An attorney for the District alleged in court Wednesday that local television news personality J.C. Hayward, who has been accused of aiding a scheme to divert millions of tax dollars from the Options Public Charter School to two for-profit companies, held an ownership stake in one of the companies.
Bennett Rushkoff, chief of the attorney general’s public advocacy section, made the claim during a D.C. Superior Court hearing on whether Hayward and other defendants should be dismissed from a lawsuit. Rushkoff said he plans to amend the complaint to include the new allegation against Hayward.
The District’s original complaint, filed in October, said the former managers of Options funneled at least $3 million to two for-profit companies they ran. The suit named Hayward as a defendant in her role as chairwoman of the school’s board of trustees.
As chairwoman, Hayward allegedly signed lucrative contracts with the two companies and helped incorporate one of them, Exceptional Education Services. Attorneys for the District have also alleged in court documents that Hayward served as a paid consultant for EES.
Hayward’s attorney, Jeffrey S. Jacobovitz, has argued that his client knew nothing about any alleged scheme and received only token financial reward for her work with the school, which serves about 400 at-risk students.
The new allegation is that EES, after being incorporated as a for-profit subsidiary of Options, came to be owned by school officials. Donna Montgomery, the chief executive of the company and of the school, had an 80 percent stake, according to Rushkoff, and Hayward had a 10 percent stake.
Rushkoff said he did not know whether Hayward still owns a stake in EES. But his allegation suggests that Hayward, in her role as Options chairwoman, may have approved payment to a company of which she was a part owner.
Jacobovitz, Hayward’s attorney, maintained that she did not knowingly do anything wrong.
“I’m not aware of J.C. currently owning 10 percent of EES,” he said in an interview. “I’m also not aware of any financial benefit that might have accrued to her even if she were an owner,” he said. He also said that all decisions she made regarding Options were reviewed and approved by attorneys at the time.
EES, which ran the Options bus transportation program and did its Medicaid billing, is being scrutinized by federal investigators who are looking into the possibility of Medicaid fraud, according to several people familiar with the case.
Jacobovitz argued in court Wednesday that his client should be dismissed from the case because the government failed in its original complaint — the only complaint now before the court — to prove that she did anything wrong. The government also is not seeking to place her assets in a constructive trust, as it is trying to do with the assets of other defendants, he said. That indicates, he said, that Hayward had not been found in possession of any ill-gotten gains.
Attorneys for the other four individuals named as defendants — the three former Options managers and a former administrator with the D.C. Public Charter School Board — also argued that their clients should be dismissed from the suit because the District had failed to show that they had broken the law.
Judge Craig Iscoe said he needs time to review the arguments before deciding whether to dismiss any defendants.