PA Cyber CEO's consulting work questioned

Leader paid by firm to help manage program to which he guided school employees


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In May 2010, one of the top managers at the Pennsylvania Cyber Charter School wrote to his leadership team about what he called a "new and exciting program." The online public school's employees would soon be able to get master's degrees from nearby Franciscan University of Steubenville in Ohio in the highly specialized area of online instruction, wrote Michael J. Conti, then PA Cyber's director of administrative services, and now its CEO.

"I am asking that each of you select no fewer than five, and no more than 10 candidates, listed in rank order, for possible selection and entry into the program," Mr. Conti wrote.

That email spurred what Mr. Conti later called an "overwhelming response" and kicked off an effort through which about 140 employees of PA Cyber have pursued master's degrees tailored to better prepare them to educate students in the growing online learning industry. Their tuition was covered by the charter school, which is funded almost entirely by the school districts from which its students hail.

As the program developed during 2011, Mr. Conti took on a second role: consultant to Avanti Management Group, a private firm run by former colleagues of his, paid to help to hone and manage the same master's degree program into which he was shepherding PA Cyber's employees.

In scores of emails provided by PA Cyber to the Post-Gazette in response to a request under the open records law, Mr. Conti as a top school administrator encouraged staff to take advantage of the master's program, resulting in payments by the school to the university of at least $1 million. At the same time, Mr. Conti as a consultant urged the university to move forward with the program and, in one instance, pushed for prompt payment of Avanti's bill. He earned $2,000 a month for around 14 months for that side job.

An arrangement in which a high-ranking school official moonlights for a consultant on a project that involves the school "may be legal, but it certainly is questionable," said Daniel Domenech, executive director of the American Association of School Administrators, which represents top school officials nationally.

"There are shades here that may be hard to determine," he added. "But usually these are situations that even if they're not necessarily unethical in terms of policy, they create the impression of impropriety. Administrators have to be very careful with things like that."

A PA Cyber spokeswoman said that on the advice of defense attorney Robert E. Stewart, neither she nor Mr. Conti could address 18 written questions on those relationships and transactions posed by the Post-Gazette on Monday. Mr. Stewart is representing the school in a federal grand jury probe believed to focus on former executives of the charter school.

"Be advised that PA Cyber's primary goal is to educate its students," Mr. Stewart wrote in an email. "Presently, we are also aiding the United States attorney's office with its investigation and will have no part in providing any information to anyone else, that in any way could impact the investigation. I apologize if you feel your role in investigating the spending of tax money is greater than that of the United States attorney's office, legally I do not agree."

From pioneers to partners

Based in the Beaver County town of Midland, PA Cyber was one of the pioneers of online public education and now serves nearly 11,000 students statewide, for which it is paid more than $100 million annually by those kids' home districts. Its proponents have noted that since PA Cyber created the online education industry, its former executives have naturally been in demand as consultants. Some have gravitated from PA Cyber into posts with nonprofit and for-profit organizations that consult for their former employer and for other online educators.

One problem PA Cyber faced was the lack of established training programs for online teachers and administrators. In a 2012 appearance, reported by the Herald-Star of Steubenville, PA Cyber founder Nick Trombetta recalled that the charter school asked several colleges and universities "if [they] could put together a master's program. ... Franciscan University was the only school to say yes. Franciscan University embraced it."

Franciscan saw it as "an excellent opportunity to test the waters of online education," wrote Robert G. Filby, the university's executive vice president, in a response to the Post-Gazette's questions. In 2010, the university started offering online graduate courses in how to be an effective online educator, and at Mr. Conti's urging PA Cyber employees signed on in droves.

Franciscan, according to its financial statements, took on Avanti as a partner, and development of the program continued into 2011 -- but apparently not as quickly as Mr. Conti wished.

In January 2011, Mr. Conti came across an ad for Abilene Christian University in Texas, which was offering a "one-of-a-kind master of education program in leadership in digital learning."

"When Franciscan hears about this they may actually move forward instead of just talking about it," Mr. Conti wrote to Mr. Trombetta and Brett Geibel.

Mr. Trombetta was then PA Cyber's CEO, a position he relinquished effective June 30 to take up unspecified new challenges. Mr. Geibel was PA Cyber's technology director until he left to co-found Avanti Management Group in 2008.

Avanti marketed four former PA Cyber executives as education consultants, and eventually moved from Beaver County to a farmhouse in Calcutta, Ohio. That site was the scene of one of a series of searches by FBI and IRS agents executed July 12.

In early 2011, Mr. Conti repeatedly arranged what he called "Franciscan Friday" meetings among employees of PA Cyber, Avanti and Franciscan University, sometimes at the farm, sometimes on the phone, and usually at 9 or 10 a.m.

It was, at times, an uneasy partnership.

In May 2011, a Franciscan department director asked Mr. Conti if he could set up training sessions for the university's faculty at PA Cyber. Advised of this, Mr. Geibel wrote, "Following that training, what exactly would they need us for again?"

Mr. Conti responded that he was "extremely uncomfortable" with the idea of training sessions for Franciscan's staff, and that he would stall the director.

"I agree, Mike," Mr. Geibel wrote. "I don't think there are enough e's in extremely."

Moonlighting

The idea of payment for Mr. Conti's work on the Franciscan project came up in August 2011 emails.

"Also, have you authorized the project management payments?" Mr. Conti wrote in an email time-stamped 6:25 a.m. Mr. Geibel wrote back that Avanti would pay Mr. Conti retroactively for work since March, and then going forward, at a rate of $2,000 a month.

Also paid for work on the project, according to the emails, was Steve Catanzarite, who was then managing director of Midland's Lincoln Park Performing Arts Center, and is now CEO of the Baden Academy Charter School. Asked whether he took any special measures to avoid any conflict of interest, he said he did not. "There was no relationship between Avanti and the Center, or Franciscan [and the Center], so there was just no conflict," he said.

Avanti does not do business directly with PA Cyber, either. Avanti did, however, get $6.7 million during the 2010-11 school year from the National Network of Digital Schools, a nonprofit company founded by Mr. Trombetta that handles nearly all of the management and curriculum needs of PA Cyber.

A week after the payments were authorized, Mr. Geibel asked Mr. Conti in an email to "lean on [Franciscan] a bit to pay their bill" to Avanti. Within a week, Mr. Conti obliged, writing at 10:45 a.m. from his PA Cyber email account to Franciscan's vice president of finance "to follow up on the invoice submitted by Avanti for services. Do you have any idea when you will be initiating payment?"

During the month that followed, Mr. Geibel had Avanti make a $7,000 down payment to Mr. Conti, while they sought the $81,000 that Franciscan then owed Avanti. The two remained in very frequent contact at all hours. Their emails are time stamped for nearly every hour between 4:30 a.m. and 8 p.m.

Mr. Domenech said that it is unusual for a high-ranking school official to moonlight for a company that is working on a project relevant to the school -- especially if side work is done on school time.

"From our guidelines, if you're on the job and you're getting paid for it," Mr. Domenech said, "to be [simultaneously] working and drawing compensation for work of a different type is unethical."

"If you are benefiting from a company that's doing business with your organization, that's also clearly a conflict of interest," Mr. Domenech added.

Told of Mr. Conti's arrangement, charter-school scholar Katherine Merseth, director of the teacher education program at the Harvard University Graduate School of Education, wrote that it "sounds too close to the line." Ms. Merseth is a co-author of "Inside Urban Charter Schools: Promising Practices and Strategies in Five High-Performing Schools."

"Generally charters need to be held to very high standards of conflict of interest," she continued, noting that states "have frequently closed charters for the appearance of financial improprieties."

PA Cyber's internal policy defines a conflict of interest as "when you are in a position to influence a decision or have business dealings on behalf of PA Cyber that might result in a personal gain for you or for one of your relatives." It requires that any officer facing "an actual or potential conflict of interest" contact the Human Resources Department so they "can set up safeguards to protect everyone involved."

PA Cyber would not say whether any safeguards were discussed or implemented in regard to Mr. Conti's work for Avanti. Mr. Trombetta, who was Mr. Conti's boss at the time of the project, did not return calls for comment.

Edward Elder, a longtime member of PA Cyber's board of directors, said he didn't know that Mr. Conti consulted for Avanti on the Franciscan project until the Post-Gazette called to ask him about it.

Did the board ever vote to approve any such relationship? "As far as I'm concerned, no," he said. He would not say whether he found the relationship to be problematic.

Whose profits?

In August 2011, Franciscan formally announced what it called "a master's degree designed to meet the growing demand for properly trained cyber educators." The university would meet the needs of teachers looking to join the "meteoric rise of K-12 charter schools" and "hybrid programs at traditional schools that also offer online academic classes."

In January, while he was still a consultant to Avanti on the Franciscan effort, Mr. Conti emailed all PA Cyber employees saying this "may be the very last time that PA Cyber can offer this program all expenses paid," and asking that anyone interested in entering the master's program contact him promptly.

In 2011 and 2012, PA Cyber paid Franciscan University of Steubenville a total of $1.3 million in tuition for the charter school's employees.

Budgets circulated in emails between Mr. Conti and Mr. Geibel in early 2011 projected that the program would rack up profits of more than $2 million by its third year. An October 2011 email showed an actual first-year "net profit" of $219,437.

The two sides explored several ways of dividing the profits.

In 2010, Mr. Filby created a for-profit business called Franciscan University Online LLC, with his university as 51 percent owner, and Avanti holding a 49 percent share. Mr. Geibel wrote in emails that Franciscan University Online LLC would not have employees. All expenses associated with its efforts would be paid for by the university or Avanti, which would then bill the limited liability corporation.

Mr. Filby wrote in his response to the Post-Gazette that the LLC was eventually scrapped in favor of a direct vendor relationship between Franciscan University of Steubenville and Avanti.

A proposed contract between Franciscan University of Steubenville and Avanti, dated May 2012, would have granted to Avanti 38 percent of the tuition paid by students of the online effort, in return for the firm's work on managing, marketing and maintaining the effort, plus securing its data.

Mr. Filby wrote that the contract wasn't consummated, and the university's relationship with Avanti was terminated. Franciscan continues to run the master's program. The first class of 30 students graduated in May, and 97 are in the program now.

Mr. Conti's work for Avanti ended effective April 30, as he was preparing to become PA Cyber's CEO. He and the board have revamped the structure of the school's top management, firing in September four high-ranking managers, including two who had consulted for Avanti.

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Rich Lord: rlord@post-gazette.com, 412-263-1542 or Twitter @richelord.


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