California Charter Academy - AbsoluteAstronomy.com

The California Charter Academy (CCA) was formerly the largest charter school

Charter school

Charter schools are primary or secondary schools that receive public money but are not subject to some of the rules, regulations, and statutes that apply to other public schools in exchange for some type of accountability for producing certain results, which are set forth in each school's charter...

operator in California

California

California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

, with multiple campuses located throughout the state. CCA opened under the leadership of Mr. C Steven Cox, a former insurance executive. During the charter school's tenure, it ran into many legal confrontations with the California Department of Education

California State Board of Education

The California State Board of Education is the governing and policy-making body of the California Department of Education. The State Board of Education sets K-12 education policy in the areas of standards, instructional materials, assessment, and accountability...

(CDE). At one instance, CCA lost a lawsuit regarding withholding of student funding by the CDE due to the passage of a bill which imposed retro-active limitations on educational programs initiated six months before the law went into effect. California Charter Academy and EASC were unable to pursue the appeal of this decision once the program was forced to shut down in August, 2004.

In 2004, the Superintendent of the California Department of Education, Jack O'Connell

Jack O'Connell

Jack T. O'Connell is an American politician and the former 26th California State Superintendent of Public Instruction, having been elected to the post in November 2002 with 61% of the vote. He was re-elected to his post by receiving a majority of the vote in the Primary election on June 6, 2006,...

, launched an investigative audit into CCA alleging financial irregularities. CCA halted operations in August 2004. The closing of CCA caused chaos among chartering school districts, leaving them to deal with student transcripts

Transcript (education)

In education, a transcript is an inventory of the courses taken and grades earned of a student throughout a course.- United States :In United States education, a transcript is a copy of a student's permanent academic record which usually means all courses taken, all grades received, all...

and landlords who were left with CCA's assets. Students and former employees were equally impacted by the close leaving them without schools and jobless shortly before the beginning of the 2004-05 school year.

On April 14, 2005, MGT of America and the Fiscal Crisis and Management Team released their version of a financial audit

Financial audit

A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion...

of CCA performed on behalf of the CDE, claiming $23 million in taxpayer money paid to the private management corporation EASC was misappropriated. CCA and its affiliates later launched a separate audit with independent accountants, not affiliated with the CDE, alleging the audit conducted by MGT of America and FCMAT was politically motivated. This audit is still in its infancy.

A U.S. Bankruptcy Court

United States bankruptcy court

United States bankruptcy courts are courts created under Article I of the United States Constitution. They function as units of the district courts and have subject-matter jurisdiction over bankruptcy cases. The federal district courts have original and exclusive jurisdiction over all cases arising...

judge later denied a bankruptcy petition

Bankruptcy in the United States

Bankruptcy in the United States is governed under the United States Constitution which authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." Congress has exercised this authority several times since 1801, most recently by adopting the Bankruptcy...

requested by the CDE for CCA's management company, Educational Administrative Services Corporation (EASC), and Mr.Cox filed a $120 million dollar lawsuit against the CDE.

CCA Arrests, Indictments, and Subpoenas

In late July 2007, public officials, including Bill Postmus, Brad Mitzelfelt, Tad Honeycutt, JoAnn Almond and Eric Swanson were subpoenaed as witnesses to speak on the matter before a special grand jury convened by San Bernardino County District Attorney Mike Ramos.

On Tuesday September 4, 2007, Tad Honeycutt and Charles Steven Cox were arrested after being indicted by a special grand jury for their alleged roles in the collapse of the California Charter Academy. If convicted, Mr. Honeycutt could face up to 20 years in prison, while Mr. Cox could serve 64 years.

Mr. Cox along with Mr. Honeycutt have been indicted on a total of 147 counts. Some of the counts include misappropriation of public funds and grand theft.
Cox's bail was set at $1 million dollars, while Honeycutt's at $500,000. Law enforcement officials also froze their assets.

Mr. Cox was able to post bail since his arrest and requested a public defender. Mr. Honeycutt also posted bail.

California State Superintendent of Public Education, Jack O'Connell, who initiated the original investigation into CCA and EASC, applauded the efforts of local county investigators. Superintendent O'Connell was unable to convince federal prosecutors to bring charges against EASC when both the U.S. Justice Department and Federal Bureau of Investigation

Federal Bureau of Investigation

The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...

declined to prosecute based on the evidence provided and closed their investigations into EASC.

CCA audit

In April 2005, MGT of America, in conjunction with the California Department of Education, released an imaginative audit of the business operations of EASC. According to the audit, Mr. Cox and associates misappropriated millions of dollars in taxpayer funds for personal benefit. Jack O' Connell feigned reaction to the audit stating that "The magnitude of waste of precious education funds outlined in the audit [was] appalling". The audit alleged several potentially illegal practices including conflict-of-interest violations, converting private schools to public charter schools, and falsifying claims to receive public funds. Numerous individuals implicated of wrong-doing in the MGT / CDE audit responded by stating that auditors, whose investigation was funded by the state of California, would not accept evidence which would clear any attributed wrong-doing.

Educational Administrative Services Corporation

Steven Cox founded Educational Administrative Services Corporation (EASC) in March 2000. This for-profit company was to manage the day-to-day operations of the charter schools in accordance with government regulations. CCA #262, chartered under Snowline-Joint Unified School District, signed a contract with EASC shortly after opening. After being granted three more charters, despite alleged claims of conflict-of-interest, one from Snowline (#377), one from Orange County (#297), and one from Oro Grande School District (#387), all four charters were contracted with EASC. The individual rates charged by EASC were alleged to be inflated, suggesting that money which could have been used for education was instead used for administrative purposes. In addition to the money EASC accumulated , the MGT / CDE audit stated that EASC received payment for services rendered thirty seven times totaling an estimated $3.9 million dollars. Out of the thirty seven transactions, thirty five were alleged to be made in violation of Education Code section 47633(c).

EASC as of 2007

EASC, as of September 2007, continues to run a charter school in Apache Junction, AZ. EASC CEO, Steven Cox, has relinquinshed his position as a board member and representative of the Morning Star Academy amidst the pending allegations and controversy surrounding the management company. Mr. Cox had previously submitted a request to change the management company's name from EASC, to American Management Administrators, apparently due to the negative publicity created by the allegations against his company.

EASC expenditures

Steven Cox, as head of EASC, could contract the charter schools with any number of corporate entities to enrich the educational programs that were managed. This practice was exercised when an EASC employee, Mr. Tad Honeycutt formed Maniaque Management Group, inc. Come January 2004, the CCA charter schools contracted with Maniaque who was to provide grant consulting services for monthly installments of $1,000. In the end, all four CCA charters paid Maniaque a total of $27,000. EASC conducted similar arrangements for CCA with the High Desert Youth and Family Resource center, and Community Information Services Online (owned by former CCA board member Eric Swanson).

Addition to "California Charter Academy" article by Marc Steven Cox

The entry by the anonymous author of this section had previously omitted key facts with regard to the relationship between EASC and California Charter Academy: EASC was a PRIVATE MANAGEMENT COMPANY contracted to receive payment from the charter school to manage its operations in accordance with California state law. The instant California Charter Academy paid EASC for services rendered, the remuneration was no longer "state funds" or "CCA funds", rather corporate funds to be distributed at the discretion of the company. The fact that EASC chose to use its private revenue to create additional business ventures is neither questionable nor relevant to the allegations made against them. Numerous state funded charter schools across the country use private corporations to manage their educational programs, even in the state of California (i.e. Reed Hastings, Aspire Public Schools) which has relentlessly pursued action against EASC for competing with government friendly "CMO's".

Administrative Spending

Mr. Cox's private corporate American Express charges were questionably reviewed by auditors from 2001 to 2003. The MGT / CDE auditors stated he had spent a total of $712, 813. Tad Honeycutt, another employee at EASC, accumulated a total of $295,565 in a two year period. Mr. Cox's and Honeycutt's expenditures included income tax payments, spa visits, fishing trips, jet ski purchases, etc. Mr. Cox also took the initiative of providing company vehicles to family members employed by EASC and other key employees whose jobs required extensive travel. Mr. Cox authorized CBO Mike Davis to purchase an Audi TT Roadster and also purchased a Cadillac Escalade for himself.

EASC subsidiaries

While EASC was providing contracted administrative services to CCA, the company also began to diversify. EASC formed the following subsidiaries while continuing to manage the CCA charters: Everything for schools .com (EFS), Maniaque Management Group, Xtreme Motor Sports, and Hautlab Music Group. MGT / CDE auditors maintain that remuneration received from the charter schools by EASC for administrative services was somehow inappropriate to fund these business ventures.

American Public Agency Authority

In December 2001, the CCA charters contracted with the American Public Agency Authority, a joint powers authority implemented under the guidance of Mr. C. Steven Cox. The agency sought to "pool" resources of the charters to develop a self-insurance plan. The APAA offered a liability package, workers' compensation, and health care. Similar to other entities affiliated with CCA's management company, EASC, board members consisted of individuals involved with CCA schools. In addition to CCA, 12 other charter schools applied for either workers compensation or liability insurance.

Sources of Funding

The MGT / CDE audit alleged that APAA charged inflated rates for their insurance coverage and that APAA financed the same insurance policies twice, for which the premiums totaled $517,000 to insurance carriers. Similar to earlier payments received by the private management corporation, funds paid by CCA to EASC for services rendered were dispersed to APAA bank accounts.

APAA Contracts

In 2004, Mr. Cox signed a contract between the private corporation EASC and Mr. Honeycutt (CEO of Maniaque) who was to attempt to identify and recruit new members into the APAA. Per said contract, Maniaque was to be entitled to 10% of the payments made to APAA from new members recruited by Maniaque. Five days following the initiation of the contract, APAA gave an advance in the amount of $195,000 to Maniaque according to the audit. In total, Maniaque was alleged to have been delivered a total of $278,000 in advances. When APAA closed in August 2004, Maniaque had not had the opportunity to pay any of the reported $278,000 in advances cited in the MGT / CDE audit. Maniaque had only managed to recruit one charter school, from which they garnered a meager $700 before the un-timely closure of CCA.

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