Prosecutors Extract Pleas, $215 Million in Charter School Fraud Case

Education

Prosecutors Extract Pleas, $215 Million in Charter School Fraud Case

At least $215 million will eventually make its way back into state coffers under the plea deal by two leaders of A3 charter schools. They were charged as part of a scheme that involved enrolling fake students into their online charters and collecting public money for each student. 

A3 charter school
District Attorney Summer Stephan discusses the indictment of several people tied to an alleged scam involving the charter school management company A3. / Image courtesy of NBC San Diego

The two ringleaders of an online charter school scam that raked in hundreds of millions of dollars in taxpayer money pleaded guilty to conspiracy charges on Friday. 

Sean McManus and Jason Schrock, as well as nine other defendants, including a superintendent, were charged back in 2019 as part of a complicated scheme that involved enrolling fake students into their online charter schools and collecting public money for each student. 

McManus, an Australian national, took part in the trial via video conference from Australia. 

Sean McManus pleaded guilty to charges related to his role in a charter school scam. He appeared via videoconference from Australia.

“The general activity is you and your friend got these millions of dollars from the state and you funneled them into your pocket, correct?” asked San Diego Superior Court Judge Frederick Link, while taking the pleas. 

Both answered yes. 

Online charter schools are allowed to collect just as much money per student as brick-and-mortar schools. But the case has pushed legislators in Sacramento to re-examine the rules surrounding online charters. Lawmakers passed a two-year moratorium on the creation of new online charters and are considering changes to the state’s enrollment and funding practices. 

Over a several-year period leading up to 2019, McManus and Schrock’s schools brought in roughly $400 million in revenue, prosecutors from the San Diego District Attorney’s Office have said. 

As part of McManus and Schrock’s plea deal, they have agreed to turn over all remaining cash and assets owned by A3 and its subsidiary companies. So far, that includes at least $215 million that will eventually make its way back into state coffers. 

An organizational chart of charter school management organization A3 Education, based on the district attorney’s indictment

McManus and Schrock could serve up to a maximum of four years in prison as part of the deal. They also agreed to cooperate in the district attorney’s ongoing case against the other defendants going forward. 

Several other defendants have already pleaded guilty, however, some have not – including former Dehesa School District Superintendent Nancy Hauer and former Mountain Empire Unified Superintendent Steve Van Zant. McManus and Schrock’s participation could ultimately end up securing further guilty pleas. 

A3 operated 19 online charter schools, including three in San Diego County. 

The scam was both audacious and multi-faceted. One of the central parts of the operation involved gathering signatures from summer sports programs, such as football and cheerleading camps. 

Lieutenants working under McManus and Schrock would approach the sports programs and offer a donation for each child who signed paperwork that essentially enrolled that student into an A3 school for the summer. Sports programs often received between $25 and $50 per student who signed the paperwork, according to an indictment that laid out the initial charges. 

For that same piece of paperwork, A3 would often receive more than $2,000 per student, even though the students did not participate in school work as part of their attachment to A3. 

In one case, a former teacher carried several suitcases full of paperwork worth roughly $5 million back to one of the A3 offices near Los Angeles, prosecutors alleged in the indictment. 

In other cases, A3 workers would approach private, religious schools in their attempts to attain enrollment paperwork, prosecutors say. In those cases, A3 would offer a certain amount of money to the private school for each student who signed enrollment paperwork – then the organization would skim the rest. 

A3 also had real teachers who taught real students. Much of the money that ultimately won’t make it back to the state went to teachers’ salaries. 

All of the A3 schools – like all California schools – participated in yearly audits. Those audits, however, never revealed wrongdoing. Instead, they revealed loopholes in the state’s auditing process, including the fact that schools and school districts can fire their auditors if they don’t like what gets uncovered

The scam also exposed flaws and vulnerabilities in the way online charters are funded

McManus and Schrock’s sentencing hearing is scheduled for June. 

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