Feds charge former PACS execs with fraud

By William Kenny

Times Staff Writer

The former chief executive and former board president of a Northeast Philadelphia charter school are facing federal fraud charges stemming from the alleged theft of school funds and their failure to adhere to state ethics requirements.

Kevin O'Shea, the ex-CEO, allegedly stole at least $500,000 from the Philadelphia Academy Charter School, while Rose DiLacqua, the former board leader, took at least $34,000 in cash loans and payments from O'Shea and another former PACS chief, according to U.S. Attorney Michael L. Levy.

Levy announced a criminal information containing the charges on July 1. If convicted on all charges, O'Shea faces a possible 35 years in prison, while DiLacqua faces a possible 20 years. No court date has been set in the case.

"Charter schools were an innovation to improve education and were never meant to be a source of personal enrichment for those running them," Levy said. "Even more troubling is the fact that the defendants both had law-enforcement backgrounds. We hope this case awakens board members of charter schools to their obligation to safeguard the funds of these schools."

An attorney representing the 50-year-old O'Shea, Peter Hardy, said in a brief prepared statement that his client "intends to plead guilty to the charges against him." O'Shea was a city police officer from 1979 to '87.

An attorney representing DiLacqua, 51, a recently retired Philadelphia police detective, did not reply to requests by the Times for comment. While in the police department, DiLacqua worked in the major-crimes unit specializing in investigating con artists who prey on retired and elderly victims.

Philadelphia Academy operates two Northeast campuses - at 1700 Tomlinson Road and 11000 Roosevelt Blvd. - and serves about 1,200 students in kindergarten through 12th grade.

Last week's legal filing identified Brien Gardiner, the late co-founder and original chief executive of PACS, only by his initials. The court document describes Gardiner as O'Shea's partner in a variety of schemes to use their influence over the publicly funded school for personal profit.

O'Shea and Gardiner allegedly orchestrated kickback payments from school vendors, submitted false invoices for personal reimbursements from the school, used school funds to pay for construction work on their own homes, kept rent payments from outsiders who had used school facilities and even skimmed profits from vending machines in the school.

Gardiner was found dead May 13 in a field near the Bethayres, Montgomery County, train station. He had a gunshot wound of the head. The death has been ruled a suicide.

The 14-page charging document released last week cites numerous individual instances of alleged theft or misappropriation of funds by O'Shea and/or Gardiner.

Among them was a May 2006 incident in which O'Shea allegedly hired a PACS contractor to make $4,000 in repairs to the home of O'Shea's sister. O'Shea billed the work to the school. In September 2007, O'Shea allegedly had contractors make improvements worth $46,000 to his own home and likewise billed the school.

In August 2007, O'Shea and Gardiner allegedly used $710,000 in PACS funds to purchase a Bustleton Avenue office building that they had arranged to quickly resell to another area charter school co-founded and influenced by Gardiner, Northwood Academy, for a $1 million profit to Gardiner's consulting company.

In January 2008, O'Shea and Gardiner allegedly ran up a $145,000 bill for the construction of "lavish" office spaces within the school that included flat-screen TVs, executive bathrooms and a kitchenette with granite countertops.

In April 2008, after parent complaints triggered an investigation into the school's finances by the School District of Philadelphia's inspector general, O'Shea allegedly hired a company to erase financial records from his office computer. He then billed PACS to pay for the attempted cover-up, according to the allegations.

The court filing suggests that DiLacqua took a series of loans or payments from O'Shea and Gardiner in exchange for her support of their efforts to profit personally from their relationships with PACS.

In the months after a $15,000 payment in March 2002, DiLacqua allegedly approved a $7,000 bonus for O'Shea, who at the time served as the school's director of operations.

The second alleged payment was for $9,000 in January 2005. A little over a year later, DiLacqua unilaterally approved a $94,000 annual contract between the school and Gardiner's consulting firm, according to the charges. The contract allowed Gardiner, a longtime city public school teacher and principal, to work no more than 90 days at PACS per year so that he could simultaneously collect his state teaching pension.

Within weeks of the third alleged payment to DiLacqua for $10,000 in August 2007, the board president arranged an "emergency" vote of the board to approve O'Shea as the school's new CEO. Gardiner allegedly chose O'Shea for the role even though O'Shea has no college degree.

No other candidate was considered for the job. Weeks later in October 2007, DiLacqua allegedly signed off on a $204,000 annual salary for O'Shea without the knowledge of other board members.

With the investigation underway in April 2008, DiLacqua and O'Shea allegedly forged a memorandum and backdated it to make it appear as if the board had approved O'Shea's exorbitant salary months earlier.