Epic Charter Schools’ founders last week not only lost their hold on the school system that made them millionaires, but they also apparently lost their fight in court to block the Oklahoma state auditor and inspector from reviewing their bank and credit card statements.
According to public records filed in Oklahoma County District Court on Friday, a judge has directed Epic Youth Services, the for-profit school management company owned by Epic co-founders David Chaney and Ben Harris, to turn over all records of purchases and bank statements related to Epic’s Learning Fund for student needs.
In a February 2020 report, the Tulsa World was first to publicly document how Epic was shifting tens of millions of public school dollars in lump sum payments to EYS for school expenditures that are never audited and which Epic attorneys claim are shielded from the Oklahoma Open Records Act.
Shortly thereafter, State Auditor Cindy Byrd, who was in the midst of an investigative audit of Epic, took EYS to court for those spending records, as well as a host of other school documents she said she had been unsuccessful in gaining access to, even by subpoenas.
Byrd’s October audit report revealed $79.3 million in Epic Charter Schools’ spending on student learning for fiscal years 2015-20 was unaccounted for after being shifted to the bank accounts of EYS.
That was separate from the $45.9 million in fees — a 10% cut of every dollar of revenue received — the company was paid for its management contracts for Epic’s two charter schools during that same time period. State education officials have since assessed millions in financial penalties against Epic for exceeding Oklahoma’s cap on public school administrative spending.
And despite paying EYS for school management, the audit found EYS was relying almost solely on Oklahoma public school employees to do the administrative work for both Epic’s Oklahoma and California schools.
Investigators documented how company “improperly transferred” $203,000 in Oklahoma taxpayer dollars from the Oklahoma schools’ student Learning Fund account to help cover payroll shortages at Epic’s California charter school.
The court’s new action, however, does not make the records directly accessible to the public. Oklahoma County District Judge Natalie Mai directed that the records disclosed “will remain confidential pursuant to the gag order previously issued by this Court” and “are to be used only for the purpose of and during the course and scope of the audit and investigation.”
Losing their court battle to keep those Learning Fund records secret from the auditor came on the heels of EYS’ losing its management contract with the governing board of Epic Charter Schools.
According to the state audit report, Epic’s school board was previously hand-picked by Harris and Chaney, who also served as Epic superintendent until forced out of that role in 2019 because of the passage of a new reform bill.
Two board members resigned ahead of last Wednesday’s meeting, at which the board voted on a major overhaul of its membership and then declared its independence from EYS for good.
Doug Scott, the longtime chair and close personal friend of Harris and Chaney, then resigned from the board.
The governing board unanimously approved a mutual termination agreement, effective July 1. But evidence that the two parties weren’t in full agreement about what the move meant became apparent by the night’s end.
A public relations firm hired by Harris and Chaney issued a media statement saying it was a “pause (of) our professional relationship and to give each entity a chance to determine how to best serve families moving forward.”
That prompted the newly seated Epic board chair, Paul Campbell, to issue a rather emphatic clarification to Epic’s staff, parents and students at the conclusion of Wednesday evening’s public board meeting.
“This is final, this is not a pause in any stretch of the imagination. This isn’t like we’re taking time to think about it and reassess. We are not reassessing anything when it comes to a CMO (charter management organization), especially Epic Youth Services,” he said. “This relationship is done as long as this board is in place.
“This is not a pause of a relationship, and I want to be clear about that.”
The split agreement bars EYS from signing any more contracts or agreements on Epic’s behalf and from attending the school’s upcoming administrative retreat at a hotel and says it must “cease and desist” contacting school employees. EYS agreed to donate or release all assets and equipment and to donate to the school an SUV and cargo van it owns.
The termination agreement also lays out a complicated calculation of how much of the school’s Learning Fund dollars could still change hands between Epic Charter Schools and EYS in the coming weeks.
In addition to its 10% cut of every revenue dollar through the end of the fiscal year, the terms of the deal indicate the school might still be on the hook to send Learning Fund dollars to EYS so EYS can ensure that all student expenses and liabilities through July 1 are paid.
But Epic Charter Schools will be deducting nearly $11 million in various administrative penalties assessed by the Oklahoma State Department of Education.
Epic Assistant Superintendent Shelly Hickman told the Tulsa World the school is still waiting on EYS to invoice it for remaining Learning Fund dollars.
“Those invoices will be scrutinized to ensure they only get what we contractually have to pay. It also doesn’t indicate the amount of the Learning Fund balance they will remit to us because they have to document that balance so we know we are getting everything owed (back) to us, too,” Hickman said. “Part of that documentation is a year of their bank records. That’s in the agreement, too.”
Through the Learning Fund, $1,000 for each student enrolled by Oct. 1 is allocated. Once any curriculum and technology costs are covered, students and parents in Epic’s virtual charter school, called Epic One-on-One, can direct the use of the remaining funds for books and materials ordered directly through the school or paid to thousands of outside vendors who contract with the school for extracurricular activities.
The unique appeal of some say-so over the Learning Fund has been one of the controversial school’s chief student recruiting tools.
State and federal law enforcement investigators are still probing allegations of embezzlement, racketeering and forgery by the former top executives at Epic and willful neglect by previous members of its governing board.