The D.C. attorney general has alleged that the former managers received “exorbitant” bonuses from the school before they resigned to run the companies full time and called into question large management contracts the companies had with the school. Hayward was chairman of the school’s board of trustees — and, according to court documents, allegedly signed off on the contracts and bonuses in that role — before she stepped down in recent days.
Although no one has yet been criminally charged, investigators are conducting interviews and a grand jury is expected to convene as early as next week, according to several people familiar with the case. It is unclear whether criminal charges could be levied in connection with the alleged diversion of millions of dollars in taxpayer money; the former Options managers have denied any wrongdoing in the case.
Bill Miller, a spokesman for U.S. Attorney Ronald C. Machen Jr., declined to comment on whether there is a grand jury investigation. Such proceedings are designed by law to be secret. Miller said last week that prosecutors would consider “all pertinent information as we continue our review of this matter.”
An Options official told a forensic accountant hired to investigate the Northeast Washington school’s finances that records also have been subpoenaed by the D.C. Office of the Inspector General, according to the accountant’s sworn declaration. The statement was among documents filed with the civil complaint last week.
D.C. Deputy Inspector General Blanche Bruce declined to comment on whether her office is pursuing an investigation.
Pamela Marple, a lawyer representing the two for-profit companies — Exceptional Education Management Corp. and Exceptional Education Services — did not respond to questions about whether her clients had been interviewed by investigators or subpoenaed to appear before a grand jury.
“EEMC has and will continue to provide information and answer all questions,” Marple said in a statement.
On Wednesday, Hayward sought to distance herself from the allegations, and her attorney’s court filing says that she is a victim of “government overreaching” and that her reputation as “a stellar member of the D.C. community” has been unfairly harmed by the case. She also has been placed on administrative leave at WUSA pending further investigation.
Jacobovitz said in the court filing that Hayward was not paid to serve on the Options board, and that the complaint does not allege that she benefited from the alleged scheme. Although the complaint alleges that she helped incorporate one of the companies in 2009, it does not accuse her of owning or controlling the companies during the period in question.
“And, in fact, Dr. Hayward has never owned or operated either entity,” Jacobovitz wrote.
Hayward also served on the boards of at least nine other D.C. institutions, including the United Black Fund, the Boys and Girls Clubs of Greater Washington, Arena Stage and Providence Hospital, according to the filing.
“While Ms. Hayward may be a relevant witness as to her activities connected to the D.C. Charter School, there is nothing in the Complaint to even suggest that she herself participated in misdeeds or received any of the alleged ill-gotten gains,” Jacobovitz wrote. “To the contrary, the most reasonable and logical conclusion to be drawn from the allegations in the Complaint is that Dr. Hayward was herself a potential victim if a scheme existed.”
The complaint alleges that Hayward assisted the ex-managers in the contracting scheme and seeks to freeze the assets of the three ex-managers and their businesses. The complaint does not seek action against Hayward.
The ex-managers agreed last week to sever their financial relationship with Options. D.C. Superior Court Judge Craig Iscoe appointed a receiver — Josh Kern, the founder of a successful charter school who now owns an education consulting firm — to oversee the school’s operations.
Amid the allegations, the school has lost a grant worth up to $600,000 that had been awarded in August by the Office of the State Superintendent of Education. The grant was meant to help Options — which serves 400 at-risk students, most with disabilities — provide therapeutic services for special-education students from other schools across the city.
“After reviewing the legal complaint, OSSE did not finalize the award and the funds were never disbursed,” spokeswoman Athena Hernandez wrote in an e-mail.
Options received a similar $300,000 grant from OSSE last year, according to Hernandez, and it was the sole applicant this school year.
The allegations also have drawn attention from the D.C. Council. David A. Catania (I-At Large), chairman of the Education Committee, has scheduled a public oversight roundtable for Oct. 18. It will be a chance to “hear from District education officials about plans to ensure students at the school continue to receive the quality of educational services they are entitled to and require,” according to the roundtable notice.
A court hearing in the case is scheduled for Friday. Iscoe is expected to appoint a receiver to oversee the two for-profit companies. Jacobovitz said he expects that Iscoe will not rule for several weeks on the motion to dismiss Hayward from the complaint.
Jennifer Jenkins and Magda Jean-Louis contributed to this report.