The Horace Mann League: Charters Get Even MORE Brazen

by Jersey Jazzman

You think the story of the foul-mouthed Bay Area charter cheerleader Ben Chavis is bad? Wait until you hear what's going on in Albany!

The former chief financial officer for the Brighter Choice Foundation, which provides funding and support to 10 public charter schools in Albany, has been charged with embezzling $202,837 from the organization.

The arrest Wednesday of Ronald A. Racela marks the second time in four years that Racela has been charged with grand larceny. Two years ago, Racela admitted stealing $53,931 from KeyBank in Albany, where he was employed as a manager in the Community Development Lending Group, court records show.

M. Christian Bender, executive director of Brighter Choice Foundation, said Brighter Choiceofficials were not aware of Racela's criminal history when he was hired as financial director of Brighter Choice Charter Schools in June 2010. Bender said Racela described his separation from KeyBank as "tense" but did not disclose he had been arrested for embezzlement eight months before he was hired by Brighter Choice.

"I knew that it had not been a smooth separation, but obviously I had no idea that it involved criminal activity on his part," Bender said Friday.

Still, a state Education Department spokesman said the agency sent written notice of Racela's criminal history to the charter school last March, when it denied the school's request to clear Racela for employment. The spokesman said the agency had first flagged an employment clearance request for Racela that was submitted by Brighter Choice in December 2011. By that time, Racela had already been working for Brighter Choice schools for about 18 months. [emphasis mine]

Wait a minute... "Brighter Choice"? This con man had been working for "Brighter Choice" since the summer of 2010? Where have I heard that name before? Thinking...

Wealthy investors and major banks have been making windfall profits by using a little-known federal tax break to finance new charter-school construction.
The program, the New Markets Tax Credit, is so lucrative that a lender who uses it can almost double his money in seven years.

In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.
But many of those same schools are now straining to pay escalating rents, which are going toward the debt service that Brighter Choice incurred during construction.
The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.
The Albany Community School's rent jumped from $195,000 to $350,000.
Green Tech High Charter School rents went from $443,000 to $487,000.
Meanwhile, all the Albany charter schools haven't achieved the enrollment levels their founders expected, even after recruiting hundreds of students from suburban school districts to fill their seats.

The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.
Several charters have fallen into additional debt to the Brighter Choice Foundation.

This story, by Juan Gonzalez in the NY Daily News, dates back to May of 2010. That would be almost exactly when admitted criminal Ronald Racela starting working at Brighter Choice. You'd think that these people, in the wake of Gonzalez's report, would be scrutinizing their entire organization to make sure everything was above board. But it looks as if they were running exactly the type of operation that would attract a guy like Racela:

You'd think these financial problems would raise eyebrows among state regulators - or at least worry those charter school boards.
But the powerful charter lobby has so far successfully battled to prevent independent government audits of how its schools spend their state aid.
And key officers of Albany's charter school boards are themselves board members, employees or former employees of the Brighter Choice Foundation or its affiliates.
Christian Bender, for example, executive director of the foundation, is chairman or vice chairman of four of the Albany charters.
Tom Carroll, the foundation's vice chairman and one of the authors of the state's charter law when he was in the Pataki administration, was a founding board member of Albany Community Charter School and is currently chairman of two other charters, Brighter Choice School for Boys and Brighter Choice School for Girls.
Carroll also sits on the board of directors of NCB Capital Impact, a Virginia organization that used New Market Credits to pull together investors for all the Albany building loans.

A Brighter Choice official confirmed Thursday that the Virginia organization gets "a 3% originating and management fee" for all school construction deals that Brighter Choice arranges.

But it wasn't just Brighter Choice that was getting a cut:

Under the New Markets program, a bank or private equity firm that lends money to a nonprofit to build a charter school can receive a 39% federal tax credit over seven years.
The credit can even be piggybacked on other tax breaks for historic preservation or job creation.
By combining the various credits with the interest from the loan itself, a lender can almost double his investment over the seven-year period.
No wonder JPMorgan Chase announced this week it was creating a new $325 million pool to invest in charter schools and take advantage of the New Markets Tax Credit.

I gotta tell you, folks, I read this stuff and I think: "Who's pulling the bigger scam: criminals like Racela, or the banks financing these loans, and the charter operators who are working the scam in unbelievably brazen ways?"

They said charters would offer needed competition to community schools, but they didn’t say the competition would be about public dollars. Today’s Albany Times Union reports on the city’s Albany Leadership Charter High School for Girls “asking for $15 million in tax-free public financing to buy the brand-new charter high school for girls built by the Brighter Choice Foundation.”

Here’s the cute part. The nonprofit Brighter Choice Foundation, which runs all 11 charter schools in Albany and erected the bulding at a cost of some $10.1 million, is directing its Charter Facilities Finance Fund to ask the city to back its selling tax-exempt bonds to investors so it can buy the school building and — are you ready for this? — lease it back to Brighter Choice.

Forget about whether the deal sounds dodgy, because it does. If the deal also sounds a bit familiar, it may be because Thomas Carroll, the prime mover behind the Brighter Choice charter schools, has been profiting from a similarly questionable real estate tax loophole for the past several years, a story exposed earlier this year by Juan Gonzalez in the Daily News.

That story from EdWize dates to November of 2010; Racela was well-established at Brighter Choice by then. I'll bet he fit in like he had been there for years...

Oh, and let's not forget who else was in on the play:

Brighter Choice Chairman Chris Bender said the sale of the of the high school would replenish the [sic] a revolving line of credit Walton Family Foundation, the philanthropic legacy of the founding family of Wal-Mart, that Brighter Choice uses pay for the construction of new schools.

That, however, could create another potentially controversial scenario in which Brighter Choice is essentially using the proceeds from the sale of tax-free bonds to bolster the account from which it builds new schools to compete with the city school district.

Even the reformy Waltons got in on the play! I am dying to know what the interest rate was on that line of credit Sam's clan, aren't you?

Seriously - how much longer does this need to go on? How many more stories of hustlers and con artists connected to charter schools do we need to hear? How many more charters that are strip clubs by night do we have to endure? How many more charters making thousands off of parents who have to pay "discipline fees"? How many more charters that can't do their taxes correctly? How many more failed cyber charters? Family-run charter cash cows? Accused charter racketeers? Way overpaid charter administrators? Outrageous junkets? Sickening political back-room dealings?

How much longer are we going to accept this nonsense? When is this nation going to stand up and say: "Enough!" When are we going to stop the Halliburtonization of our public schools?