School for Arts in Learning

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Charter school pioneer gets FBI scrutiny: Posh living, finances eyed (The Washington Times, May 5, 2010)

Charter school pioneer L. Lawrence Riccio is known internationally as an influential voice for youths with disabilities, an innovator in special education and the arts. He's authored books, drives a Porsche, dines in style and travels abroad frequently.

But his vaunted standing was brought low by claims of malfeasance after he retired in June from the nonprofit group and arts-based charter school he headed in Washington, D.C., according to public records, educators and school board officials who have been questioned by the FBI and the District of Columbia's office of inspector general.

An independent auditor's report said that in the fall of 2008, the U.S. attorney's office issued a subpoena for school financial records related to Mr. Riccio's "alleged criminal activities." The report said the school he founded in 1998 — the School for Arts in Learning (SAIL) — was cooperating with the investigation.

A review by The Washington Times of records and interviews of more than a dozen people familiar with the investigation has exposed cracks in the fiscal oversight of the District's 57 public charter schools in a city known as the vanguard of the nation's charter school movement but with a history of unaccountability and shoddy oversight.

Questions also have surfaced over Mr. Riccio's suspected use of a school credit card for travel, restaurants, liquor, flowers and lingerie.

D.C. Public Charter School Board officials confirmed that the investigation is ongoing…

A 2007 memo by a financial consultant to SAIL's former chief financial officer, obtained by The Times, describes an accounting department in disarray, an "alarming" lack of control over cash, the use of maxed-out credit cards to pay school bills, and a grants-management system "neither coherent nor applicable" to grant files.

An outside auditor's report for the year ending June 30, 2008, said SAIL and related entities established by Mr. Riccio were unable to document more than $200,000 in expenditures. Mr. Riccio retired a year later under pressure from the charter board, which was threatening to revoke SAIL's charter, Mr. Williams said.

By then, SAIL had a budget deficit of $323,000, was failing to meet standards for fiscal management and had experienced four years of poor math and reading scores…

After launching SAIL, records show, Mr. Riccio increased the budget and enrollment at a rapid pace, earning himself increasingly lucrative contracts and autonomy over the school's finances. By 2007, SAIL was receiving 79 percent of its $5.9 million in annual revenue from the District of Columbia.

But school audits, internal documents, e-mails and memos, along with former employees who were not authorized to speak publicly on the matter, portray Mr. Riccio's 10-year run as plagued by mismanagement and high administrative turnover.

One former administrator, who worked at SAIL for more than five years and has been interviewed by the FBI, was struck by Mr. Riccio's persistent cost-cutting measures and aggressive strategies to find grant funding or maximize per-pupil subsidies…

The ex-administrator said Mr. Riccio controlled the finances for both WVSA and SAIL, and wanted to buy property for an upper school to complement a $2.8 million property that housed the elementary school at 16th and L streets in Northwest Washington.

Despite such ambitions, SAIL's finances were stretched so thin, the former administrator said, that the school had to cancel student field trips and other educational outings. On several occasions, the former administrator said, the school had to take out payday loans to meet payroll demands…

Both former administrators, in addition to a third former administrator who also spoke anonymously, said they addressed their concerns to the charter board as early as 2003, but they never saw anything come of it. One of the former administrators conceded they could have done more to confront the problem, but resigned instead.

One financial consultant lasted eight weeks, another less than three months. The school had three principals in three years. Independent audits and records offer a paper trail that put the school's trustees on notice at least five years ago that something was wrong, yet they failed to take action.

For the year ending June 30, 2005, an audit by Walker & Co. LLP identified three contracts each exceeding $25,000 that bypassed charter board approval as required. The audit also noted that SAIL and WVSA shared expenses and borrowed or loaned funds to each other — along with other affiliated entities that Mr. Riccio had established — and that some of the entities were in debt.

The school also had failed to pay $257,280 for a year's rent on a building it leased for the upper school.

Yet in a letter to the trustees, Walker & Co. noted "no matters involving the internal control over financial reporting that we consider to be material weaknesses." The firm found "no instances of noncompliance" that were required to be reported…

When SAIL bought a building at 16th and L, Mr. Offner said, the seller set a condition that it also buy her apartment in Scotland.

Records obtained by The Times show that when Mr. Riccio was chief executive officer, he regularly traveled to Scotland, with SAIL or WVSA paying for his airfare, transportation and food. Mr. Riccio also maintained a bank account in Scotland, and the records show wire transfers of money from the school to the account in Scotland.

A financial statement obtained by The Times said that in 2004, WVSA paid a $4,854 credit card bill to cover Mr. Riccio's travel-related expenses in Scotland.

The financial records also show that SAIL paid Mr. Riccio's membership dues and dinner tabs at the University Club, one of the premier private clubs in the country. He traveled to Boston, Denver, Houston and New Orleans on the school's credit card, records show, and he used it at grocery stores, drugstores, wine and liquor stores and flower shops…

Mr. Riccio is now a professor of special education at Trinity University in Washington…

Mr. Williams, who said problems at SAIL didn't surface until July 2008, blamed "extremely suspect" audits by outside accounting firms at three of the District's charter schools in the past two years. He said the charter board is urging schools to adopt tougher oversight standards. But with 27 employees and a $3 million budget to police 57 charter schools in control of $575 million, he said, the board doesn't have enough resources.

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