Cyber-school empire under attack
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In the past seven years, Nicholas Trombetta has climbed from small-town Beaver County school administrator to the head of a sprawling educational network fueled by millions of taxpayer dollars.
Now this onetime wrestling coach finds himself grappling with a ring of powerful opponents -- from law enforcement agencies to the state Legislature to litigators -- who are imperiling the empire he built from scratch.
Detractors claim Dr. Trombetta has misused the public's money and engaged in a range of questionable business practices at his booming Pennsylvania Cyber Charter School and affiliated entities. Those include the Lincoln Park Performing Arts Center, a $23.5 million jewel that sits across from Dr. Trombetta's office on the main drag of Midland, population 3,000.
Although it is not clear exactly what state Attorney General Tom Corbett Jr. is investigating, a statewide grand jury whose term recently ended heard testimony over several months about alleged financial shenanigans within Dr. Trombetta's network. Prosecutors are expected to continue presenting evidence to a new grand jury next month.
Subpoenaed witnesses have provided the grand jury with information they say points to possible violations of a range of laws concerning charter schools, campaign finance, corporate governance and nonprofit organizations.
In a recent interview, Dr. Trombetta -- whose doctorate is in education -- declined comment on the grand jury but said he understands the intense scrutiny attracted by his organizations.
With his cyber school drawing 6,200 students and anticipated revenue this year of $50 million in tuition from school districts around the state, Dr. Trombetta views himself as an upstart bound to ruffle feathers among proponents of the traditional model of public education -- local students going to school rather than being educated online at home from anywhere in the state. Traditional schools, he said, are unused to the competition, and success breeds contempt.
"Has it been pleasant? No," Dr. Trombetta, 51, said of the controversy in Midland, an old steel town just across the border from Ohio. "I tell this to the staff: This is all part of it. No one who challenges a system that has been unchallenged for so long is going to go away unscathed. We are under the microscope, and we should be."
Dr. Trombetta is chief executive officer of the charter school, a 21st-century economic engine for tiny Midland. which foundered after Crucible Steel shut down in the 1980s.
The school, along with the performing arts center, the affiliated Lincoln Park Performing Arts Charter School, and the Beaver-based National Network of Digital Schools, a management group of which Dr. Trombetta is president, have created nearly 800 jobs.
Dr. Trombetta is also superintendent of the Midland School District, which approved the charter for the cyber school. He intends to step down July 1 as superintendent. Dr. Trombetta said this year he is earning $149,000 from the cyber charter school and $50,000 from Midland.
Dr. Trombetta is perceived as a power broker in town, mighty by merit of the fact that he is at the heart of the web of educational entities. Critics have complained that many people in his employ or on the various boards of his organizations are beholden to him and therefore incapable of independent decision-making. In short, they say, Dr. Trombetta's rule is absolute.
"Just the way he's set things up, he's like an old ward leader who basically controls his turf, and anybody who's on a board out there either works for Nick or has someone in his family who works for Nick, so the chance that he would have any dissent is nil because everybody works for Nick or entities that he controls," claims Mark Zabierek, a lobbyist and longtime political player in Western Pennsylvania who worked for a firm, Centre Educational Consultants, that was fired by Mr. Trombetta. Mr. Zabierek has testified before the grand jury.
Dr. Trombetta's control, critics say, extends to how money is spent, whether on the construction of the performing arts center or accommodations for employees at a resort hotel for a conference. The debate is over whether Dr. Trombetta dispenses money for pet projects or legitimate business expenses.
"Nick has treated all of the accounts out there as if they were his own money," Mr. Zabierek said. "Just because you have all this money doesn't give you a license to go nuts. That wouldn't be accepted at any school district or on any government level."
Mr. Zabierek looks skeptically at the relationship between the cyber school and the National Network of Digital Schools. The cyber school pays 12 percent of its revenue -- an expected $5 million to $6 million this year -- to NNDS to handle non-instructional needs, from legal affairs to purchasing to billing. That represents the vast bulk of NNDS's revenue. Dr. Trombetta said the 12 percent is at the low end of the fair market range for the type of services NNDS provides.
Critics have pointed to an educational conference for cyber school educators at a New Mexico resort as wasteful spending of taxpayer dollars. But Dr. Trombetta said NNDS covered expenses -- not the cyber charter school -- for eight employees at a cost of $125 a night per room and defended the trip as legitimate.
Dr. Trombetta sees the money spent by NNDS as segregated from the tax dollars that flow into the cyber school.
"The boards are independent and to suggest that NNDS somehow exercises undue influence over PA Cyber, or vice versa, as your questions insinuate, is an insult to the board members of both organizations. Bear in mind too that these services and costs are audited then scrutinized by board members that are not paid a dime for their services," Dr. Trombetta said.
He also dismisses the criticisms that he runs an empire stocked with employees who are unqualified political hires.
"I think it demeans the people who worked hard to create what we have," he said. "People want to throw stones at people who are successful."
Dr. Trombetta's success stems from the hard times his town fell on two decades ago. Midland closed its high school in 1986, and with no other Beaver County school district willing to take its students, the borough eventually sent them across the border to East Liverpool, Ohio. That did not sit well with Dr. Trombetta, an Aliquippa native and resident of East Liverpool. He wanted Midland children to stay local.
By 2000, Dr. Trombetta had found the answer: Launch a cyber charter school that could attract both Midlanders and students from around the state.
Starting with 527 students in 2000-2001 and revenue of $2.9 million, the school has grown exponentially.
Students' home school districts must pick up part of the tab for their education and pay the cyber charter school, whose expenses, critics say, are lower than traditional schools because there is no significant infrastructure to maintain, such as classrooms, swimming pools and stadiums.
However, Dr. Trombetta argues that just because cyber schools provide online education does not mean that they do not have significant expenses, including computers, textbooks and buildings for their employees.
This disparity in revenue and expense has led the cyber charter school to be immensely profitable. It has $9.1 million on hand. But appearances can be deceiving. Dr. Trombetta said that cash cushion is necessary to cover expenses for the coming year since some school district payments come in late, causing the cyber school to take out loans or lines of credit to meet expenses.
But critics question the use of the cyber school's income. Exhibit A in their opinion is the performing arts center. It was built with $7.5 million in state funds, $3 million from Beaver County, and $3 million from the Midland School District. Filling out the funding: a $10 million, 20-year pre-paid lease by the cyber charter school.
"The school has funneled millions of dollars into the construction of Lincoln Park Performing Arts Center ... without proper documentation, purpose or, at times, authority for such payments," Michael Barney, a former business associate, charged in a 2005 letter to Dr. Trombetta.
Mr. Barney declined comment for this story in order to "maintain the integrity of the grand jury investigation."
Dr. Trombetta said the cyber school uses about 35,000 square feet of space, which amounts to just over $14 per square foot -- a price he said was good, especially considering the quality of the accommodations.
It made more sense to lease additional space at a new facility and help build something significant in Midland that was a boon to the region than to spend $10 million to renovate the dozen buildings in which the cyber school's employees are housed, Dr. Trombetta said. The school occupies, owns or leases space in eight buildings in Midland and one each in Beaver, Beaver Falls, Cranberry and Philadelphia.
He also noted that public officials poured in millions of dollars, meaning that government officials were involved in the financing of the center from the get-go. If there were any legal problems or questionable spending, Dr. Trombetta said, there was ample opportunity for politicians to balk at funding the project.
Lawsuits and allegations
Mr. Barney is a key figure in the grand jury investigation. He runs Rodis LLC, which provided management services to the charter school for about eight months. But Dr. Trombetta fired Rodis, which then sued for breach of contract. The cyber school sued back, and the litigation is pending.
Mr. Barney was the first witness to testify before the grand jury. In a four-page letter to Mr. Trombetta dated March 2005, Mr. Barney questioned billing practices, use of public funds and some payments involving the cyber school and performing arts center.
Dr. Trombetta charged that Mr. Barney's motivation is about one thing: the nearly $500,000 he believes he is owed by the cyber charter school. Dr. Trombetta claims the transactions of the cyber school and related entities have been open and honest.
"We're a transparent organization. We have offered at every turn our willingness to cooperate with every state agency because at the end of the day we believe we will be standing tall and proud," Dr. Trombetta said.
Beyond contending with the grand jury investigation and the Rodis lawsuit, Dr. Trombetta has been targeted by a foe in Harrisburg, state Rep. Karen Beyer, R-Lehigh, a former school board president who is on the House Education Committee.
Ms. Beyer said she has based some of her conclusions on discussions with Mr. Barney, whom she described as a "whistle-blower."
Ms. Beyer said she told Dr. Trombetta. "Nick, you continue to operate, I have no problem with what you do. I'm not trying to ban cyber charter schools. I'm trying to get a handle on the money."
Dr. Trombetta said if anything, Ms. Beyer's criticisms have helped enrollment at the school by generating publicity.
"We have invited Rep. Beyer to come to Midland and learn about the high quality education we provide to over 6,000 students across the state of Pennsylvania. She has refused to take us up on that offer and continues to mischaracterize our work and our mission," Dr. Trombetta said.
"We remain at a loss why she is not interested in learning about what we are doing before making judgments. Other elected officials have done so and come away with a clear understanding that the work being done here is meaningful and important to many families across the Commonwealth and that we represent the future of public education."
Ms. Beyer has introduced legislation to tighten financial controls on cyber charter schools and cut tuition. She has written letters to both the state's attorney general and auditor general requesting investigations of Dr. Trombetta.
Ms. Beyer claims that the contract between the cyber school and NNDS and the funding of the performing arts center represent improper uses of taxpayer money.
"Those dollars were assigned to the students to use for their education. They weren't assigned to build a performing arts center," particularly one that tuition-paying students on the other side of the state don't have access to, she said.
As for NNDS, Ms. Beyer said, "He's taking these tuition payments and starting up some subsidiary business with the purpose of creating business out of the state." NNDS sells services to 33 clients other than Pennsylvania Cyber Charter School, including cyber charter schools in Ohio and New Mexico.
"He's required the utilization of taxpayer resources to execute his big, huge plan, whatever that ultimately is," Ms. Beyer said. "He wants to be the king of cyber schools, and I'm here to tell Mr. Trombetta he's not going to be the king of cyber schools with taxpayer money, period."V.W.H. Campbell, Post-Gazette
Nick Trombetta during construction of the charter school for the performing arts in 2004.
Click photo for larger image.
First Published March 18, 2007 12:00 am