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10 charter schools sue White Hat over assets

By John Published: May 18, 2010

By John Higgins
Beacon Journal staff writer

The governing boards of 10 Ohio charter schools are challenging the legality of the state law regulating the for-profit corporation that operates their schools, Akron-based White Hat Management.

In a suit filed Monday in Franklin County Common Pleas Court, the school boards argue the law is unconstitutional because it gives too much power to White Hat, one of the largest charter school operators in the nation.

The company was founded by David Brennan, a prominent Akron businessman and Republican donor.

The suit charges that White Hat lobbied the state legislature for changes to the charter school law in 2006 that made it possible for White Hat to fire any school board that tries to sever ties with the management company.

Nor is it financially feasible for a charter school to switch operators because White Hat's contracts state that it owns the school's property, furniture and equipment — even though they were all paid for with tax dollars, according to the complaint.

''Essentially, White Hat created an educational model where tax dollars flow to the private corporation with little room for oversight or control by the schools' governing bodies,'' said a news release accompanying the filing of the lawsuit. ''Further, the law makes White Hat's receipt of tax dollars hard to stop.''

The plaintiffs in the suit represent seven
Hope Academies and three Life Skill Centers in Cleveland and Akron. Named as defendants are White Hat and the Ohio Department of Education.

An Ohio Department of Education spokesman said the state doesn't comment about pending litigation.

A White Hat representative issued a statement Monday defending the company's management. While saying company officials couldn't comment ''on the specifics of the lawsuit'' because they have not received a copy of the complaint, the statement added that ''the State of Ohio fully requires that state and federal funds are properly accounted for, and White Hat audits have been accepted every year.''

Charter schools are privately operated schools that receive state funding based on enrollment and other factors. Some operate their own schools, while others hire a management company such as White Hat, which is the largest for-profit operator in Ohio.

The plaintiffs contract with White Hat Management, which receives about 96 percent of the public money allocated for the school, according to the suit. Their contracts expire on June 30, but the school boards want several changes that would give them a better accounting of how White Hat spends taxpayer dollars. The defendants ''have been unwilling to substantially change or modify any of the contract terms and conditions,'' according to the suit.

The charter schools are asking the Columbus court to declare the charter school law unconstitutional, void all contracts, prohibit White Hat from removing any property from the schools, and require the company to conduct any future negotiations ''in good faith.''

Charter schools also must have a state sponsor to operate. The state authorizes the sponsor to oversee the schools, to collect the fees for that oversight and to suspend operations or cancel contracts if necessary.

Overriding decision

Changes to the charter school legislation in 2006 made it possible for an operator such as White Hat to override a school board's decision to switch operators by appealing directly to the sponsor.

The lawsuit contends that White Hat or one of its affiliates lobbied the legislature for the new language and argues that it is unconstitutional.

It means that if White Hat's sponsor, the Ohio Council of Community Schools, agrees that White Hat should remain the operator, then White Hat can fire the school board and replace it with a new governing board.

However, if the sponsor agrees that a new operator is warranted, then the boards still lose, because they must then buy the building, furniture and equipment from White Hat if they want to keep their schools.

''A similar situation happened in Columbus with Life Skills Centers a few years back, where Life Skills Centers terminated their agreement with White Hat,'' said Carlo LoParo, spokesman for the school boards. ''They were allowed to terminate the agreement, but then White Hat took all of the assets, the school facilities and the teachers and moved on.''

In 2006, the boards of three Life Skills Centers for high school dropouts cut ties with White Hat and reopened as Focus Learning Academies with new buildings, staff and curriculum, according to the Columbus Dispatch.

''Even if they fire White Hat and are permitted to fire White Hat, they essentially lose the school because the public money that flowed to the school was used to purchase all of the assets by White Hat, and in turn, White Hat owns all of the assets,'' LoParo said.

Public to private

''The biggest issue of contention is that these tax dollars that purchased the facilities and operate the schools, everything that was purchased with the tax dollars, is now property of the private company as opposed to the nonprofit board.''

The lawsuit also alleges that White Hat has failed to account for how grants have been spent or to prepare quarterly un-audited financial disclosures required by the contract.

It also alleges that the defendants, White Hat and its subsidiaries, ''have failed to promote the academic success of each school's students, ultimately jeopardizing the charters of the plaintiff schools.''

'Academic emergency'

Four of the 10 plaintiff schools were designated an ''academic emergency,'' the equivalent of an F grade on the last state report card. Two were in ''academic watch,'' a D grade. Three received a grade of C, ''continuous improvement.'' One was unrated.

The three schools in Summit County suing White Hat are:

• Hope Academy University (academic emergency).

• Hope Academy Brown Street Campus (continuous improvement).

• Life Skills Center of Akron (not rated).


John Higgins can be reached at 330-996-3792 or jhiggins@thebeaconjournal.com. Read the education blog at http://education.ohio.com/.
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