Troubles persist at several charters

Rosemary DiLacqua's husband was in trouble.

Joseph J. DiLacqua, a captain in the Philadelphia Police Department, had been charged in early 2002 with covering up the drunken-driving accident of a fellow officer, and the family needed $15,000 to pay for a lawyer.

Brien N. Gardiner, founder of the charter school where Rosemary DiLacqua was board president, provided the solution. He secretly lent her the money.

But the money had strings attached, prosecutors said, and accepting it exposed DiLacqua, who was also a police detective, to federal charges.

It was just one part of a web of criminal intrigue that pervaded Philadelphia Academy Charter School. Details came to light earlier this month when Rosemary DiLacqua was sentenced in federal court for taking a total of $34,000 in secret payments from Gardiner and a former chief executive and then giving them raises and lucrative contracts.

A lot happened between spring 2008, when The Inquirer first reported allegations of fiscal mismanagement at the Northeast charter, and Rosemary DiLacqua's sentencing on Dec. 15. And the school was not the only one shaken by the revelations of suspected corruption. Reverberations are still felt across Pennsylvania's charter-school landscape.

Federal investigators who began their probe of Philadelphia Academy in May 2008 concluded that Gardiner and Kevin M. O'Shea, the former CEO, had looted the school. Gardiner committed suicide in May when indictments seemed imminent. O'Shea, who pleaded guilty to stealing as much as $1 million, is serving a 37-month sentence in federal prison.

Although the federal probe has spread to at least five other charters in the area, the Philadelphia School District has made only modest changes to increase oversight of the city's 67 charter schools.

The real reform may come from Harrisburg. Legislation has been introduced in the state Senate to overhaul the 12-year-old charter law and provide more scrutiny of taxpayer-funded charters.

"Hopefully, soon the legislature will correct the gaps in the existing law and allow the public to benefit from the good work that the charter schools can perform," U.S. District Judge Eduardo C. Robreno said at DiLacqua's sentencing.

The judge said he was sending DiLacqua to federal prison for a year and a day and fining her $10,000 to signal "that the charter schools of the commonwealth are not to be used as a personal piggy bank."

The problems at Philadelphia Academy came to light in early 2008 after two concerned mothers discovered alarming information about the school's operations.

The Inquirer reported allegations of fiscal mismanagement and an open investigation by the school district inspector general in April 2008. The paper found that a web of business interests enabled Gardiner and O'Shea to be paid more than most superintendents in the area.

Within a month, the federal probe was launched. Sources with knowledge of the situation say the investigation has spread to at least five other charters in the area.

Authorities have obtained federal subpoenas to collect financial records, and agents have interviewed former and current school employees.

John J. Pease, an assistant U.S. attorney who is chief of the government fraud and health-care fraud unit, has assumed responsibility for the federal charter investigations. He declined to comment on specific probes.

Federal and local authorities "will continue to vigorously investigate and prosecute persons who cheat taxpayers by stealing public funds," Pease said earlier this month. "Fraud schemes aimed at educational-program funds are of particular concern because they deprive our children of the full education they deserve, causing societal harm that simply cannot be measured in dollars and cents. The Philadelphia Academy Charter School case is an important example of our commitment to this effort."

The schools under investigation include Northwood Academy, another charter in the Northeast that Gardiner founded. Federal agents gathered financial documents as part of their investigation of his school activities.

At Germantown Settlement Charter School, federal authorities are trying to determine whether charter money propped up other entities run by the school's parent organization, Germantown Settlement, sources said. The school closed in June after the School Reform Commission refused to renew its operating charter.

Federal officials are scrutinizing Agora Cyber Charter School in Devon to determine whether its founder, Dorothy June Brown, diverted money to her management company. Brown severed her ties with the school in October as part of a civil-suit settlement that paid her $3 million in state and private money but that allowed the school to stay open. A slander lawsuit that Brown filed against parents who questioned her company's role at Agora is pending in Montgomery County.

In August, teams of federal agents raided Community Academy of Philadelphia in Kensington and carted off boxes of documents and copies of computer hard drives. Those with knowledge of the investigation said authorities are examining the school's ties with a related nonprofit that pays salaries to some school employees, including its founder and CEO. The nonprofit owns the charter's building and operates two alternative schools under a contract with the school district.

At New Media Technology Charter School in Stenton and Germantown, authorities are reviewing allegations that charter money was used to pay expenses at a private school, a restaurant, and a health-food store. All have ties to the school's CEO and its founder.

John F. Downs, the school district inspector general, said his inquiry into charter schools continues as well. He said his investigators had found a troubling pattern of practices at charters across the city.

"They all seem to have nonprofits, pay rent to the nonprofits, and everyone gets rich," Downs said.

Under the law, school districts are supposed to ensure that charters they approve educate students and operate lawfully. But such scrutiny generally comes only once every five years, when the charters are up for renewal.

The state provides direct oversight for only the 11 cyber charters that provide online instruction.

Partly in response to the charter probes, the Philadelphia School District has increased staff in its charter office from four to six.

And, since the financial scandal erupted at Philadelphia Academy, the district has quietly begun reviewing the finances of charters a year before renewal so it can conduct its own audits.

The early look "is an integral part of the process of the review of charter schools at this point," said Benjamin W. Rayer, an associate superintendent who oversees charters.

The commission closed Germantown in June, along with another troubled charter. But the district seems reluctant to clamp down on others.

The commission ordered sweeping changes at New Media in August as conditions for obtaining a new charter. Yet the commission has allowed the school to miss deadlines for ousting its CEO and replacing its board.

Rayer said his office was negotiating a new timetable because New Media had been making a good-faith effort.

In the 1990s, charter schools were touted as innovative alternatives to traditional public schools. They won support in Harrisburg from an unusual coalition of Republican legislators eager to apply free-market principles to education and some Philadelphia Democrats frustrated by the quality of city schools.

Today, the charter movement has strong support from both parties in Harrisburg and in Washington. And two of the maverick city Democrats who pressed for passage of the charter bill in 1997 - State Rep. Dwight Evans and State Sen. Anthony Hardy Williams - have helped found several charters and become vocal defenders.

The proposal to rewrite the law calls for closing loopholes that have enabled some charter operators to enrich themselves, and for creating a state office to oversee charter schools and investigate complaints of fraud and mismanagement.

No hearing dates have been set, but staffers for Sen. Jeffrey E. Piccola (R., Dauphin) said hearings likely would be held in January or February.

Piccola, majority chair of the Senate Education Committee and one of the sponsors of the original law, has concluded that changes are needed.

He said the bill would "address a number of issues that have arisen in the last year as several charter schools, particularly in the Philadelphia region, have been the target of criminal investigations and financial scandal."

Rosemary DiLacqua's husband ultimately was acquitted of all criminal charges. But prosecutor Derek Cohen said her acceptance of cash and favors from Gardiner and O'Shea - including a bank bag containing $10,000 - had enabled the men to get away with their crimes.

DiLacqua pleaded guilty to a count of mail fraud and theft of honest services. She was to report to federal prison Feb. 1, but her attorney is appealing the sentence to the U.S. Court of Appeals for the Third Circuit.

Philadelphia Academy's current board president, Patrick Milligan, a parent, said DiLacqua's sentencing should help end a painful chapter at the Northeast charter school.

"We feel we have closure," Milligan said. "The board, the faculty, and staff and parents - we want to move on now and make our school the best possible for the kids."