CHARTER SCHOOL PAYMENTS
To Repay Misused Funds, City To Take $9 Million From Coffers
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Thursday, November 2, 2006
Up to $9.6 million in District money will be used to replace federal payments that were earmarked for charter schools but were instead invested in a company accused by federal regulators of fraud, according to city officials.
A spokesman for the Office of the Chief Financial Officer said recently that the money would come from the city's general fund and that no D.C. government program would suffer as a result.
Congress awarded the money to the District several years ago for charter schools to purchase, renovate and maintain buildings. A city employee invested the funds in 2003 with a private Maryland company, an arrangement that was not reviewed by city financial officials.
When city officials asked for nearly $10 million last spring from the company, Geneva Capital Partners LLC, it did not get any funds back. Shortly after that, a federal judge froze Geneva's assets at the request of the Securities and Exchange Commission. U.S. District Judge Deborah K. Chasanow is expected to rule soon on the company's fate.
City officials will not say explicitly that they do not expect to get back the $9.6 million that was invested with Geneva. But the Senate Appropriations Committee has directed the city to use local funds to keep the charter school program running, and Mayor Anthony A. Williams (D) has vowed to ensure that the schools are not affected, the officials said.
SEC regulators have said they do not think that Geneva has the assets for repayment, and some city officials believe the District will ultimately have to replace nearly all of the funds.
The money was invested in Geneva by the D.C. Office of Public Charter School Financing and Support, which at the time was housed in the Department of Insurance, Securities and Banking and run by Jennipher Snowden.
Snowden could not be reached for comment after repeated efforts.
Current and former city officials said that Snowden operated with almost no oversight from her superiors until early 2005, and that there was no review of the investment by city financial officials. At the time of the investment, Geneva was three months old and run by Eric M. Westbury, who declared personal bankruptcy in 2002.
Congress plans to continue providing funds to the program for D.C. charter schools, a pet project of some members of Congress. The Senate Appropriations Committee has approved $6 million for next fiscal year, and the funding is expected to be approved by both houses.
