A federal probe of former employees of the Pennsylvania Cyber Charter School appears to be reaching a conclusion, according to a letter sent by attorneys to employees of a key vendor of the Beaver County-based online educator.
The recent letter from attorneys Tom Farrell and Jay Reisinger to employees of the National Network of Digital Schools Management Foundation names PA Cyber founder Nick Trombetta and is the first public indication that he is the central figure in the grand jury investigation.
The nonprofit NNDS, which was founded by Mr. Trombetta in 2005, manages PA Cyber and provides its curriculum.
"All signs are that the investigation is coming to a close, and a decision to charge individuals or to decline to bring any charges is imminent," according to the letter, dated this month and obtained Friday by the Pittsburgh Post-Gazette.
"In this final period of investigation before a charging decision is made, federal agents or attorneys and investigators for Dr. Nicholas Trombetta, or Dr. Trombetta himself, may attempt to discuss the investigation with you," it continues. It urges that NNDS employees "not talk to anyone about the investigation," adding that when it is "commendable to cooperate with lawful prosecution and defense requests," it should be done "with counsel."
The letter goes on to say that neither NNDS, nor its employees or leadership, are targets of the investigation.
Christina Zarek, spokeswoman for both PA Cyber and NNDS, said that neither organization is a target and both continue to cooperate with federal authorities.
The letter comes roughly one year after the FBI, IRS Criminal Investigations Division and U.S. Department of Education conducted a series of searches, taking documents from PA Cyber's headquarters in Midland as well as from offices used by NNDS and Avanti Management Group in Calcutta, Ohio.
Mr. Trombetta could not be reached for comment at Kuhn's Quality Foods, where he now works. Mr. Farrell and Mr. Reisinger could not be reached for comment. A spokeswoman for U.S. Attorney David Hickton's office, which has been leading the investigation, had no comment.
Mr. Trombetta, of East Liverpool, Ohio, started from scratch and built one of the nation's early public cyber educators.
A former wrestling coach, Mr. Trombetta was superintendent of the Midland School District when finances forced its high school to close in the mid-1990s. When other districts refused to take his students, he formed the Western Pennsylvania Cyber Charter School, which eventually became PA Cyber, the state's largest online public educator.
When he left last year, PA Cyber had 11,300 students. It finished the 2012-13 school year with about 11,500 students, and last month graduated its largest-ever class: 1,500 seniors.
Local and state funds that would otherwise go to traditional public schools follow students to PA Cyber when they enroll there. The local and state payments to PA Cyber have exceeded $100 million annually in recent years. Struggling school districts have protested that the diversion isn't fair, because teaching kids by computer doesn't cost nearly as much as educating them in schools.
Among other things, investigators have looked at PA Cyber's computer purchases, attorneys have told the Post-Gazette.
PA Cyber paid Virginia-based NCS Technologies Inc. roughly $4 million a year for laptop computers. Investigators are reviewing the relationship between NCS and other PA Cyber vendors.
A spokesman for NCS, reached Friday afternoon, declined to comment on NCS' role in the investigation, saying that the firm doesn't talk about legal matters.
The Post-Gazette last year detailed the relationships between PA Cyber and various nonprofit entities and for-profit companies, created or managed by former PA Cyber employees. Those relationships appear to have continued through the 2011-12 school year, but have ended or are winding down.
Former PA Cyber technology director Brett Geibel served as senior vice president at NNDS before forming the for-profit Avanti Management Group and another spinoff, Palatine Development.
PA Cyber, NNDS, Avanti and Palatine continued to do extensive business through June 30, 2012, which was the end of their fiscal year and the effective date of Mr. Trombetta's resignation.
According to disclosures filed with the IRS on May 22 and provided to the Post-Gazette on Friday, during the 2011-12 school year, PA Cyber paid NNDS $52 million. That was the bulk of the nonprofit management foundation's receipts of $61 million.
NNDS paid $9 million to Avanti for "management, marketing and sales services," according to the disclosures. NNDS also paid $64,167 to Palatine Development, according to the disclosures.
According to the disclosures, NNDS hired "an independent third party" to review its dealings with Avanti and found that it was "comparable to an arm's length fair market value contract." The disclosures also indicated that the rent paid to Palatine was "comparable to fair market value for office space" in that area.
Ms. Zarek said that NNDS no longer does business with Avanti or Palatine.
Mr. Geibel's attorney, Efrem Grail, declined Friday to characterize his role in the investigation.
Besides renting property to NNDS and Avanti, Palatine and Mr. Geibel were involved in a series of Florida property transactions last year.
Mr. Trombetta bought a condominium in Bonita Springs, Fla., in 2011 for $933,000, then transferred it to Palatine Development for a nominal amount listed as $10 on Lee County property records. Palatine in November sold the condo to a Florida couple for $850,000.
PA Cyber officials have said the school had no role in the Florida transactions.
Ms. Zarek said that the investigation, which became public a year ago, "gave both entities an opportunity -- even though they were not targets -- to look back and reflect and restructure so both are more accountable and transparent."
Rich Lord: firstname.lastname@example.org, 412-263-1542 or Twitter @richelord. First Published July 20, 2013 4:00 AM