D.C. attorney general seeks repayment of Options school funds

November 20, 2013

D.C. prosecutors have asked a judge to force Exceptional Education Management Corp., a for-profit company founded by the former managers of Options Public Charter School, to begin repaying $753,569 allegedly owed to the school, according to court documents filed Tuesday in D.C. Superior Court.

The school for at-risk youths needs the money to address a significant budget shortfall, according to the motion filed by the Office of the Attorney General. The court filings are part of an ongoing lawsuit alleging that three former Options managers funneled millions of taxpayer dollars to EEMC and another company they ran.

The request for payment drew immediate objection from EEMC attorney Pamela J. Marple in a court motion filed Wednesday. In an accompanying letter to prosecutors, she argued that Options was in excellent financial shape and enjoyed an operating surplus until the District filed its “factually inaccurate” complaint last month.

“The sole cause of the Options School current financial distress is the decision of the OAG to bring this litigation,” Marple wrote, adding that the company deserves a full hearing of its case in court before a judge orders payment.

The District has accused three former Options managers of diverting money from the school to their companies via several large contracts. The allegations prompted the managers, who were still running Options from positions at their companies, to agree to sever all financial ties with school. They have denied any wrongdoing.

In the motion filed Tuesday, the District’s lawyers argued that Options overpaid EEMC for a contract signed in February and that the overpayment should be returned.

The contract — to manage the school’s operations, and estimated at the time to be worth $2.8 million — was supposed to be paid in quarterly installments of about $700,000 each.

But Options paid about $1.45 million for less than one quarter’s work between July and October, according to court records.

The District’s lawyers argued in the motion that whatever factual disputes remain to be resolved in court, there is no basis for that overpayment, and “EEMC should therefore be ordered to promptly return as much of that overpayment as practicable from its available funds.”

A budget gap

EEMC is now controlled by a court-appointed receiver. Options is overseen by a different court-appointed receiver, Josh Kern, who reported last month that the school is facing a $1.6 million shortfall that has forced staff layoffs.

Kern attributed the gap to low enrollment and the loss of a $600,000 city grant, stripped in the wake of the legal complaint. He also reported that Options would not be able to retrieve $1.5 million it had expected to get from Medicaid reimbursements for services delivered at the school.

The former school managers had been in charge of Medicaid billing.

“These severe losses to Options School have nothing to do with the supposed ‘financial’ allegations’ ” contained in the District’s lawsuit, EEMC lawyer Marple wrote in her letter to prosecutors, adding that the company offered to perform Options’ Medicaid billing for free but never received a response.

Marple said the lawsuit is “full of false facts,” pointing to the District’s claim that Options paid the managers’ companies more than 10 times the amount it had paid a previous vendor for bus transportation.

Documents show that Options actually saved $100,000 by contracting with EEMC, Marple wrote.

Documents also show that the school did not pay for the companies’ furniture and rent as alleged, she wrote, and that no one received “improper” payments. Payments were reviewed and approved by the school’s lawyers, and the contracts were provided to the D.C. Public Charter School Board, she wrote.

Marple accused Scott Pearson, the charter school board’s executive director, of wrongfully telling schools to cancel their contracts with EEMC after the allegations surfaced. Theola Labbe-DeBose, a spokeswoman for the charter board, declined to comment: “These are legal arguments made by attorneys that are best resolved in a court of law,” she said.

A spokesman for the attorney general’s office said prosecutors will answer Marple’s arguments in court.

What’s next

The next hearing in the case is scheduled for Dec. 10, when Judge Craig Iscoe will consider three defendants’ requests to be removed from the case.

One of those seeking dismissal is local television news anchor J.C. Hayward, who allegedly signed contracts in her role as chairwoman of the Options board.

Hayward, who has said she did nothing wrong and was not aware of any financial scheme, has been on leave from her job at WUSA (Channel 9) since Oct. 1. Her supporters are planning to hold a vigil at the station Thursday evening, calling for her return to the air.

Emma Brown writes about D.C. education and about people with a stake in schools, including teachers, parents and kids.
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