Former CEO directed funds to campaign contributions
September 1, 2013 8:00 AM
Cyber school pioneer Nick Trombetta leaves the Federal Courthouse in Pittsburgh, after he pleaded not guilty to an 11-count indictment earlier this week in U.S. District Court.
By Rich Lord and Karen Langley Pittsburgh Post-Gazette
Elected officials who received political contributions from former associates of cyber school pioneer Nick Trombetta -- checks referenced in an indictment issued late last month -- said last week that they hadn't known the donations might not be legal.
The indictment of the former CEO of the Pennsylvania Cyber Charter School spurred some politicians to start tallying Trombetta-related campaign contributions, and to consider what to do with them. Gov. Tom Corbett's re-election committee, for instance, will send back a $5,000 contribution made by Mr. Trombetta in December 2011, campaign manager Mike Barley said last week.
"In light of the serious allegations that were made, we're going to refund that contribution," he said, adding that a 2010 donation from Mr. Trombetta was spent on that year's campaign. He said the governor has no relationship with the former cyber school boss.
PG chart: Snapshot of donations (Click image for larger version)
The 11-count indictment of Mr. Trombetta, of East Liverpool, Ohio, and his former accountant Neal Prence, of Koppel, focuses mainly on the flow of money out of the Pennsylvania Cyber Charter School to private non-profit and for-profit entities, and allegedly into the defendant's personal accounts. Both men pleaded not guilty Wednesday in U.S. District Court in Pittsburgh.
Referenced in the indictment, but not the subject of any criminal count, are $40,000 in campaign contributions.
Those contributions represent a small fraction of the political involvement of charter school-related businesses in the political process. They are noteworthy, though, because of the allegation that they were made by executives of Avanti Management Group -- and their spouses -- at Mr. Trombetta's direction, and that the donors were reimbursed by the firm.
"If those allegations are true, that's obviously a violation of the law," said former U.S. Rep. Jason Altmire, who received $5,700 in contributions from people tied to Avanti. He added that he would have had no way to know that anyone was reimbursing others for contributions to his campaign.
PG chart: PA Cyber political donations (Click image for larger version)
"I think [reimbursement for contributions] is uncommon because it is explicitly illegal, and the repercussions for doing so are very severe," said Mr. Altmire. "Everyone associated with the political giving system understands that."
The role of Avanti
Mr. Trombetta founded the 11,000-student online school and was its CEO until he left the job June 30, 2012. On July 12, 2012, IRS and FBI agents searched the school's offices and those of vendors and subcontractors.
The investigation led to accusations that Mr. Trombetta got $990,000 through fraud, theft and bribery, and conspiring to reduce his tax burden. Mr. Prence is charged with tax conspiracy.
Avanti is portrayed in the indictment as a central point through which funds flowed, ostensibly owned by four former PA Cyber executives but controlled by Mr. Trombetta.
The PA Cyber CEO, according to the indictment, "caused employees of [Avanti], and their spouses, to make financial contributions to political candidates of [Trombetta's] choosing."
Later those employees "were reimbursed from the funds of [Avanti]. By this means, [Trombetta] directed payments of more than $40,000 to political candidates of his choosing" using the firm's funds.
Both state and federal laws bar the reimbursement of one person's political contributions by another person or a business.
On the federal level, contributions by individuals and political committees are capped, and secret reimbursements could be used to circumvent those caps.
The state doesn't limit the size of contributions to its races, but bars corporations and unions from issuing campaign donations, and requires disclosure of checks of more than $50. Reimbursements could undermine those laws.
U.S. Attorney David Hickton's office would not provide the Post-Gazette with a list of the contributions associated with Avanti, in keeping with its policy of not commenting on active cases or releasing information not included in court filings.
The Post-Gazette used online databases of campaign contributions maintained by Pennsylvania's Department of State, Ohio's Secretary of State and the Federal Elections Commission to assemble a list of contributions made by Mr. Trombetta, Avanti principals and people who appear to be their close family members. The 91 contributions identified by the Post-Gazette ranged from $100 to $5,000, and totaled $88,450 -- roughly half of them by Mr. Trombetta. They began in December 2007 and ended in February 2013.
The databases show that Mr. Trombetta and Avanti executives B. Jane Price, Rebecca S. Manning, Brett W. Geibel and Robert J. Babish -- and occasionally apparent family members -- repeatedly made simultaneous or near-simultaneous political donations.
It's unclear why Mr. Trombetta would have wanted to conceal any political giving. His attorney, J. Alan Johnson, declined comment.
Mr. Geibel's attorney, Efrem Grail, declined to discuss his client's political activity. Ms. Manning could not be reached at the Lincoln Park Performing Arts Charter School, where she is CEO. Ms. Price and Mr. Babish could not be reached.
Among the Pennsylvania recipients of the contributions were the campaigns of Mr. Corbett, Mr. Altmire, former state senator Jeff Piccola, state Sen. Elder Vogel and state representatives Jim Christiana, R-Beaver, and Jim Marshall, R-Big Beaver.
Among Ohio campaigns receiving funds tied to Avanti, former U.S. Rep. Charles A. Wilson's committee got the most, followed by U.S. Sen. Sherrod Brown, state Sen. Bill Seitz, former state senators Mark Wagoner and Tom Niehaus, and others, including Gov. Ted Strickland.
Some legislators who received contributions noted that they are known supporters of charter schools.
Mr. Piccola, a Dauphin County Republican who retired as chairman of the Senate Education Committee, said he expects he received comparable amounts from other people involved in charter schools.
"I have been for the last 15 years a strong supporter of charter schools. That's no secret," he said. "People that agree with you tend to contribute to you. That's the way it happens."
"I don't think [Mr. Trombetta's] legal problems impact on the need to continue a strong alternative in educational choice," Mr. Piccola added.
Sen. Jake Corman, R-Centre, who chairs the Appropriations Committee, said he had visited the cyber school site in Midland but could not recall ever hearing from Mr. Trombetta when the Senate considered charter school legislation.
Mr. Vogel, R-New Sewickley, said his campaign staff have been tallying donations related to Mr. Trombetta, who he said held a couple of fundraisers for him.
"We're still trying to figure out what's been donated," he said. "We haven't made any hard decisions."
The two men had wrestled against each other in high school, Mr. Vogel said, when Mr. Trombetta was at Quigley Catholic in Baden and Mr. Vogel was at Freedom Area. But they did not see one another again until Mr. Vogel was elected to the state Senate and Mr. Trombetta invited him to tour the school in Midland, Mr. Vogel said.
He said he had not heard of Avanti until the indictment came out, and had no indication that any donors could be receiving reimbursements for their contributions.
"People just brought checks," he said. "I never really met a lot of these people, to tell you the truth."
Return to sender ...
Several officeholders said they had decided to return donations to Mr. Trombetta. A spokesman for Mr. Pileggi said the senator's campaign committee had donated the contribution to an educational organization in his district.
Mr. Christiana said he had returned a check several months ago. "Once the investigation became public I felt that it was appropriate at that time not to be receiving contributions from Mr. Trombetta himself," he said.
Mr. Christiana, a supporter of charter schools, said he would sometimes discuss education issues with Mr. Trombetta.
"He was running the largest cyber school in Pennsylvania," Mr. Christiana said. "We definitely discussed policy regularly, in the sense of several times a year, if issues would come up."
Mr. Christiana said he believes schools should post their spending online, and has prepared proposals to require such disclosure.
Mr. Altmire, now an insurance executive in Florida, called Mr. Trombetta "a friend," and said he was surprised to hear of the indictment.
"That cyber school was in my district. It was in the heart of my district in Beaver County," said Mr. Altmire, adding that he served on the House Education & Workforce Committee.
"The Avanti contributions were for two consecutive golf outings that I had," said Mr. Marshall. When he saw the report of the indictment, he said, "I mailed a check back to Avanti."
He said he had no inkling of any legal problems with Avanti, or with the contributions.
The indictment accuses Mr. Trombetta of using the subcontractors of PA Cyber to buy a plane and a Florida condominium. Mr. Marshall said he had no knowledge of the condo, but did once hitch a ride with Mr. Trombetta on the plane, around three years ago.
"We were both ... on a talk show in Harrisburg," said Mr. Marshall. "I probably just went out with him for that day."
Charter schools are public institutions, funded according to a state formula through tuition paid by the home school districts of their students. They are often run by education management organizations, and get services and curriculum from nonprofit or for-profit vendors.
People associated with the charter school industry have joined the ranks of Pennsylvania's biggest campaign donors, according to an October 2012 study by PublicSource, a nonprofit investigative news group in Western Pennsylvania with which the Post-Gazette is a news partner. For instance, Vahan Gureghian, a Philadelphia-area charter school management executive, gave more than $242,000 to two Eastern Pennsylvania campaign committees, Public Source found.
"As long as people make contributions that are legal, and the contributions are disclosed, then the voters decide" whether there's anything wrong with the support, said Guy Ciarrocchi, chief of staff to Lt. Gov. Jim Cawley. Mr. Ciarrocchi received a $500 contribution from Mr. Trombetta when he ran for state House in 2008. Later Mr. Ciarrocchi became the executive director of the Pennsylvania Coalition of Public Charter Schools.
"The teachers union contributes," Mr. Ciarrocchi said. "Lots of folks on all sides of the education issue contribute."
According to charter school critic Lawrence Feinberg, of the Keystone State Education Coalition, contributions allegedly reimbursed by Avanti are an extreme version of something that happens routinely: the funnelling of political money by the charter backers through multiple committees to make it less transparent.
"We've seen, let's call it money laundering," said Mr. Feinberg. "If these folks are proud of making these contributions why do they pass them through all of these organizations? ... My gut reaction is that maybe they're ashamed of their behavior."