City Controller Alan Butkovitz's investigation of 13 Philadelphia charter schools found repeated examples of complex real estate arrangements in which charters leased or rented facilities from related non-profit organizations...
His staff has been sharing information with the U.S. Attorney's Office, which is conducting a criminal investigation of at least nine area charter schools, according to sources with knowledge of the probe.
Butkovitz's complete report, which will include findings on the School District's oversight of 67 city charters and recommendations for tightening state law, is scheduled to be released Thursday afternoon...
"The fact there were significant issues at 13 out of 13 raises the likelihood you would see many of these same issues found in a much larger sampling of the schools," Butkovitz said.
Among those 13 schools, four were the subject of extensive focus by Butkovitz for complex real estate maneuvers, apparent conflicts of interest and CEO salary arrangements, according to a draft of the report obtained by The Inquirer:…
Preparatory Charter School
Located at 1928 Point Breeze Ave. in South Philadelphia, "Prep Charter" is a high school known for a program that allows seniors to take classes at Community College of Philadelphia and for its sports teams.
The charter took CEO John Badagliacco off the payroll Sept. 1, 2007, so he could retire and collect his state pension. Badagaliacco remained as CEO under the terms of a five-year management contract with a management firm he created, Education First, Inc.
The controller's office found that Badagliacco was paid $198,220 in 2009. In addition, state pension records obtained by The Inquirer show he also collected a monthly pension of $7,100, bringing his total salary and pension to $283,420 a year.
Prep Charter opened in 1998 in a building at 1631 E. Passyunk Ave. that Badagliacco had acquired from his mother. In 2003 the charter bought its current facility, then a vacant former grocery store at 1928 Point Breeze Ave., for $875,000. The charter spent $2.6 million to gut it and convert it into a school.
The next year, the school transferred ownership to the nonprofit Friends of the Preparatory Charter School for $1, the report said. The charter and the nonprofit have the same board members.
Badagliacco is on vacation and not available for comment. Joseph G. Caruso, an attorney on staff at the charter school, said Wednesday that ownership of the property was transferred to the nonprofit before it was rehabbed.
Prep Charter has a 14-year-lease with the nonprofit, and records show the school pays $660,000 annual rent. Caruso said the money pays the constuction [sic] loans.
According to the nonprofit's records, its only income is charter rent and investments. Before obtaining the Point Breeze property, the nonprofit had zero assets. By 2008, its assets totalled $5.4 million.
Caruso was paid a salary of $79,256, according to 2008 tax records. Like other employees at the school, he participates in the state teachers' retirement system.
Butkovtiz's office questioned his participation, saying school counsels are not covered by the retirement system. Caruso said he was hired by the charter's board to handle all the school's legal matters. He said no one else has questioned his participation in the pension system.
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Preparatory Charter School
BUTKOVITZ CITES CHARTER SCHOOL PROFITEERING, April 7, 2010, Philadelphia (PA) Inquirer