Philadelphia Academy Charter School

This story is a dramatic progression of events. The full articles offer additional fascinating details.
Charter founder getting consulting fees (The Philadelphia Inquirer, May 14, 2008)

Philadelphia Academy Charter School founder Brien N. Gardiner's web of business relationships includes a $108,000-a-year consulting agreement with an education company that does business with the city's school district.
Camelot Schools of Pennsylvania L.L.C. is paying Gardiner's consulting company - Charter School Development Associates - $9,000 a month, for a total of $108,000 this year, Camelot officials said.
The Texas-based company has a multimillion-dollar contract with the district to operate three schools, two disciplinary and one for at-risk students. The company received $10.4 million from the district for its programs the last school year.
Gardiner's Camelot fee is in addition to the hundreds of thousands that he has collected from companies tied to Philadelphia Academy Charter in the Northeast, where he remains on paid leave as a consultant.
Gardiner's status at the charter he founded in 1999 will come up tonight when the school's attorneys present results from an internal investigation of allegations of conflicts of interest, mismanagement, and nepotism.
The school district's inspector general has been looking into the same issues at the school, which has 1,200 students in kindergarten through 12th grade, for the last month.
Gardiner's relationship with Camelot began in 2004, when he was instrumental in helping the company navigate the Philadelphia School District and obtain its first contract, said Todd Bock, Camelot's senior vice president for education services.
"He does consulting," Bock said. "He knows a lot of people."
Albert S. Dandridge 3d, Gardiner's attorney, yesterday said neither he nor Gardiner would comment on Gardiner's ties to Camelot.
Camelot arrived when Paul Vallas, then the district's chief executive officer, was expanding alternative and disciplinary programs with the School Reform Commission's approval…
The school's former CEO, Kevin M. O'Shea, who was demoted to chief operating officer, was suspended with pay. O'Shea, who earned $206,137 as CEO in 2006-07, resigned last Wednesday.
It is not known whether Gardiner's deal with Camelot was covered in the board's inquiry. Henry E. Hockeimer Jr., the lawyer who is overseeing the investigation, declined to comment yesterday.
But as The Inquirer reported last month, Philadelphia Academy Charter School paid Gardiner's Charter School Development Associates $216,130 during the 2006-07 academic year "for services."
The other charter school that Gardiner founded - Northwood Academy - paid the company $86,044, records show.
Gardiner worked for free to help Camelot get its first contract, Bock said.
Once the contract was secured in 2004, Bock said, the agreement called for Gardiner to be paid $3,000 per month for each program. He said that Gardiner started out receiving $6,000 because the district contracted with Camelot to operate Boone, a disciplinary school, and Excel Academy, a school for at-risk over-age students…

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Charter probe expands to land deals: Investigators are looking at properties leased back to two Phila. schools by their founder, Brien N. Gardiner. (The Philadelphia Inquirer, September 17, 2008)

The federal criminal probe of former top administrators at Philadelphia Academy Charter School has expanded to land deals, including one involving another Northeast Philadelphia charter school.
Investigators are interested in the methods that charter founder Brien N. Gardiner used to buy buildings that allegedly were leased to the charters at high rates, enabling him to accumulate reserves of public funds for other purposes, according to several people with knowledge of the probe.
"They're following the money trail," one source said.
A slew of grand jury subpoenas have been issued for documents related to the purchase and financing of a building for Northwood Academy Charter School at 4621 Castor Ave. and for Philadelphia Academy's high school campus at 1700 Tomlinson Rd.
Gardiner, who founded Philadelphia Academy in 1999, opened Northwood in 2005 and at one time was chief executive of both charters. His contracts were terminated in April and May.
It's not clear what parts of the real estate deals federal investigators are focusing on.
But an Inquirer examination of documents shows that Gardiner and his associates created nonprofits they controlled to buy property from a local developer, borrowed money to renovate the buildings, and then refinanced the debt through a state tax-free program.
The result: allegedly lots of missing cash, at least $710,000, according to lawyers who investigated one of the school's finances. The cash reserves have also raised questions about whether Gardiner and others went too far using options allowed under state law…
In a subsequent internal probe, lawyers said they uncovered "substantial evidence" that Gardiner and O'Shea systematically looted the school for personal gain and to benefit their other businesses.
The federal criminal investigation of Gardiner and O'Shea was launched in the spring. In the widening probe, investigators have been asking questions and issuing subpoenas for documents to track every step of the land transactions.
Interviews and documents show that this is how Gardiner put together the land deals that have captured the attention of federal investigators:
Philadelphia Academy's elementary school building at 11000 Roosevelt Blvd. is owned by a corporate landlord. But after the SRC gave the charter permission in May 2003 to add a high school, Gardiner decided to buy a building. He used Philadelphia Academy Community Development Corp., a nonprofit he had created a year earlier. O'Shea's wife, Jamie, was named board president.
Another nonprofit owns Northwood's building on Castor Avenue: NW CDC L.L.C. State records show that Gardiner has sole control.
In both cases, the nonprofits bought their buildings from the same seller: the developer Hardeep Chawla.
Property records show that a Chawla company paid $700,000 in December 2003 for a former warehouse on Tomlinson Road. After making some upgrades, he sold it two months later to the nonprofit Philadelphia Academy Community Development Corp. for $2.45 million.
The Reinvestment Fund, a nonprofit based in Center City that finances neighborhood and economic development projects, later provided a $6.8 million loan that was used to pay off a short-term loan, complete renovations and outfit the school, an official with the Reinvestment Fund said.
Chawla was indicted last month on charges of conspiracy, wire fraud and bribery as part of a federal corruption probe involving City Councilman Jack Kelly's chief of staff and campaign treasurer. He has pleaded not guilty.
Neither Chawla nor his attorney could be reached for comment…
Philadelphia Academy's high school building opened in September 2005. The charter's lease set rent at 110 percent of the nonprofit's debt service. The Reinvestment Fund recommends that amount to cover costs and give the nonprofit a cushion. The lease runs through 2033.
Under that formula, Philadelphia Academy's current monthly rental costs should be about $16,500, according to attorneys for Ballard Spahr Andrews & Ingersoll L.L.P. who conducted the internal investigation for the charter's board. In reality, the charter was paying $66,975 per month, state education department records show.
A recent Philadelphia Academy audit says the school was paying the higher rate "due to increasing cash flow needs" but provides no explanation and does not say who set the higher payment…
The nonprofit that owns Northwood - Gardiner's second charter - also used a tax-exempt note to lower its costs from the purchase of the school building on Castor Avenue. Northwood's nonprofit refinanced an existing loan from Sovereign Bank in December with a $5.3 million tax-exempt note from the Abington Township Industrial and Commercial Development Authority.
Despite the savings the nonprofits achieved through the refinancings, the charters' rent was not reduced. Federal investigators are trying to determine what happened to the extra rent, sources said…

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Mothers whistled up a storm at charter (The Philadelphia Inquirer, November 12, 2008)

Megan Snyder Galo reread her long e-mail to the Philadelphia School District's charter school office.
"I am the parent of a child attending the Philadelphia Academy Charter School. There are things that are going on at the school which are alarming . . ."
Galo, who had gone over each word with fellow parent Lisa George, took a deep breath and hit the send key.
That simple act last November triggered a chain of events that resulted in the overhaul of Philadelphia Academy's operations and a widening federal criminal probe that has ensnared at least three charter schools.

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Brien Gardiner, charter-school pioneer under federal investigation, commits suicide (Philly.com, May 14, 2009)

BRIEN N. GARDINER, the former darling of Philadelphia's charter-school movement who fell from grace amid a financial scandal, shot himself to death yesterday afternoon in the parking lot of a SEPTA regional-rail station, police in Montgomery County said last night.

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Jim Horn connected more dots involving Gardiner, Camelot Schools, Paul Vallas, and student abuse at From CEDU to Brown Schools to Camelot Schools, Inc. (Schools Matter, May 19, 2009)

Gardiner was under investigation for thievery and other forms of corruption related to his work for a number of charter school outfits, including one called Camelot Schools of Pennsylvania. Gardiner had been instrumental in guiding Camelot to part of the $40 million that Philadelphia schoolman, Paul Vallas, was paying out to have Philadelphia's "high-need" students professionally handled.

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Investigative report press release from the U.S. Department of Justice’s United States Attorney of the Eastern District of Pennsylvania
July 1, 2009: FORMER BOARD PRESIDENT AND FORMER CEO OF PHILADELPHIA ACADEMY CHARTER SCHOOL CHARGED WITH FRAUD

PHILADELPHIA - United States Attorney Michael L. Levy today announced the filing of an information1 charging Kevin O'Shea and Rosemary DiLacqua with mail fraud and honest services fraud based on their roles in defrauding the Philadelphia Academy Charter School (“PACS”). O'Shea is also charged with theft from a federally funded program and filing a false tax return.
The information charges that O'Shea, the former CEO of PACS and BG, another former PACS CEO who died prior to the filing of these charges, made approximately $34,000 in undisclosed payments to DiLacqua, the PACS board president and a Philadelphia police detective. While receiving this money, DiLacqua approved a series of salary increases for O'Shea and BG as well as entering into a twenty-year consulting contract with BG that would have paid him in excess of $100,000 annually for no more than 90 days of consulting. DiLacqua did not disclose these payments on her mandatory statement of financial interest form or to the other board members. O'Shea is also charged with stealing at least $500,000 from PACS and filing a false tax return.
“Charter schools were an innovation to improve education and were never meant to be a source of personal enrichment for those running them,” said Levy. “Even more troubling is the fact that the defendants both had law enforcement backgrounds. We hope this case awakens board members of charter schools to their obligation to safeguard the funds of these schools…”

The indictment document is here: http://www.justice.gov/usao/pae/News/Pr/2009/jul/pacsinfo.pdf

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Investigative report press release from the U.S. Department of Justice’s United States Attorney of the Eastern District of Pennsylvania
October 22, 2009: FORMER CEO OF CHARTER SCHOOL SENTENCED TO 37 MONTHS ON FRAUD, THEFT AND TAX CHARGES

PHILADELPHIA - Kevin O'Shea, 50, of Philadelphia, was sentenced today to 37 months in prison for mail fraud, theft from a federally funded program, and filing a false tax return. At the time of the crimes, O'Shea's was working for and defrauding the Philadelphia Academy Charter School (“PACS”), announced United States Attorney Michael L. Levy.
In July 2009, O'Shea entered a guilty plea admitting that he stole between $400,000 and $1 million from PACS by: (1) using approximately $710,000 in PACS' funds to purchase a building in the name of his purported non-profit business; (2) demanding kickbacks from PACS vendors; (3) submitting for reimbursement at least $40,000 in fraudulent invoices for personal meals, entertainment, home improvements, and gas and telephone bills; (4) having approximately $50,000 worth of home repairs improperly billed to PACS; (5) collecting approximately $34,000 in rent from entities using PACS facilities; and (6) hiring a computer firm in an attempt to destroy computer evidence to obstruct this investigation. O'Shea also admitted to filing a false tax return for 2006.
In addition to the prison term, U.S. District Court Judge Eduardo C. Robreno ordered O'Shea to pay restitution in the amount of $900,000, to forfeit $500,000, and pay a $1,000 fine. O'Shea must report to prison by December 7, 2009...

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Investigative report press release from the U.S. Department of Justice’s United States Attorney of the Eastern District of Pennsylvania
December 15, 2009: FORMER BOARD PRESIDENT SENTENCED IN CHARTER SCHOOL FRAUD CASE.

PHILADELPHIA—Rosemary DiLacqua, 51, of Philadelphia, was sentenced today to a year and a day in prison for honest services mail fraud committed while she was board president for the Philadelphia Academy Charter School (“PACS”), announced United States Attorney Michael L. Levy. DiLacqua accepted a total of approximately $34,000 in payments from codefendant Kevin O’Shea, the former CEO of PACS, and another former school official that she did not disclose on her mandatory statement of financial interest form or to the other board members. After receiving these undisclosed payments, DiLacqua approved a series of salary increases for O’Shea and also a 20-year consulting contract for the other former school official that would have paid him in excess of $100,000 annually for no more than 90 days of consulting each year. When O’Shea left PACS the following Spring (May 2008), he was earning in excess of $200,000 in salary from PACS.
DiLacqua pleaded guilty to the charge in July 2009. In addition to the prison term, U.S. District Court Judge Eduardo C. Robreno ordered DiLacqua to pay a fine in the amount of $10,000 and to pay a special assessment of $100. Co-defendant Kevin O’Shea was sentenced, in October, to 37 months in prison and $900,000 restitution...