For Profit Charter School Chains Make Money with Questionable Real Estate and Management Deals
Charter schools are once again receiving unwanted scrutiny. Since its inception over a decade ago, reports of academic failures, management deficiencies and financial improprieties have dogged Ohio’s charter school program.
This time, our attention is drawn to two of the for-profit companies that operate charter school franchises throughout the state.
First, White Hat Management, Ohio’s largest for-profit charter school operator, was recently sued by the governing authorities of ten of its charter schools. Click here to view the complaint.
The lawsuit alleges that White Hat has abused its unfettered control of each of its charter schools by maliciously breaching its fiduciary responsibilities by failing to account for its use of public funds and by using those funds for purposes other than providing for the education of students.
Second, Imagine Schools, Inc., the nation’s largest for-profit operator of charter schools, is the subject of a new study by Policy Matters Ohio. Report author, Piet Van Lier, paints a picture of a profiteering company that uses questionable leaseback arrangements to further enhance its bottom line at the expense of its students’ educational needs.
The report details how Imagine, through a subsidiary, brokers real estate deals which allow the company to buy a property, then sell it to a real estate investment trust company from which Imagine leases back the property and in turn rents it to an Imagine-run charter school. This practice enables Imagine to enjoy profits on both the resale of the property and the high rents that it charges to its schools.
The brands offered by White Hat and Imagine have provided little in terms of tangible results – White Hat’s dropout prevention charter schools post a graduation rate of just 14 percent and no Imagine school earned better than a D on the most recent state report card.
Yet, these and other management companies continue to reap a generous bounty from state policies largely sown by White Hat founder, David Brennan.
Mr. Brennan can be credited with the role of the man behind the curtain in shaping the state’s school choice programs. In addition to generating about three-quarters of a billion dollars in state aid payments for his White Hat enterprise, he has also been wildly successful in securing special protections for White Hat, and other, for-profit operators.
A case-in-point illustration of the fruit of Mr. Brennan’s legislation-influencing labors is a provision under current law that will allow White Hat to fire the lawsuit’s plaintiffs and appoint new, more compliant governing authorities.
The White Hat lawsuit and the Policy Matters’ report have reignited the debate over the appropriateness of allowing for-profit companies to operate charter schools.
However, it is difficult to envision how those who will still argue in support of this marriage of free enterprise and public education can continue to defend the records of White Hat and Imagine.
By Andrew Jewell
Research Development Consultant
Ohio Education Association