Imagine Schools, Inc.

Imagine Schools is the nation's largest for-profit charter school management company operating 71 public charter schools, and enrolling more than 36,000 students nationwide. Imagine's Web site lists its schools operating in the following 14 states: Arizona, California, Colorado, Florida, Georgia, Indiana, Maryland, Michigan, Missouri, Nevada, Ohio, Pennsylvania, Texas, and Washington, DC.

The company was founded in 2004 by its current president Dennis Bakke and his wife, Eileen. Bakke is a leader in the anti-union Christian management movement. His wife was in a prayer group (which was also attended by Hillary Clinton) which was part of the Fellowship (or "the Family"). "The Fellowship believes that the elite win power by the will of God, who uses them for his purposes." *

Imagine Schools, Inc. arrived in California in 2010: SECOND IMPERIAL VALLEY CHARTER SCHOOL SLATED TO OPEN THIS FALL, April 18, 2010, Imperial Valley Press (El Centro, CA)

2010

PUBLIC GOOD VS. PRIVATE PROFIT: IMAGINE SCHOOLS, INC., May, 12, 2010, Policy Matters Ohio: PRESS RELEASE AND FULL REPORT

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AS ST. PETERSBURG SCHOOL FOUNDERS, DISTRICTS QUESTION IMAGINE SCHOOLS' STATUS, May 9, 2010, St. Petersburg Times (FL)

An F-rated St. Petersburg charter school stands on the verge of collapse, mired in debt and losing enrollment. And most of those debts — around $1 million in public tax dollars — are owed to the same private company that founded it.

Pinellas County district officials say they're battling with Virginia-based Imagine Schools, the nation's largest commercial charter operator, over the future of the Central Avenue school.

The school was $963,572 in deficit last spring, according to auditors. It's paying $881,179 to lease a half-empty building from Imagine's real estate affiliate, plus thousands more for equipment, administration and fees, on income of just $2 million a year.

"It's a death spiral," said district charter supervisor Dot Clark.

Pinellas officials are now joining districts across Florida — including Hillsborough and Pasco — in raising doubts about whether the company is running its schools as nonprofits, as required by state law…

This year, enrollment has slipped from 376 to 320 in grades K-5 — a far cry from the 514 students Imagine was planning and budgeting for. And fewer students means less state money to pay contractual expenses.

Imagine and district officials have failed to agree on a plan to turn the situation around, and have asked the state to mediate. The district says the school needs 590 students next fall to remain viable; the company says 518 would be sufficient.

"They owe a tremendous amount of money to their management company, and it looks to us hopeless that they'll ever pay it," said Pinellas School Board attorney James Robinson. "And they don't have enough students to generate the state funding they need."

Parent Scott Benjamin saw and heard more in his role as chairman of the parent-teacher organization. He pulled his fourth-grade son out of the school last spring, after several experienced teachers were fired.

"The teachers told me about the budget cuts and the stress they were under to work after school, for what they described as no additional payments," he said…

According to the Internal Revenue Service, charters must be run by independent boards and negotiate contracts that benefit the school — not a management company or vendor.

"A board must show that it is not a front for a management company," the agency said in published guidelines.

But the Pinellas charter's board is chaired by Justin Matthews, who works for the company as a school principal in North Port…

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FOR SCHOOL COMPANY, ISSUES OF MONEY AND CONTROL, April 23, 2010, New York Times

…The arrangements, they say, allow Imagine to use public money with little oversight. “Under either charter law or traditional nonprofit law, there really is no way an entity should end up on both sides of business transactions,” said Marc Dean Millot, publisher of the report K-12 Leads and a former president of the National Charter Schools Alliance, a trade association, now defunct, for the charter school movement.

“Imagine works to dominate the board of the charter holder, and then it does a deal with the board it dominates — and that cannot be an arm’s length transaction,” he said.

Such concerns have thwarted efforts by Imagine to open a school in Florida, threaten to stall its push into Texas, and have ended its business with a school in Georgia and another in New York, as well as other states.

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WELLS ST. IMAGINE PLACED ON PROBATION: BSU CITES ISSUES FROM JG REPORT, February 2, 2010, The Journal Gazette (Fort Wayne, IN)

Ball State University has placed Imagine MASTer Academy on probation after a nearly three-month investigation into violations of state law and a lack of local control by the charter school’s board, officials announced Monday.

The Imagine MASTer Academy board must take a number of corrective action steps this year, otherwise the school’s charter will be revoked, said John Jacobson, dean of Ball State’s Teachers College, which oversees the university’s charter school office…

2009

CHARTER SCHOOL COMPANY WITH PLANS FOR MCKINNEY IS CRITICIZED, July 4, 2009, The Dallas Morning News

A national charter school company that plans to open new schools in Texas, including one in McKinney, has run afoul of an education official in Nevada and two of its former principals, and they all pose the same question.

Does Imagine Schools Inc. force its charter schools to spend too much money on complex real estate deals and not enough money on teachers and academic programs?

Virginia-based Imagine Schools has emerged as one of the largest for-profit charter school management companies, running several dozen schools in 12 states. It plans to open Imagine International Academy of North Texas in McKinney next year.

Charter schools house their students in Texas in a variety of ways, according to the former Charter Resource Center of Texas, from renting space in a shopping center to doing complex property transactions such as Imagine's.

Typically, after an Imagine-managed charter school gets approval to open, Schoolhouse Finance, Imagine's real estate arm, purchases a campus and charges the school rent. After the school begins to pay that rent, Schoolhouse sells the campus to a real estate investment trust, which then leases it back to Schoolhouse.

The charter school eventually sends rent payments – in one case upward of 40 percent of the school's entire publicly funded budget – to two for-profit companies.

"The arrangement is very lucrative because it's a direct conduit to public funds. The school [property] is paid off with public funds," said Gary Horton, who oversees charter school funding for the Nevada Department of Education…

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The Journal Gazette (Fort Wayne, IN) printed a lengthy four-part series on Imagine Schools in late 2009.

EDUCATION INC. – PART I: PRIVATE COMPANY SKIRTS PUBLIC BOARDS IN RUNNING TAX-FUNDED CHARTER SCHOOLS: FOR-PROFIT MAKES DECISIONS FOR TAX-FUNDED IMAGINE, November 1, 2009

The local school board was about to spend almost $100,000 of taxpayer money on a busing service for students.

But there was no discussion of bids to ensure taxpayers got the best deal. There were no questions about cost, insurance or alternatives to this contract awarded to a southern Indiana trucking company.

Most importantly, there was no vote.

Despite spending millions of tax dollars a year, the board of this public school votes on almost nothing.

Not the $87,510 a year to operate school buses. Not $114,871 to run a lunch program. Not which teachers are hired or whether to hold summer school, or even whether to borrow more than $1 million for operations.

All those decisions and many more were made by a private company from Virginia, though Internal Revenue Service regulations say tax-exempt organizations such as this one must have independent, local control…

EDUCATION INC. -- PART II: IT'S 'OUR SCHOOL, NOT THEIRS': COMPANY'S BOSS GIVES LITTLE AUTHORITY TO CHARTER BOARDS, November 2, 2009

The president of Imagine Schools Inc. sent his employees a memo last fall outlining how he thinks his schools should operate.

In Dennis Bakke's opinion, it shouldn't be local people making decisions about how local tax dollars should be spent; it should be the Imagine executives employed by the for-profit educational management company based in Arlington, Va.

"In none of these cases did the board have a major role in 'starting' the school. They didn't write the charter. They didn't finance the start up of the school or the building. They didn't find the principal or any of the teachers and staff. They didn't design the curriculum. In some cases, they did help recruit students," Bakke wrote. "I do not mind them being grateful to us for starting the school (our school, not theirs), but the gratitude and the humility that goes with it, needs to extend to the operation of the school."

In fact, one Imagine executive said local school boards should be nothing but figureheads.

Paul Faber, an Imagine Schools Inc. regional executive director, told the St. Louis Post-Dispatch last week boards are needed only to hold the charter.

"Ultimately, do you really need a board to run a school?" he asked the newspaper. "No. You really don't."

The problem with local boards, Bakke opined in the memo, is that members sometimes think they should have the right to make decisions…

EDUCATION INC. – PART III: LOCAL BOARD SECRETLY STARTS TWO SCHOOL CORPORATIONS IN TEXAS, November 3, 2009

On Feb. 8, 2008, a curious thing happened.

According to Texas Secretary of State records, Imagine Schools of Central Texas Non-Profit LLC of Georgetown, Texas, was established. That in itself was no surprise, because Imagine charter schools have been popping up all over the country.

What was curious was who owns the corporation and its twin, Imagine Schools of North Texas Non-Profit LLC of McKinney, Texas. The sole member of both limited-liability companies is Imagine-Fort Wayne Charter Schools Inc.

And the Texas entities get their tax-exempt status because each is a wholly owned subsidiary of the Fort Wayne company.

Imagine-Fort Wayne Charter Schools Inc. is the non-profit corporation that runs Imagine MASTer Academy, a charter school at 2000 N. Wells St. in Fort Wayne. Imagine MASTer Academy is a public school whose $2.9 million cost to operate last year was paid for with state taxes.

So why does a Fort Wayne charter school own two charter school corporations in Texas? It’s a question most board members here could not or would not answer, even though in January 2008 they secretly signed documents creating and governing the schools there and, as recently as August, made drastic changes to one of their entities in Texas.

All of these actions were done in secret: According to board meeting minutes provided by the Imagine-Fort Wayne Charter School board, Fort Wayne members never publicly discussed or voted to create the Texas schools, amend the agreements that govern the relationship between the schools or appoint board members to their Southern franchise…

Asked about the Texas entities, most board members refused to speak about it. Some referred questions to Imagine Schools Inc., the for-profit management company based in Arlington, Va., hired by the charter schools to handle day-to-day operations. Others didn’t seem to know what they had signed.

"It sounds sneaky and sleazy," said Trent Stamp, who served as the founding president of non-profit watchdog Charity Navigator for seven years.

"Any time something doesn’t pass the basic smell test for a layperson, there’s a problem there."…
EDUCATION, INC. – COMPANY’S COMPLIANCE TO TAX POLICY IN QUESTION, November 1, 2009
The biggest question facing the Internal Revenue Service when it decides whether to grant tax-exempt status to a hopeful non-profit is who benefits from the non-profit’s operations, according to agency guidelines.

If benefits go to anyone or anything besides the organization’s charitable purpose, then it does not qualify as tax-exempt, the IRS says.

That becomes critical for charter schools in Indiana, because state law requires them to be tax-exempt. Lose your tax-exempt status, lose your school.

But drawing the line between public and private benefit gets especially tricky for charter schools, because most are run by educational management organizations – called EMOs in the industry – some of which are for-profit companies.

Officials at Imagine Schools Inc., in Arlington, Va., often claim they are non-profit, but Imagine Schools Inc. is, in fact, a for-profit company formed after Dennis Bakke and his wife bought another for-profit EMO, Chancellor Beacon Academies. Imagine is the EMO for two charter schools operating in Fort Wayne as well as for a third proposed to open next year.

In 2005, Bakke incorporated a separate company, Imagine Schools Non-Profit Inc. in Virginia, but that company has not yet been granted tax-exempt status by the IRS. Even if it had been granted, the charter schools’ contracts in Fort Wayne are with Imagine Schools Inc., the for-profit version of the company, not Imagine Schools Non-Profit.

Imagine MASTer Academy received $2.9 million in tax revenue for the 2007-2008 school year; it paid Imagine Schools Inc. $343,757 in management fees.

Bakke did not return several calls seeking comment…

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FEDS GAVE $11 MILLION TO IMAGINE SCHOOLS, November 4, 2009, The Journal Gazette (Fort Wayne, IN)

Imagine charter schools in seven states and the District of Columbia have received more than $11 million from the federal stimulus program this year.

Including $971,950 sent to Imagine schools in Fort Wayne and $493,689 given to Imagine schools in Indianapolis, facilities throughout the country received a share of the stimulus money that was funneled through state education departments.

Distributed on a formula basis, schools received money to help prevent teacher layoffs, to pay for catch-up programs for low-income children and to underwrite the cost of education for children with special needs.

Imagine Schools is an Arlington, Va.-based company that is the subject of a Journal Gazette series that examined the company’s operating procedures. The series found that the parent company appears to make decisions about local charter school policies – including curriculum and hiring – instead of the boards of the charter schools.

In all, Imagine schools in Indiana, Ohio, Arizona, Missouri, Nevada, Michigan, Pennsylvania and the District of Columbia received $11.3 million, according to reporting filed on the government’s Web site that tracks stimulus money…

2008

BOARD LOOKS AT HANDLING OF $50,000: CHARTER SCHOOL APPLICANT'S USE OF FEDERAL MONEY UNDER SCRUTINY, December 7, 2008, Las Vegas Review-Journal (NV)

A charter school applicant came under scrutiny Saturday as Nevada education officials questioned whether the school's administrators mishandled more than $50,000 in federal funds…

…The two applicants' relationship with its intended contractor, Imagine Schools of Arlington, Va., was a source of controversy at Saturday's meeting.

Arensdorf cited a letter from Assemblyman Harvey Munford, D-Las Vegas, who asked that the two applications not be approved unless they obtained a different contractor or until Imagine resolved financial and management issues surrounding the 100 Academy of Excellence, a charter school at 2341 Comstock Drive.

That charter school is operating under a financial deficit partly because of the rent it pays to Imagine Schools, whose subsidiary built and owns its $10 million building, state education officials have said.

Education officials also suspect that Imagine fired Hugh Wallace, the former principal of 100 Academy, because he was raising too many questions about the school's finances, according to a Department of Education e-mail that the Review-Journal obtained last month…

2006

CHARTER ED APPLICANT HAS BAGGAGE: DEBT, LOW SCORES HIGH TURNOVER CITED, March 7, 2006, San Diego Union-Tribune

One of the nation's largest education management companies, Imagine Schools Inc., which has asked the Oceanside Unified School District to approve its charter, inherited a host of academic and economic problems from a company it acquired, Chancellor Beacon Academies.

In recent years, numerous schools linked with one or both companies have been in debt, had dismal test scores, high staff and student turnover and inadequate teacher training…

…an annual survey of education management organizations by Arizona State University's Education Policy Studies Laboratory found that ties between 24 schools nationwide connected with Chancellor Beacon, and in many cases its predecessor, were severed between 2002 and 2005. That includes five schools in Massachusetts, four of which closed, and 11 in Michigan.

Since the study, more problems have arisen…

Central Missouri State University refused last year to renew its sponsorship of Imagine's Southwest Charter High School. The school had a deficit of more than $1 million, said Rick Sluder, dean of education and human services. Other problems included low test scores and high staff turnover. There were four school administrators in five years, he said…

In Florida, 12 Imagine charter schools had a combined debt of more than $8 million, according to the state's Auditor General Report released last September.

River's Edge Charter Academy, for example, finished the school year with a $2.3 million debt, said Vicki Muse, director of the Office for School Choice for Brevard Public Schools in Florida. The debt was from fees owed to the management company, Muse said. Imagine has forgiven that debt, she said, but the school has mounted more than $332,000 in additional debt this school year. Low test scores at River's Edge were also a concern, she said…

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STRUGGLING TO MAKE THE GRADE: COMPANY THAT WANTS TO OPEN CHARTER SCHOOL ON YWCA CAMPUS HAS HISTORY OF PROBLEMS, May 12, 2006, The News-Sentinel (Fort Wayne, IN)

A company that wants to open a charter school on the YWCA campus on Wells Street has a history of poor academic performance and financial problems in other states.

Ball State University, which grants approval for new charter schools, will decide by September whether Imagine Schools of Arlington, Va., can open the school as soon as fall 2007.

Last month, local philanthropist and businessman Don Willis agreed to buy the campus and plans to sell it to Imagine, one of the nation's largest education-management companies.

Since 2002, at least 35 schools have cut ties with Imagine or Chancellor Beacon Academies, which Imagine acquired in June 2004, because of problems ranging from high teacher and student turnover to low test scores, among other things….

Imagine operates 54 schools in 12 states outside Indiana, bringing in about $100 million a year. Dennis Bakke and his wife, Eileen, founded the company in 2004 after they bought out Chancellor Beacon, a Florida-based educational management company…

2005

TRUSTEES END CHARTER SCHOOL'S RUN; SUNY BOARD'S DECISION MEANS MORE THAN 500 PUPILS MUST FIND NEW SCHOOL, March 2, 2005, The Post-Standard (Syracuse, NY)

Syracuse's first charter school has lost its authority to operate and will have to close at the end of this school year.

The State University of New York board of trustees voted Tuesday not to renew the charter of the Central New York Charter School for Math and Science, said Jeffrey Perez, a spokesman from the SUNY Charter Institute.

The institute, which oversees charter schools for SUNY, recommended the charter not be renewed because of the school's poor academic performance. The school is in its fifth year of operation and has about 536 pupils in grades kindergarten through six…

…Founders created the school to provide city pupils with an education rich in math and science and a better option than the traditional city schools. But scores have been low since the beginning.

…The school's demise will leave hundreds of families looking for a new school and about 55 employees looking for new jobs…

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CHARTER SCHOOL FIRM LOSES WORK ACROSS NATION, August 28, 2005, The Post-Standard (Syracuse, NY)

The defunct Central New York Charter School for Math and Science is just one of more than two dozen schools across the country that broke ties with Imagine Schools Inc. and its predecessor.

Imagine lost the contracts over the last three years because of poor test scores and other problems that either forced the charter schools to close, or led school boards to decide against keeping Imagine as its management company…

In addition to poor academic performance, regulators who closed or criticized Imagine schools over the last few years cited high turnover rates among school officials, shaky financial management and a lack of involvement with the schools' academic programs. School boards that chose not to renew Imagine's contract frequently complained that the firm did not provide all the services outlined in its agreements…

The firm is clearly losing ground in New York state, where, in less than a year, it has dropped from managing three schools to one: the two-year-old Community Charter School in Buffalo.

This year, the state closed Imagine's Central New York Charter School for Math and Science, located in Syracuse, for poor academic performance.

Last December, Imagine lost its contract with the South Buffalo Charter School. South Buffalo's board decided not to renew its agreement with Imagine because it found the company was no longer providing the school with anything it couldn't do more efficiently itself, according to the board president…

Imagine was created last year through the purchase of the financially troubled Chancellor-Beacon Academies…

Recent failed partnerships involving Imagine or Chancellor-Beacon Academies include:

In Washington, D.C., the district's oldest charter school fired Chancellor-Beacon Academies in 2003 because the company hired a convicted felon to serve as the school's principal, according to reports published in The Washington Times. Edward Dixon had served five months in federal prison for bank fraud and was still on probation three years later when the firm hired him, the news reports said.

In Philadelphia, the city's school superintendent canceled all of Chancellor-Beacon's contracts in the city - a $15 million blow to the firm - saying it had failed to make substantial educational improvements in its five Philadelphia schools, according to articles in The Philadelphia Inquirer…

In Michigan, 13 schools have discontinued their association with the company or have closed since 2002, according to the annual surveys. That leaves the firm with five schools in that state.

In Massachusetts, all of Imagine's six schools have terminated contracts with the company, the survey shows. The most recent, at the multi-lingual Lowell Community Charter School, was canceled by the board just this June.

And in Missouri, where all charter schools must be sponsored by a university, two universities pulled their support from Imagine schools this year.

The University of Missouri-St. Louis ended its relationship with Imagine's Thurgood Marshall Academy this spring, according to Bob Samples, communications director for the university...

A former president of the school board was recently indicted for stealing $21,000 from the inner-city school by using a school debit card at a casino, Samples said.

"There were very bad test scores, constant turnover of teachers and constant turnover of principals," he said. "We dealt, in effect, with three different management teams over a five-year period."…

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DESPITE DEBT, SCHOOL FIRM AIMS TO OPEN MORE CHARTERS, October 17, 2005, Palm Beach Post (FL)

With its 12 Florida schools already combining for more than $8.3 million in debt, one of the largest charter school companies in the country is looking to open at least nine more in the state this year, including one each in Palm Beach and Martin counties.

"There are times when you need to push for development, and now is one of those times," said Rod Sasse, director of development for Imagine Schools Inc. "Some of our schools that have been with us for a while are going out on their own now. And we just have to continue our development stream."

In Florida, only two charter schools managed by Imagine Schools have gone "out on their own" in the past three years, according to state and local records.

The Central Florida town of Oakland took over Oakland Avenue Charter on Oct. 1 after the school received a D from the state this year. The North Tampa Alternative Charter was turned over to the school district in 2003 after several years of financial troubles.

Nationally, however, two dozen Imagine-managed schools have either shut down or cut ties with the company, according to an annual Arizona State University report. Just one other charter school company has lost more during that time…

Imagine officials said most of their debt was in place before their company took over the schools. Imagine bought the Miami-based Chancellor-Beacon in June 2004 and now oversees schools in nine states with about 20,000 students, including 6,500 in Florida.

But many of Imagine's regional directors in Florida remain from Chancellor-Beacon, and recent audits show debts have increased since Imagine took control, according to school district records…

…Just 27 percent of Imagine's schools received an A or B, while 66 percent of public schools statewide earned one of the top two grades.

In Martin, where Imagine officials want to build a new elementary, 94 percent of the schools received an A or B last year.

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*HILLARY'S PRAYER: HILLARY CLINTON'S RELIGION AND POLITICS, Sep. 1, 2007, Mother Jones

When Clinton first came to Washington in 1993, one of her first steps was to join a Bible study group. For the next eight years, she regularly met with a Christian "cell" whose members included Susan Baker, wife of Bush consigliere James Baker; Joanne Kemp, wife of conservative icon Jack Kemp; Eileen Bakke, wife of Dennis Bakke, a leader in the anti-union Christian management movement; and Grace Nelson, the wife of Senator Bill Nelson, a conservative Florida Democrat.

Clinton's prayer group was part of the Fellowship (or "the Family"), a network of sex-segregated cells of political, business, and military leaders dedicated to "spiritual war" on behalf of Christ, many of them recruited at the Fellowship's only public event, the annual National Prayer Breakfast. (Aside from the breakfast, the group has "made a fetish of being invisible," former Republican Senator William Armstrong has said.) The Fellowship believes that the elite win power by the will of God, who uses them for his purposes. Its mission is to help the powerful understand their role in God's plan.