California Charter Academy

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The California Charter Academy (CCA) was formerly the largest charter school operator in California, with multiple campuses scattered throughout the state. CCA opened under the leadership of Mr. C Steven Cox, a former insurance executive. During the charter school's tenure, it ran into many legal confrontations with the California Department of Education (CDE). At one instance, CCA lost a lawsuit to the CDE, which claimed some of the charter schools were illegally converted from private schools.

In 2004, the Superintendent of the California Department of Education, Jack O'Connell, launched an investigative audit into CCA alleging financial irregularities. CCA halted operations in August of 2004. The closing of CCA caused chaos among chartering school districts, leaving them to deal with student transcripts and landlords who were left with CCA's assets. Students and former employees were equally impacted by the close leaving them without schools and jobless shortly before the beginning of the 2004-05 school year.

On April 14th 2005, MGT of America and the Fiscal Crisis and Management Team released an investigative financial audit of CCA they had performed on behalf of CDE, detailing school administrator's expenditures, and claiming $23 million in taxpayer money was missapropriated. CCA and its affiliates later launched a separate audit with outside accountants not affiliated with the CDE, claiming the audit conducted by MGT of America and FCMAT was "politically motivated". This audit is still in its infancy.

A U.S. Bankruptcy Court judge later denied a bankruptcy petition requested by the CDE for CCA's management company, Educational Administrative Services Corporation (EASC), and Cox has filed a $120 million dollar lawsuit against the CDE.

The FBI and San Bernardino County have open investigations into CCA. At this time, no charges have been filed, and officials will not go on record as to when or if they expect indictments and what form such indictments might take.

Contents

[edit] CCA audit

In April of 2005, MGT of America in conjunction with the Fiscal Crisis and Management Team released an elaborate audit of the business operations of CCA. According to the audit, Mr. Cox and associates missapropriated millions of dollars in taxpayer funds for personal benefit. Jack O' Connell reacted to the audit stating that "The magnitude of waste of precious education funds outlined in the audit [was] appalling". The audit identified several potentially illegal practices including conflict-of-interest violations, converting private schools to public charter schools, and falsifying claims to receive public funds. Many individuals mentioned in the audit took the offensive claiming the auditors would not accept information which would clear their names from any wrong doing.

[edit] Educational Administrative Services Corporation

Steven Cox founded Educational Administrative Services Corporation (EASC) in March of 2000. This for-profit company was to act as a "liaison" between charter schools and government entities. CCA #262, chartered under Snowline-Joint Unified School District, signed a contract with EASC shortly after opening. This immediately created a conflict-of-interest between CCA and EASC, as Mr. Cox was CEO of both entities. After being granted three more charters, one from Snowline (#377) and two from Oro Grande Unified (#297, #387), all four charters were contracted with EASC. The individual rates charged by EASC were later found to be greatly inflated, suggesting that money which could have been used for education was instead used for administrative purposes. In addition to the money accumulated by EASC by charging inflated rates, the CCA audit found that EASC transferred money from CCA bank accounts to EASC bank accounts a total of 37 times totaling an estimated 3.9 million dollars. Out of the 37 transactions, 35 were made illegally in direct violation of Education Code section 47633(c).

[edit] EASC expenditures

The ability for EASC to enter into contracts with entities for questionable purposes without the knowledge of CCA board members allowed the company to effortlessly engage into numerous contracts. This practice was exercised when an EASC employee, Mr. Tad Honeycutt formed Maniaque Management Group, inc. Come January 2004, the CCA charter schools contracted with Maniaque who was to provide grant consulting services for monthly installments of $1,000. In the end, all four CCA charters paid Maniaque a total of $27,000 for no apparent services. EASC conducted similar arrangements for CCA with the High Desert Youth and Family Resource center, and Community Information Services Online (owned by a former CCA board member), where there was similarly no evidence of services being rendered. Mr. Cox's practice of moving EASC employees from EASC to CCA payroll also contributed to the liquifying of CCA funds.

[edit] Administrative Spending

Steven Cox and other employees at EASC engaged in spending CCA's funds for non-educational purposes. When Mr. Cox's corporate American Express charges were reviewed by auditors, it was found that from 2001 to 2003, he had spent a total of $712, 813. Tad Honeycutt, another employee at EASC, accumulated a total of $295,565 in a two year period. Mr. Cox's and Honeycutt's expenditures included income tax payments, spa visits, fishing trips, jet ski purchases, etc. Mr. Cox also took the liberty of providing company vehicles to family members and key employees at EASC.

[edit] EASC subsidiaries

While EASC was providing administrative services to CCA, the company also began to diversify. EASC formed the following subsidiaries while continuing to manage the CCA charters: Everything for schools .com (EFS), Maniaque Management Group, Xtreme Motor Sports, and Hautlab Music Group. Auditors suspect that money accumulated from overcharging the charter schools for administrative services was funneled to fund these business ventures.

[edit] American Public Agency Authority

In December of 2001, the CCA charters formed the American Public Agency Authority, a joint powers authority under the direction of Mr. C. Steven Cox. The agency was to "pool" resources of the charters to develop a self-insurance plan. The APAA offered a liability package, workers' compensation, and health care. Ironically similar to companies affiliated to CCA, board members consisted of individuals involved in CCA charter schools. In addition to the CCA charters, 12 other charter schools applied for either workers compensation or liability insurance.

[edit] Sources of Funding

The CCA audit uncovered that APAA charged highly inflated rates for their insurance coverage. Adding to the sum of money APAA made through charging excessive rates, it was also discovered that APAA financed the same insurance policies twice. This contributed to a surplus of cash which APAA did not require to pay their $517,000 premiums to insurance carriers. Similar to earlier transactions performed by EASC, EASC again transferred funds from the CCA charters, but this time, to APAA bank accounts.

[edit] APAA Contracts

In 2004, Mr. Cox signed a contract with Mr. Honeycutt (CEO of Maniaque) who was to recruit members into the APAA. Maniaque was to be entitled to 10% of the payments made to APAA from new members recruited by Maniaque. Five days following the initiation of the contract, APAA gave an advance in the supposed amount of $195,000 to Maniaque. However, Maniaque was delivered a total of $278,000 in advances. When APAA closed in August of 2004, Maniaque had failed to pay any of the $278,000 in advances which it had not earned. Maniaque had only managed to recruit one charter school, from which Maniaque earned a meager $700.

[edit] External links

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