Each of the five people accused of helping divert taxpayer dollars from the District’s Options Public Charter School will remain defendants in the case, a D.C. Superior Court judge decided Wednesday.
Judge Craig Iscoe ruled that none of the five defendants met the legal standard to be dismissed, writing that “the District has sufficiently pleaded that Defendants may have participated in a plan to run Options contrary to its nonprofit purpose.”
Three former Options managers allegedly sent millions of dollars from the charter school to two for-profit companies they controlled as part of a self-dealing scheme, according to a civil lawsuit filed in October by the D.C. Office of the Attorney General. The managers were allegedly aided by two others: television news personality J.C. Hayward and former D.C. Public Charter School Board official Jeremy Williams.
The alleged scheme violated the District’s Nonprofit Corporation Act, according to the complaint.
In seeking to be released from the case, the defendants argued that the District’s complaint failed to allege specific wrongful acts. They also argued that the case is moot because the District already ousted the former Options managers and gained control over the assets of the two for-profit companies. Both the school and the two companies are now controlled by court-appointed receivers.
Iscoe was required to treat the suit’s claims as true in deciding whether to release the defendants. He ruled that the complaint plausibly argues that a self-dealing scheme might have occurred and that the case is not moot because the District is seeking to recover money from the three former Options managers. The government also wants a permanent order barring Hayward and Williams from having any future relationship with Options.
A. Scott Bolden, an attorney for David Cranford, Options’ former clinical director, said the government’s complaint fails to describe “what was illegal, unlawful or inappropriate” about Cranford’s earnings. In the end, he added, he fully expects “Dr. Cranford to be found not liable for any of these claims pending against him.”
Hayward, who has been on leave from her job as an anchor at WUSA (Channel 9) since Oct. 1, allegedly signed key contracts on behalf of Options as the school’s board chairwoman. Iscoe called the claims against her “substantially less detailed” than those against the other four.
Jeffrey S. Jacobovitz, Hayward’s attorney, said his client was not aware of and did not profit from any alleged scheme. “The judge’s decision certainly does not constitute a final finding of wrongdoing by the defendants, only that the District may move forward with the case,” he said.
Now Iscoe must decide whether to accept an amended complaint from the District, which includes far more detailed allegations about how Options money was diverted into individual defendants’ pockets.
A spokesman for the D.C. Office of the Attorney General said in a statement that the office was pleased with Wednesday’s ruling and is “prepared to prove significant misconduct beyond that set forth in our original complaint.”