Two charter-school officials charged

Kevin M. O'Shea and Brien N. Gardiner did not stint on the decor of their executive offices at Philadelphia Academy Charter School, where they ran up $145,000 in expenses that included flat-screen TVs, lavishly appointed bathrooms, and a kitchen with granite countertops.

Even $46,000 in improvements to O'Shea's home in the Morrell Park section were billed to the Northeast Philadelphia school.

Gardiner, founder and former chief executive officer, and O'Shea, his handpicked successor, secretly paid $34,000 to Rosemary DiLacqua, the school's board president. She approved raises for both men, and signed off on a 20-year consulting contract for Gardiner, giving him more than $100,000 annually for 90 days' work or less.

Such alleged misspending of hundreds of thousands of dollars in school money from March 2002 to May 2008 added up yesterday to federal criminal charges against O'Shea and DiLacqua.

U.S. Attorney Michael L. Levy announced that O'Shea, 50, a former city police officer with a high school diploma, and DiLacqua, 51, until recently a Philadelphia police detective, were charged with mail fraud and honest-services fraud.

Gardiner, mentioned by his initials in the federal filing, committed suicide seven weeks ago amid indications that charges were imminent.

Yesterday's 14-page filing details allegations of how Gardiner and O'Shea used taxpayer money intended for the Philadelphia Academy students "in various ways to enrich themselves."

The year-long investigation "shows that people who are supposed to be watching out for our students and our schools were only acting in their own self interest," said Derek A. Cohen, the assistant U.S. attorney in charge of the case.

The federal probe includes operations of a number of local charter schools. However, it began with Philadelphia Academy and Inquirer reports in April 2008 that the Philadelphia School District's inspector general was investigating allegations of financial mismanagement, nepotism, and conflicts of interest at the school. The paper found that O'Shea and Gardiner, through a web of charter and business entities, were earning more than most area superintendents.

Philadelphia Academy, opened in 1999 by Gardiner, enrolls 1,200 students from kindergarten through 12th grade on its campuses at 11000 Roosevelt Blvd. and 1700 Tomlinson Rd.

Cohen said his probe of charter schools was continuing.

"It's not the end of our investigation," he said. "We continue to look into this and related type fraud."

Although the federal documents filed yesterday mention that O'Shea and Gardiner collected kickbacks from the charter school's vendors and contractors, no total has been placed on the alleged fraud. O'Shea is charged with stealing at least $500,000 from the school and filing a false tax return.

"It's important not only to hold Mr. O'Shea responsible for the theft but to hold the president of the board responsible for her failure to disclose her relationships," Cohen said. "Schools need to be able to rely on these boards to protect the students and the funds."

O'Shea faces up to 35 years in prison, DiLacqua 20.

The announcement of the charges came exactly seven weeks after Gardiner, 64, died of a self-inflicted gunshot wound in the parking lot of the Bethayres train station in Lower Moreland, Montgomery County.

Cohen declined to comment yesterday on Gardiner's death.

The charges were described in a document known as an "information," which generally signals that defendants are going to plead guilty and sometimes means they are cooperating with authorities, legal experts said.

"Kevin intends to plead guilty to the charges against him," his attorney, Peter Hardy, wrote in an e-mail to The Inquirer. "He has been cooperating with the government and its investigation since last year. Kevin apologizes to the children and parents of Philadelphia Academy Charter School, to the citizens of Philadelphia, and to his own family."

Mark E. Gottlieb, DiLacqua's attorney, could not be reached for comment.

"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 in a statement yesterday. "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."

Said Don Fort, special agent in charge of IRS Criminal Investigation: "The alleged actions of O'Shea and DiLacqua were motivated by greed, and the ultimate victims in this case were the students of the charter school."

He said the investigation, carried out by several agencies, "necessitated following an intricate web of financial transactions devised to conceal the alleged wrongdoings."

As The Inquirer reported, O'Shea and Gardiner used $710,000 from the Philadelphia Academy to buy a building at 6632 Bustleton Ave. for Philadelphia Academy Services, a nonprofit that Gardiner founded to provide special-education services.

Government investigators found Gardiner and O'Shea had used the nonprofit for various money-making ventures, including real estate holdings and vending machines.

Gardiner had planned to sell the Bustleton Avenue property to Northwood Academy, another charter school he controlled, "for an approximately $1 million profit," the filing said. The sale was not completed because Northwood backed down after the federal investigation became public last year.

O'Shea, who was a city police officer from December 1979 through January 1987, rose from the ranks of parent volunteer at the charter to board member before joining the staff in 2002.

Federal investigators found that while O'Shea had no school administration experience, he suddenly was promoted from director of operations at Philadelphia Academy to CEO in September 2007 at Gardiner's insistence. Having already begun to collect his pension from the state teachers retirement system, Gardiner remained involved in the school as a consultant.

O'Shea was the only candidate considered at a hastily arranged "emergency" meeting, and DiLacqua was the only board member who knew in advance that a new CEO would be chosen, federal documents said.

On the same day, DiLacqua and O'Shea signed an addendum to Gardiner's consulting contract, extending it through December 2026.

The month after O'Shea was named CEO, DiLacqua approved a raise that pushed his salary to $204,000. No other board members approved the raise.

After The Inquirer's reports and the inspector general's investigation, the Philadelphia School Reform Commission forced Philadelphia Academy to overhaul its operations to obtain a new, five-year operating charter.

The commission required the school to replace its board and sever all ties with Gardiner, O'Shea, their relatives, and their businesses. O'Shea was fired in May 2008; DiLacqua left the board last summer.

John F. Downs, the district's inspector general, began investigating parents' allegations of wrongdoing at Philadelphia Academy nearly 18 months ago. Yesterday he said the district's probe was not done.

"This has been a very complex and difficult investigation to do because of the money trails, the contracts, the consultants, and the buildings," he said. "There are still unanswered questions."