Charters' business manager admits role in fraud scheme

The former business manager of the Philadelphia-area charter-school network founded by Dorothy June Brown pleaded guilty Friday in federal court to his role in an alleged scheme to defraud the schools of $6.7 million.

In a separate hearing later in the day, attorneys for Brown won a bail reduction for the 75-year-old educator, who faces more than 60 counts of wire fraud and charges that she led a broad conspiracy to obstruct justice.

Anthony Smoot, 50, of New Castle, Del., pleaded guilty to charges that he participated in a conspiracy with Brown and others to obstruct justice and had obstructed justice during parts of a four-year federal probe of the schools.

Smoot handled finances for Brown's taxpayer-funded schools from 2001 until she fired him in May 2010. The federal probe began in May 2008.

Smoot admitted fabricating, altering, and backdating charter board minutes, invoices, contracts, and financial records to mask the fact that Brown - and not the charters' boards - was running the schools, and that she and her two management companies were receiving millions in taxpayer funds from the schools.

After the federal grand jury returned indictments in July 2012, Smoot, Brown, and three codefendants entered not-guilty pleas.

In January, Smoot filed documents indicating he intended to admit his role in the scheme.

Smoot faces up to 25 years in federal prison. He said he had no prior record. U.S. District Court Judge R. Barclay Surrick set sentencing for June 14.

Surrick agreed to the government's request to seal the agreement Smoot reached with the U.S. Attorney's Office, but the judge noted that the government had agreed to seek a sentence below the federal guidelines.

Assistant U.S. Anthony G. Kyriakakis declined to comment. Legal observers said the language typically means a defendant has agreed to cooperate with prosecutors.

Smoot and his attorney, James J. McHugh Jr., a federal public defender, also declined to comment.

A former Philadelphia School District principal, Brown founded three kindergarten-through-eighth-grade charter schools in the city: Laboratory, which has campuses in Northern Liberties, Overbrook, and Wynnefield; Ad Prima, in Overbrook and Frankford; and Planet Abacus, in Tacony.

In addition, in 2005 Brown helped create the Agora Cyber Charter School in Devon, which provides online in-home instruction to students from across the state. Four years later, she cut her ties with Agora as part of a settlement involving several civil suits. Now based in Wayne, Agora operates under new leadership.

When the grand jury indictments were unsealed in July, a federal magistrate set Brown's bail at $1.5 million secured by the deed to the home in Haverford she owns with her husband, William H. Brown 3d, a lawyer.

Last month, Brown's attorneys asked the court to change the terms to $50,000 unsecured bail - the same as two of her codefendants. The other two were released on $25,000.

"I've never seen a bail like this in this kind of case," William M. McSwain, one of Brown's attorneys, said in court Friday. He told the judge that Brown was "a pillar of the community," had deep ties to the area, and posed no risk of flight.

McSwain said Brown might need to tap the equity in her home to pay for her defense but could not if the deed was securing her bail.

Kyriakakis said Brown had not claimed financial hardship and added that her assets include a second home in Annapolis, Md.

He noted that Brown was facing more than 50 counts of wire fraud that allegedly put $6.5 million into her pockets and that she was charged with attempting to tamper with a witness as recently as April 2012.

The jousting between McSwain and Kyriakakis prompted Surrick to comment, "It would appear from what I have heard here this afternoon, there's going to be a battle royal during the course of the trial."

The judge said Brown was unlikely to flee and ordered her bail reduced to $100,000.

Before the hearing began, Brown, her husband, and attorneys waited outside the courtroom while the judge handled another matter.

At one point a man exited the courtroom. He looked at Brown's upswept blond hair, chic knit suit, and heels, and said: "You look famous."

"Infamous," Brown quipped.

"Who are you?" he asked, and she replied, "June Brown."

Later the man approached Brown again.

"Anna Verna," he said, referencing the former City Council president. "That's who you look like."

The federal criminal trial of Brown and her three remaining codefendants is scheduled to begin Oct. 21.