Charter School Hustle
By Rick Outzen and Jeremy Morrison
Teaching is seen by many as a dedicated profession whose motive is not profit. However, charter schools in Florida have been very profitable for some.
A highly critical report released last year from Integrity Florida outlined a number of issues haunting the state’s charter schools, among them painful lease agreements with corporate affiliates. It appears Escambia County was home to a mom-and-pop version of just such a scenario tethered to the recently demolished McReynolds school building in East Hill.
In February 2001, Celestine Lewis incorporated the nonprofit New Road to Learning, Inc. to operate the Jacqueline Harris Pyramid School of Learning located at 615 N. W Street. Under Florida law, charter schools must be organized as, or be operated by, a nonprofit organization.
She named the school in memory of Jacqueline Watson Harris, a respected educator who worked in the Escambia County School District as a teacher, curriculum coordinator, elementary principal and director of the Chapter 1 program. Harris had passed away in 1998.
From the beginning, the charter appeared to have issues. According to its 2002 audit report, the school had a problem with related-party transactions during its initial year, 2001-02. A related-party transaction is one that takes place between two parties who hold a pre-existing connection before the transaction occurs. The school paid $7,000 rent per month to Pensacola Family Care for Youth, a nonprofit that had Lewis as its president and the school’s accountant and secretary as its other directors.
However, related-party transactions didn’t deter the Escambia County School Board from selling the McReynolds school property at 1408 E. Blount Street to the new charter school. The board chose not to put the site out for bids and approved the sale for its appraised value, $520,000.
Ted Kirchharr, the assistant superintendent of operations, told the News Journal at the time that if the property had gone to bids, it likely would have been demolished and the land used for residential purposes (PNJ, “School building sale ‘win-win’ situation,” 8/22/02).
School Board member Gary Bergosh called the deal a “win-win for the district.” He told the daily newspaper, “Ms. Lewis is a pretty sincere lady and has done remarkable things for that school. And it is a fair deal.”
According to the article, Lewis thanked God daily for the gift the Escambia County School Board gave the Jacqueline Harris Pyramid School of Learning.
Switcheroo at Closing
Unfortunately, the school never received that gift. The “present” went to a for-profit company formed by Lewis the day before the closing. In October 2002, Lewis’ Creative Projects, Inc.—instead of the nonprofit New Road to Learning—bought the McReynolds property. School district records stated it appeared Creative Projects had no assets on Oct. 4, 2002, the date of the purchase.
New Road to Learning, the charter school, paid the down payment and closing costs, $79,147, as a security deposit for the lease and later for improvements to the building, $295,782—even though the school didn’t own the property.
Creative Projects borrowed $480,000 to complete the purchase. New Road to Learning signed a 10-year lease with Creative Projects for the McReynolds school and agreed to pay $10,000 per month, beginning Nov. 1, 2002, and ending Oct. 1, 2012.
When the school district’s internal auditor questioned the lease, Lewis provided a letter from Robert Smith of John S. Carr & Company that stated the $10,000 monthly rent was “very reasonable for a renovated building with the central location it has.” Smith’s letter was dated July 21, 2003, after the renovations were completed.
Smith didn’t state what the rent should have been for the building before the renovations or whether it was unusual for the tenant to pay for renovations and then be charged a higher rent because of the improvements.
The district’s internal auditors were concerned because the property wasn’t sold to “the nonprofit corporation controlling the charter school (New Road to Learning) as per the Board’s request discussed in meeting minutes of Aug. 7, 2002.”
In May 2003, they met with the school district’s attorney, Francisco Negron, who said he wasn’t happy the transaction was “rushed through” without his department having time to provide oversight. The attorney said he expressed his displeasure with then-board chairman Dr. John DeWitt. He agreed with the auditors’ concerns with Creative Projects. Dr. Dewitt signed the documents on behalf of the school district.
A significant concern of the auditors was that if the charter school ceased to function, the McReynolds property would not have reverted to the school district but would remain with Creative Projects. This particular concern was among those highlighted in last year’s Integrity Florida report, as well as a 2015 Associated Press report that pegged the amount shuttered schools in the state had spent to lease facilities at $70 million.
In 2004, an internal audit report was produced and discussed by the district’s audit committee. No action was taken on Creative Projects being substituted for New Road to Learning as the buyer of the McReynolds property.
Based on the school district’s calculations, had New Road to Learning bought the building as the Escambia County School Board intended and took out a $480,0000 mortgage for 10 years at an interest rate of 6.5%, the monthly payments would have been $5,450. By September 2012, New Road to Learning would have paid $654,043 in principal and interest and owned the building free of any debt. Instead, the school paid over $2.3 million to rent the property, including a lump sum payment to get out of the lease this past May—depriving students and teachers of almost $1.7 million that could have been spent on classroom instruction and salaries.
The renovations of the McReynolds school were done by Hudson Construction, whose owner sat on the school’s board of trustees. The company was paid $70,000 in cash, and a note was issued for the balance—another related-party transaction.
Three years after her Creative Projects began collecting rent from the charter school for the McReynolds property, Lewis was able to move from her modest home on 13th Avenue to a mansion on Bayou Boulevard.
Meanwhile, the school had financial issues. In July 2004, it borrowed $30,000 from Creative Projects, which the school paid back two years later. Creative Projects reduced the monthly rent to $7,756 per month from October 2004 to November 2006.
In 2008, the school was warned it could be penalized for failing to meet Florida’s class size reduction requirements. The state Board of Education recommended a $10,825 penalty against Jacqueline Harris Preparatory Academy, which was slightly more than one month’s rent paid to Lewis’ company.
Lewis told the daily newspaper that the $10,825 coming out of her budget could be better spent (PNJ, “Charter schools’ classes too big,” 2/6/08). She said, “I’d love to be able to put that money towards hiring a teacher, but we can’t do that.”
Budget issues came up again when the school received a failing grade in 2011. Lewis told the News Journal that she had to cut back on staff because of budget constraints (PNJ, “Prep school at a critical crossroads,” 7/12/11).
Charter school board chairman David Alexander presented a school improvement plan to the Escambia County School Board. He laid out plans for possible budget cuts that could save up to $132,000 per year that included cutting some positions and decreasing some salaries (PNJ, “Charters safe for now,” 7/15/11).
New McReynolds Owner
Two years later, the school renewed its lease with Creative Projects, increasing it to $11,000 per month for 10 years. Apparently, the lease without a buy-out or termination clause made the property very attractive to potential buyers.
In March 2014, Durga Das Trust bought the McReynolds School from Creative Projects for $1,305,000—$830,000 cash and a note for $475,000 due to Creative Projects. New Road to Learning would continue to pay rent to Durga Das Trust, including the three years after the charter moved to Pensacola Boulevard.
In March 2016, Lewis sold the Bayou Boulevard residence and began construction on a home in the Nature Trail subdivision. The Escambia County Property Appraiser shows an assessed value of $489,184 for the new house, which is 4,000 square feet less than the Bayou Boulevard mansion.
On Dec. 30, 2016, New Road to Learning bought the school property formerly used by Newpoint on Pensacola Boulevard from GCLC Investments for $2,900,000. The mortgage with Beach Community Bank was for $3 million. Board Chairman Alexander signed the mortgage.
Had the school owned the McReynolds property, it would have received the proceeds from the sale, used the funds to make a substantial down payment on the Pensacola Boulevard property and reduced the monthly mortgage by $5,000 or more.
According to meeting minutes obtained through a public records request, the school board of New Road met only once in 2016, on May 26, even though charter school boards must meet twice a year according to Florida law. No minutes were provided that showed the board voted to purchase the Pensacola Boulevard property or agreed to the mortgage.
The school had a history of incomplete board minutes. An internal audit report, dated June 14, 2004, found the board minutes didn’t reflect the board ever voted on the contract for the renovations of the McReynolds property or an amendment to the contract. The auditors recommended the board take a more active role in oversight of the school and meet on a more frequent basis. They also stated that major purchase and contractual obligations made by the director first be approved by the board, and the vote be reflected in the minutes.
Lewis responded to the recommendations in writing—“We believe that our procedures for obtaining Board approval of major purchases and contractual obligations is proper. We admit we have not provided the proper documentation to Board decisions and approvals, and we will work to improve our documentation.”
Unfortunately, the school didn’t improve its documentation. Inweekly’s review of the board minutes for 2013-2019 didn’t show any board votes for the purchase of the Pensacola Boulevard property or the mortgage with Beach Community Bank.
From August 2017 through April 2019, the school paid every month $11,000 rent on a vacant McReynolds building and a mortgage payment of $15,992.21—a total of $26,992.21 per month. According to the school district’s Comprehensive Annual Financial Report for the fiscal year ended June 30, 2018, 35% of the school’s expenses went toward the physical plant operations, maintenance and interest on long-term debt. The district’s other charter schools spent an average of 15% on their physical plant.
In the March 13, 2019, board minutes, there is a reference to the lease—“Old building, 1408 E. Blount Street, we contacted Mr. Sonny to discuss a Buy-Out. Waiting on a response.”
On May 30, 2019, the school paid $350,000 to end the Durga Das Trust lease. The school borrowed $300,000 to cover the payment. The monthly note payments of $7,032 began on July 1, 2019, and will continue through June 2023.
No board minutes were provided that showed the board voted on the lease pay-off or approved the new loan. After its March meeting, the board didn’t meet again until Sept. 11.
On June 6, Durga Das Trust filed a notice of satisfaction of mortgage with Creative Projects. It’s unknown how much of the $350,000 went to Creative Projects. The City of Pensacola issued a demolition permit for the 1408 E. Blount Street building on Aug. 29.
The Escambia County School Board renewed the school’s charter for 15 years on Sept. 17 under its consent agenda.
Florida law requires that a charter school have a governing body. Jacqueline Harris Preparatory Academy’s board of trustees includes retired Pensacola Police Chief David Alexander, E.J. Hudson of Hudson Construction and Cindy Andrews-Bess, the former office manager of the school who replaced Georgia Smith in 2017. Ms. Smith’s last board meeting was June 17, 2015.
The governing board of the charter school must annually adopt and maintain an operating budget and exercise continuing oversight over charter school operations. The board must establish and maintain internal controls that prevent and detect fraud, waste and abuse.
Under Florida law, “abuse” means behavior that is deficient or improper when compared with behavior that a prudent person would consider a reasonable and necessary operational practice given the facts and circumstances. The term includes the misuse of authority or position for personal gain.
“Fraud” means obtaining something of value through willful misrepresentation, including, but not limited to, intentional misstatements or intentional omissions of amounts or disclosures in financial statements to deceive users of financial statements, theft of an entity’s assets, bribery or the use of one’s position for personal enrichment through the deliberate misuse or misapplication of an organization’s resources.
“Waste” means the act of using or expending resources unreasonably, carelessly, extravagantly or for no useful purpose.
Board members must adhere to the state’s standards of conduct. F.S. 112.313 (3) states, “No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent or lease any realty, goods or services for his or her own agency from any business entity of which the officer or employee or the officer’s or employee’s spouse or child is an officer, partner, director or proprietor or in which such officer or employee or the officer’s or employee’s spouse or child, or any combination of them, has a material interest.”
The 2004 internal audit report pointed out the initial renovations to the McReynolds school were done by a board member’s company without a vote by the board. In her response to the audit, Lewis said the renovations had been approved by the board, but “we failed to document the approval.” She added, “We will continue to work to improve our documentation of Board matters.”
Inweekly reviewed the audited financial statements for 2012-2019 and found several related-party transactions that the auditor pointed out to the board. In 2012 and 2013, the school outsourced its Pre-K program to Adoring Additions, which was run by Lewis’s husband. The 2014 audit reported the McReynolds property had been sold, and Lewis had personally guaranteed the school would continue to make the $11,000 monthly rent payments for four years. For 2013-2015, the school employed Lewis’s relative as a building manager. Hudson Construction, owned by board member Hudson, did minor repairs at the school.
Florida law required the school maintain a website. The 2014 audit reported the school didn’t have one that met the requirement. Lewis created a corrective action plan that stated, “We are evaluating vendors to provide training to staff that will assist in updating our website. We anticipate that we will have our website fully updated during the upcoming year.”
However, the audits for 2015, 2016 and 2017 continued to point out the school didn’t have the legally required website. The board minutes don’t show that the board of trustees ever discussed the website.
Inweekly interviewed board of trustees chairman Alexander in mid-October. He didn’t offer many details about the board’s real estate decisions. The newspaper offered him opportunities to gather any info he thought would be relevant to the conversation and call back, but he declined.
“I don’t go around with Jaqueline Harris information just sitting on the top of my head,” he said. “Am I walking around with a file in my brain?”
Alexander said the school moved from the Blount Street property to Pensacola Boulevard because they had a plan to expand. He said, “We pretty much had outgrown the property on Blount Street.”
The board saw the Pensacola Boulevard property as “an opportunity that wasn’t going to sit and wait.”
Alexander told Inweekly paying the mortgage and lease was a real burden on New Road to Learning. He said, “It was a real strain on the school, on running the school.”
The board wanted to get out of the lease on Blount a lot sooner than they did. “The guy wouldn’t let us out,” said Alexander. “We wanted out of that lease, but that was not something he was interested in. He said that he needed to make money.”
He didn’t remember how much they owed on the lease or how much of a break the $350,000 pay-off was. He said, “I think we were looking for something less than that but decided to do it.”
All decisions are discussed by the board, according to Alexander. He said, “Any move that the school makes, the board has a discussion about it.”
He described the board as a group of folks just trying to act in the best interest of the school; they’re volunteers. Alexander said, “You’re not talking about a lot of hardnose analyzing.”
Conflict of Interest
New Road to Learning renewed its charter school contract with the Escambia County School District in June 2009. Alexander signed for the school, and School Board Chairman Patty Hightower signed for the school district.
The contract had a Conflict of Interest clause that prohibited the school from using funds to purchase or lease property, goods or services from a director, officer or school employee or any business in which an officer or employee had an interest. The board and school employees also had to comply with the state statutes regarding the code of ethics for public officers and employees, which also had a conflict of interest clause. Failure or refusal to comply with the conditions would “constitute good grounds for termination/non-renewal of this Charter.”
Per the 2009 charter contract, Lewis had three choices. She could dispose of her interest in Creative Projects, sell the McReynolds property or resign as the executive director of the school. If she refused to end the conflict of interest, the board of trustees had to relocate the school, according to its charter agreement.
Nothing changed, and the school district did not enforce the clauses, even though the related-party transactions were highlighted in the annual audit reports given to the district.
Checkered Charter Past
This year, the Escambia County School District has five charter schools—Jacqueline Harris Preparatory Academy, Pensacola Beach Elementary, Byrneville Elementary School, Beulah Academy of Science and Capstone Academy, which is designed for developmentally delayed students.
Pensacola Beach Elementary has been an A school since it was formed. Byrneville Elementary earned a B this past school year. Beulah Academy is a middle school and was a C last year but earned more points than six other middle schools in the district. Jacqueline Harris is an alternative charter school and is allowed to opt-out of the grading system. The school was given a “maintaining” designation last year.
Jacqueline Harris Preparatory Academy ranked among the worst elementary schools in Escambia County with its Florida Standard Assessment Test scores. Less than a third of the fifth (31%), fourth (25%) and third graders (31%) read and write on their grade levels. The math scores were similar for the fifth and fourth graders, and only 13% of the third graders scored on their grade level.
The Escambia County School District has had some of the state’s biggest charter school scandals.
In 2004, Escambia Charter School, the district’s first chartered high school, faced organized fraud charges for taking $140,000 from the state to educate at-risk students who actually were working on road crews in Northwest Florida, for which FDOT paid the school $250,000. The school pleaded no contest to a lesser charge of grand theft of between $20,000 and $100,000 and agreed to pay $20,598 in restitution to the state.
In 2008, Life Skills Center of Escambia County closed after its management company, White Hat Management, pulled out because the school owed it more than $580,000, according to news reports. John H. Wyche, the president of the not-for-profit Escambia County Community Land Trust, Inc., and O.J. Rembert, its treasurer, were charged with taking more than $480,000 intended for the charter high school. Wyche ran the school and was found guilty of racketeering and unlawful financial transactions.
In March 2015, Inweekly broke the news that Escambia County School District’s award-winning charter schools operated by Newpoint Education Partners weren’t as good as they seemed. The state attorney’s investigation uncovered a scheme that covered charter schools in six counties that involved NEP founder Marcus May and two of its vendors. Last year, May was sentenced to 20 years in prison for stealing $5.2 million from the school systems.
According to the Florida Department of Education, the Escambia County School District has closed nine charter schools since 2001.
Inweekly contacted Norm Ross, deputy superintendent for the Escambia County School District, and Vickie Mathis, director of Alternative Education for the district. Neither district official seemed to be concerned about Jacqueline Harris Academy or Lewis’ conflicts of interest over the years.
Mathis spoke a bit about the district’s relationship to charters in general, how the district is a “sponsor” of a charter and how it also provides some services to charters, such as mental health services and security.
Insofar as checking in on the charters, making sure everything is up to snuff—in this case, conflict of interest matters—the district monitors the board meetings of a charter and also the minutes of those meetings. Also, they sometimes visit the campus.
“We listen, and we read their board meeting minutes that are required to be turned in quarterly,” said Mathis. She wasn’t concerned that the minutes appeared to leave out details, such as the purchase of the Pensacola Boulevard property—“They don’t have to report word for word.”
She told Inweekly that she had not heard any concerns about the Jacqueline Harris Academy charter.
Ross wasn’t very talkative when contacted by Inweekly. He referred the newspaper to the
board’s counsel, Donna Waters, who had not returned the call as of publication deadline.
When asked about the initial sale of the McReynolds property to Lewis, the deputy had nothing to say— “I can’t respond to that. I wasn’t part of the transaction.” Ross was appointed deputy superintendent in 2001, the year before the sale.
Pushed about the switch from New Road to Learning to Lewis’ for-profit Creative Projects for the sale, Ross agreed it wasn’t standard practice—“It doesn’t happen every day”—but he said he was really just speculating about a theoretical. He wouldn’t comment about the case specifically.
The deputy superintendent said that if concerns are raised about a charter, the district checks them out. He added, “If there are things that come up, we try to address them as expeditiously as possible.”
However, he said that the district had not heard any concerns regarding this charter—“No, I’m not aware of them anyway.”
Inweekly tried to contact Ms. Lewis for this article. She did not return the call.
Read the public records that support this article here.