happened during the previous administration, and we are committed to not let that happen again.”
The public hearing on the appeal is to take place at the office of the San Bernardino County Superintendent of Schools on July 8, with the county school board scheduled to vote on granting or denying the appeal August 1. .
Tom Baumgarten, the superintendent of the Morongo Unified School District, is credited with having been the linchpin in the effort to push Mecham out of Hope Academy and the instigator of the Fiscal Crisis and Management Assistance Team audit.
He said his suspicions were raised when “I was not able to get certain reports from them.” That suspicion went critical, Baumgarten said, when some documentation became available. “Eventually I was able to get some things, one of which was a signed document that looked like there was a conflict,” he said. “That was the one he signed while he was superintendent with a company he owned, the master agreement for services with SavantCo. I asked them [the San Bernardino County Superintendent of Schools and California Department of Education] to review it in November 2015.”
Additionally, Baumgarten said, “I turned what I had over to the sheriff and district attorney. They were waiting upon the completion of the audit and will determine now if there is a case for the misappropriation of funds.”
Asked whether he believed the Hope Academy was a misadventure from the start or that it had simply been driven off of its rails by Mecham, Baumgarten said, “Jared Mecham played a vital role. I think unfortunately this was an example of things having not been done right. Like with everything else, sometimes what is intended and what is possible in the best sense doesn’t get accomplished.”
Baumgarten did not go so far as to say that the abuses perpetrated by the Hope Academy operators delegitimized the charter school concept.
“This was a real challenge for us, but I don’t think I am qualified to take what the Fiscal Crisis Management and Assistance Team had found in this case and look beyond that to make a conclusion beyond what occurred here.”
Nevertheless, there have been multiple instances of scandal plaguing charter schools in San Bernardino County in recent months and years, nearly all of which involve the founder or superintendent exploiting the operations for personal profit.
The most egregious example is that of the California Charter Academy, founded by C. Steven Cox.
Shortly after the California Charter Academy’s first campus was founded in 2000 under the auspices of the Snowline-Joint Unified School District, which exists in the High Desert communities of Phelan and Pinon Hills, Charles Steven Cox managed to expand the California Charter Academy in relatively short order into the largest charter school operator in California. He convinced Snowline to charter a second academy, then obtained two more charter sponsorships, one from the Orange School District in Orange County, and one from the Oro Grande School District, located in San Bernardino County’s High Desert.
Simultaneous to his founding of the non-profit California Charter Academy, Cox created Educational Administrative Services Corporation (EASC), 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, desks, chairs, projectors, computers, etc. The rates charged by EASC reflected in the billings were inflated. In some cases, educational materials that were paid for by the charter schools were never delivered.
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. In 2004, the superintendent of the California Department of Education, Jack O’Connell, launched an investigative audit into California Charter Academy, alleging financial irregularities. 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.
On April 14, 2005, MGT of America, an auditing firm hired by the California Department of Education, and the state’s Fiscal Crisis and Management Team released their joint financial audit of California Charter Academy, showing $23 million in taxpayer money paid to the private management company Educational Administrative Services Corporation 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 EASC and Charter Academy employees were provided with luxury automobiles, and that among the expenses accumulated by Charter Academy were accommodations in Las Vegas, at Disneyland and the Disneyland Hotel, studio musical recording equipment, spa visits, fishing trips and jet skis. The audit alleged 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.
Ultimately, 147 yet outstanding criminal charges against Cox and his associate, Tad Honeycutt, were filed by the San Bernardino County District Attorney’s Office. That case has yet to go to trial.
In the Chino Valley Unified School District, Sue Roach, an award winning and respected educator and the principal of that district’s best performing school, in 2010 was entrusted with $3 million of the district’s revenue to Oxford Preparatory Academy. Roach’s formula, which involved intense academics and parent participation, proved successful and Oxford Preparatory in short order established itself as one of the highest performing schools in San Bernardino County, with its students having the highest scores on state standardized tests of any county schools three of the first five years of its existence. When the school’s charter came up for renewal earlier this year, however, Chino Valley Unified Superintendent Wayne Joseph, who was closely aligned with and highly supportive of Roach in the past, recommended against renewing Oxford’s charter and the school board supported him in voting to make that denial. Joseph pointed to Roach’s creation of a for-profit company, Edlighten Learning Solutions, which then was given a contract to serve as Oxford Academy’s  “charter management organization,” which called for ten percent of Oxford’s revenues to be diverted to Edlighten for that service. Furthermore, Joseph decried other “consulting work” to be done for the academy that was likewise scheduled to be steered to Edlighten.
Roche had engaged in “arrogance, overreach and greed” in the administration of the academy, Joseph said in recommending against the charter renewal in March, adding, “This is a classic example in which a very, very successful charter school, somewhere along its journey, lost its way.”
In March 2015, Excelsior Charter Schools made an ugly public display when it conferred severance packages upon former superintendent Bill Flynn and former assistant superintendent of student services Minda Stackelhouse. Unofficial reports were that the severance packages Flynn and Stackelhouse received were $635,000 and $298,000 respectively when they made their departure from Excelsior the previous month. Excelsior is chartered under the authority of the Victor Valley Union High School District, serving students in grades seven to twelve. It consists of five schools, two in Victorville and one each in Phelan and Barstow as well as in Norco in Riverside County. On February 19, 2015 Flynn and Stackelhouse resigned, but no indication was given as to why. Their lawyer maintained they were due the remaining amount under the nearly four years unexpired in Flynn’s contract and the nearly two years remaining in Stackelhouse’s contract.
In 2011, the Adelanto School District revoked the charter it had granted to the Adelanto Charter Academy in 2009 after it was demonstrated that a number of public figures, including indicted and now convicted former San Bernardino County Assessor Bill Postmus, Hesperia School District board member Anthony Riley, indicted former California Charter Academy founder Charles Steven Cox, Peggy Baker (Cox’s sister-in-law), then-San Bernardino County Supervisor Brad Mitzelfelt, Mitzelfelt’s field representative Jessie Flores, indicted former assistant assessor Adam Aleman and indicted local businessman John “Dino” DeFazio all siphoned off money from the Adelanto Charter Academy or entities deriving money from the academy.
On November 30, 2015, the Adelanto School District’s Board of Trustees, in support of Superintendent Edwin Gomez’s recommendation, voted unanimously to deny Debra Tarver’s application for the charter renewal of the school that had been installed two years previously at Desert Trails Elementary School following a “parent trigger” takeover there. Debra Tarver, the owner/operator/progenitor of the LaVerne Preparatory Academy, came in to serve as the “director” at Desert Trails, which underwent a name change to Desert Trails Preparatory Academy.
Gomez cited “flaws” in the way Desert Trails Prep was being operated, including a lack of academic achievement, inadequate academic testing and action bordering on or crossing into the arena of a financial conflict of interest, when Tarver shifted governance to Ed Broker’s Educational Services, a company which Tarver owns. The district cited Ed Broker’s Educational Services as being the governing corporation for LaVerne Elementary Preparatory Academy, founded and also owned by Tarver, located in Hesperia. Tarver receives a salary of $100,000 per year from Desert Trails to serve as the School’s CEO/executive director while she was devoting a third of her time to Desert Trails Preparatory Academy a third of her time to LaVerne Elementary Preparatory Academy and another third of her time to the LaVerne Academy’s corporate function.

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