Feds charge charter school founder with fraud
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Within five months of securing a charter from the Pennsylvania Department of Education for the Agora Cyber Charter School, Dorothy June Brown and a second person created The Cynwyd Group in order to defraud the school of more than $5 million over the course of two years, a federal indictment filed last week in U.S. District Court for the Eastern District of Pennsylvania alleges.
According to the indictment, Ms. Brown used The Cynwyd Group to bill the charter schools for management services she never actually performed.
Ms. Brown, 75, denied the charges in a press release issued by her lawyer, Gregory Miller of Drinker Biddle & Reath.
The press release touted her 25 years of experience in the Philadelphia school district, and noted that she had "founded a number of high-performing charter schools in the area, including Laboratory Charter School, Planet Abacus Charter School, Ad Prima Charter School, Agora Cyber Charter School and Main Line Academy, which is a private, not-for-profit school for the disabled."
She is married to William H. Brown III, who is senior counsel at Schnader Harrison Segal & Lewis. According to his biography on the firm's website, he is the former chairman of the U.S. Equal Employment Opportunity Commission and served as chief of the fraud unit and deputy district attorney in Philadelphia.
The indictment alleges that Dorothy Brown defrauded a total of three charter schools -- she founded all three -- of more than $6.5 million. It also charges Joan Woods Chalker, Michael A. Slade, Courtney L. Knight and Anthony Smoot with conspiring to obstruct justice with Ms. Brown.
Ms. Brown allegedly defrauded the Planet Abacus Charter School of more than $700,000 and the Laboratory Charter School of Communication and Languages of $37,000.
In May 2006, about a year after Agora's charter was granted, Ms. Brown signed a management contract between Cynwyd -- which she claimed already had a management contract with Agora -- and K12 Pennsylvania.
The contract assigned K12 Pennsylvania the responsibility to handle "'all business aspects and day-to-day management' of Agora," according to the indictment.
"After Brown executed the K12-Cynwyd contract, K12 managed and operated Agora while Brown and Cynwyd did little more than collect millions of dollars in 'management fees' from Agora while providing little or no services to Agora," according to the indictment.
Following an audit of Agora in 2009, the Pennsylvania Department of Education announced it would revoke the school's charter because the payments to Ms. Brown and Cynwyd "raised conflicts of interest, and that there was an absence of clear and credible evidence that Cynwyd rendered services to Agora," according to the indictment.
"To continue her fraud ... Dorothy June Brown and Cynwyd caused lawsuits to be filed in the U.S. District Court for the Eastern District of Pennsylvania," according to the indictment.
In those suits, Ms. Brown claimed Agora's board of trustees had voted to enter into a contract with Cynwyd, although it had not actually done so, according to the indictment.
By October of that year, she had settled with the state Department of Education and K12 based on her allegations that the board had agreed to a 10-year contract with Cynwyd -- they paid Cynwyd $3 million from the Agora operating account, according to the indictment. After that point, neither Ms. Brown nor Cynwyd had a relationship with the school.
Timothy Eller, press secretary for the Pennsylvania Department of Education, did not return calls for comment.
The case was investigated by the Federal Bureau of Investigation and the U.S. Department of Education's Office of the Inspector General and is being prosecuted by Assistant U.S. Attorney Anthony Kyriakakis.
"Charter schools are funded with public money that is intended to help educate children in our communities," special agent-in-charge George C. Venizelos of the Philadelphia Division of the FBI said in a prepared statement. "When individuals misappropriate those funds, as this indictment today alleges, they trade our children's education and our children's future for their own illegal profit."
According to the most recent report available from the state Department of Education, which is from 2011, Agora received just more than $4 million in federal money. The same report said Agora has an annual operating budget of roughly $70 million.
First Published July 30, 2012 12:00 am