For a second time, a Northeast Ohio charter school may end up in court after firing its management company.
Invictus High School, a Cleveland charter school for struggling urban students, tore up its management agreement with Cambridge Education Group at a school board meeting Nov. 1.
Ten days later, the company, which operates out of Akron but is owned by Florida-based Midwest Education Partners, filed a Cuyahoga County lawsuit arguing that terminating the five-year deal early is a breach of contract.
The school and its attorney, April Hart, argue that Cambridge has steered public money away from the classroom and toward select vendors in order to enrich itself and its owner, Marcus May.
Cambridge Executive Director John Stack said “it came as somewhat of a mystery” when the board shredded the contract. He blames the unrest on a “disgruntled employee.”
The ensuing legal fight will be the latest chapter in an ongoing debate over how much power private and for-profit operators should exert over publicly funded charter schools in Ohio.
Wide reach
Cambridge is one of the largest for-profit operators in Ohio, where private firms run most charter schools.
Together, the 20 schools it manages receive more than $30 million in state funding. Operations include seven schools in Cleveland, a startup in Canton and four in Akron — Towpath Trail High School, Middlebury Academy, Main Preparatory Academy and Colonial Prep Academy.
The company, with a local headquarters in Fairlawn, does all the hiring and firing. The schools pay staff and teachers, who work “at will” for the company.
On top of paying salaries and cutting checks for furniture, books, technology, rent or mortgage and other routine expenses, the schools pay Cambridge a management fee of up to 18 percent of state and federal funding.
After Invictus renewed its contract with Cambridge last year, state legislators passed a bill that requires any management company pulling more than 20 percent of government funding to detail spending. Management companies can avoid this disclosure while steering the schools to hire from what its critics say are affiliated companies.
This is done through hiring affiliated vendors. It’s what Newpoint Education Partners, which is also owned by May, has been accused of in Florida. In the spring, a grand jury in Escambia County issued an indictment of grand theft, money laundering and aggravated white-collar crime against Newpoint and three of its vendors — which sometimes share addresses or owners.
The Florida case is ongoing. It’s raised concerns in Ohio, where school boards began asking questions over the summer. To quash those concerns, Stack, the top administrator at Cambridge, said he and staff have made presentations to the school boards to explain that Newpoint and Cambridge are not the same, though they are owned by the same person.
“You can have a person who owns multiple companies, and that’s the case here,” Stack said.
Asked why a specific vendor was used to bill the school for furniture instead of buying directly from manufacturers, Stack said the third-party vendors provide financing and guarantee on-time delivery, though at a higher cost.
Hart, the attorney for Invictus, penned a letter to the company following the board’s decision to cancel the contract.
“It has come to attention of the Board,” Hart wrote, “that Cambridge and/or Marcus May, its owner, has intentionally deceived the Governing Authority regarding its relationships and financial arrangements that exist between (including but not limited to) the following companies: Newpoint Education Partners, LLC; Epiphany Management, LLC; Midwest Education Partners LLC ; School Warehouse; Newpoint Enterprises, LLC and School Financial Services.”
Epiphany Management is located in Akron. It was previously owned, in part, by May. It provides technology services to Cambridge-managed charter schools, area public schools and was named in the Florida grand jury indictment.
“Several assurances have been requested and received in writing that no such conflicts exists between, Cambridge, Marcus May and third party-related vendors,” Hart wrote. “However, new evidence in the criminal case between the State of Florida and Newpoint Management, LLC., alleges a state of specific financial transactions involving school vendors that also do business with Invictus High School.”
Round two
Invictus first hired Cambridge in 2012 after a particularly nasty breakup with its former operator, White Hat Management of Akron.
In 2010, Invictus — then known as Life Skills Center of Cleveland — joined nine other charter schools in questioning how White Hat was spending public money. The schools eventually decided to let their management agreements with White Hat expire. White Hat then kicked them out and kept all assets.
The Ohio Supreme Court ruled last year in White Hat’s favor. State law has since been changed to ensure schools keep what companies purchase using state money.
Invictus principal Joe Palmer and assistant principal Dean Manke are named along with the school and its board members in the breach of contract lawsuit filed by Cambridge this month.
For Manke, who was at the school when White Hat ran it, the new allegations of self-dealing sound too familiar.
“The original boards, back under White Hat, were kind of hand-picked,” Manke said. “They were installed not to ask questions. And you see that across the state.”
The current board at Invictus, and reportedly others under the Cambridge umbrella, have started asking questions.
Palmer was dismissed by the company as a trouble-making, disgruntled employee. He said Cambridge has individually named the Invictus school board members in the lawsuit to discourage others from carrying out their fiduciary duty and asking questions about how tax dollars are spent, who’s getting them and what is the relationship between vendors and the management companies that recommend hiring them.
Doug Livingston can be reached at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow on Twitter: @ABJDoug .