Meridian Elementary School District Superintendent Marty Ofenham’s “spidey senses” about a charter school registered in his district first kicked in when their officials turned over fluctuating projected attendance numbers and budgets. 

“It showed increases that didn’t seem reasonable,” Ofenham said Monday. “That hit my alarm bells and then I started to question.”

And for good reason: 11 founders and leaders of A3 Education, based in Newport Beach, are facing a criminal indictment filed in late May in San Diego County and alleging they defrauded the state and taxpayers of over $50 million in an elaborate scam.

The fake charter school system encompassed 19 schools in 14 counties, including Sutter, and specifically targeted small school districts. 

The defendants, all from southern California, include founders Sean McManus and Jason Schrock, Justin K. Schmitt, Eli R. Johnson, Richard B. Nguyen, Nyla J. Crider, Steven B. Zant, Michelle C. Kukahiko, Kealii T. Kukahiko, Nancy C. Hauer, and Robert J. Williams.

Tens of thousands of students were enrolled in the charter schools. While some followed an online curriculum and corresponded with real teachers, many were associated with summer athletic programs and never did class work or talked to teachers, the Voice of San Diego reported. 

The scheme

The object, prosecutors say, was to misappropriate public funds by falsely claiming and obtaining apportionment funding for students attending charter schools when the students were not receiving such services. The defendants also allegedly paid existing athletic organizations – like the San Jose High School football team – for student report cards and falsified charter school enrollment documentation, which allowed the defendants to obtain state funding for the athletic participants over a summer program that did not exist, according to the indictment. 

For example, A3 officials reached out to high school football programs and offered to donate money to the athletic program for each student who signed up for the summer program, starting at $25 per student, it was reported, though no active participation was required. But the total worth of each student was actually $1,600. What wasn’t donated to the athletic program was skimmed by A3 officials. 

McManus (who is presumably on the run in Australia), and Schrock founded the scam school system, and both face more than 40 years in prison. Nine others have been charged in the scheme and played various roles in the organization: a consultant, an accountant, a registrar, football coaches, a business manager and even a superintendent, according to Voice of San Diego, which wrote an all-encompassing story of the case (which can be read here: All except McManus have pleaded not guilty.

A3 Education had been operating California Prep Sutter under the Meridian Elementary School District since the 2015-16 school year with a five-year agreement, Ofenham said; he became superintendent in summer 2018. 

Not only was he alarmed by projected attendance rates for the charter school, but he said the school wasn’t turning over board agendas in a timely manner; and when he asked for board minutes, they lacked specificity. Several A3 Education officials, as outlined in the indictment, discussed fabricating Cal Prep Sutter board minutes in an attempt to avoid the state’s conflict-of-interest laws, according to Voice of San Diego (McManus was listed as the CEO of Cal Prep Sutter, and paperwork indicated that the school was also in business with McManus’ A3 Education company). An auditor became suspicious of Cal Prep Sutter in winter 2017.

“If what is alleged is true, then you, and I and everyone got ripped off,” Ofenham said. “And I’m not happy about it.”

Cal Prep Sutter is still listed online as a K-7 and 8-12 tuition-free, online public school. While there’s still informational tabs and officials listed (like a head of school), the enrollment tab has been disabled, and no one answers the automated phone system. (Meridian Elementary School District’s other charter school, California Virtual Academy at Sutter, is not involved at all).

Ofenham said in January this year, he sent Cal Prep Sutter officials a list of corrective actions, including a request for a list of students and their ID numbers, so the school district could corroborate enrollment — officials never turned it over. Last month, after the indictment was filed, Ofenham reached out to the California Department of Education to find out how to proceed.

While charter schools operate independently, school districts provide oversight, Ofenham said, including overseeing what the organization reports to the county and state, and making sure the organization meets deadlines — the nuts and bolts pieces, he said. But districts don’t oversee programming, tutoring or curriculum. In return, Cal Prep Sutter agreed to pay Meridian Elementary School District a 1 percent oversight fee, outlined in the MOU.

The charter is supposed to have their own auditor, and they’re responsible for inputting student data and making sure it’s accurate and certified, he said. Superintendents sign off on that information, indicating the information is true to their knowledge. While five months ago, Ofenham had no reason to believe there was misinformation coming from Cal Prep Sutter, now would be a different story.

“There were a couple things that let me know, it just didn’t feel right and if it doesn’t feel right then I’m going to start questioning,” Ofenham said.

What’s next

While students aren’t affected by the indictment, as there were no students actually utilizing the Cal Prep Sutter charter school, it’s a murky area for Ofenham, who has to oversee the process. 

The district has a memorandum of understanding with the charter that spells out duty, predating Ofenham’s tenure. Ofenham said the reason this charter school may have targeted small, rural districts — like Meridian, which has around 50 students — is because it’s difficult to reject a petition from a charter. Districts have to show why they rejected a charter, and charters can then take legal recourse to fight against a rejection, costing small districts money and time. 

Once they’re in that MOU, it’s even more difficult to revoke, he said. The memorandum with Cal Prep Sutter is due for renewal at the end of 2020.

It’s not clear, if A3 Education goes out of business whether the agreement with Meridian Elementary School District would automatically  be voided? In light of the criminal indictment, Ofenham wouldn’t sign off on attendance numbers. And he’s unsure whether that would bring an end ot the agreement.  The state Education Code outlines petitions, but not revocation. 

Either way, A3 Education’s assets are frozen (the Superior Court of San Diego ran legal ads in the Appeal-Democrat regarding an injunction on real and personal properties involved in the case, including bank accounts for Cal Prep Sutter), so the organization isn’t in operation. He’s handed it over to the district’s legal team to find out what the district’s rights are moving forward, he said.

“It’s no different than it would feel for any other citizen of California—we got duped,” Ofenham said. “I can guarantee that whatever I do and whatever we as a district decide to do will be in the best interest of the Meridian School District, the citizens, kids, families and Sutter Count and we’ll do things the right way because that’s our job.”

Sutter County Superintendent Tom Reusser said last week that the district is working with the state Department of Education and the San Diego District Attorney to find out what needs to be done on their end.

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