A former White Hat board member speaks out

The Cleveland Free Times, September 5, 2007

Charters And Gaffes

There are lots of villains and no clear heroes in a court battle involving charter school oversight

By Charu Gupta

TOWNSEND - A fixture on numerous county boards during their times of peak ineffciency.
AKRON-BASED WHITE HAT MANAGEMENT and former Clevelander Robert Townsend once enjoyed a mutually beneficial relationship. White Hat operates charter schools, reporting to each school’s board of directors. Townsend joined one of those boards as president in 1999, then went on to preside over an additional 18 others. Townsend was paid for his service, White Hat saved time by dealing with fewer board presidents, and everyone seemed happy.

The relationship began to sour in 2005. Suddenly, after years of relative silence, Townsend and some fellow board members started, well, acting like a board. They complained that White Hat wasn’t doing enough. They questioned why test scores were so low, who White Hat was hiring, and how state money was being spent. They demanded more information and better results. Meetings got heated.

Whether they were concerned more about the students they’d been appointed to watch over or their own reputations (White Hat’s image was being tarnished by media reports at the time) remains a matter of some debate. But whatever the case, the simmering tension prompted White Hat to seek relief from its many friends in the state legislature, who obligingly changed the law in ways that helped the company to marginalize the meddling Townsend and his colleagues.

“It gets really tiresome sometimes, to fight that fight,” Townsend said recently. “It takes a toll on your family and yourself when you’re trying to do something to educate people, and then they introduce a bill, a law, and change the whole charter school movement and no one says anything?”

Today the whole affair is in court, with Townsend and eight fellow board members on one side, and White Hat and the state legislature and department of education on the other. And frankly, it’s hard to know who to root for.

IN OHIO, the person most closely associated with charter schools is David Brennan. The Akron-based industrialist had great influence in determining how charter schools are established and run.

A school-choice advocate, Brennan cultivated political clout. George Voinovich received more than $120,000 from the Brennan family during his time as Ohio’s governor, 1991-98, which helped earn Brennan the chairmanship of Voinovich’s Commission on Educational Choice. The commission would soon recommend taxpayer-funded vouchers for parents and students. Brennan then raised millions to help Republicans win control of the General Assembly in 1994.

The next year, a $5 million voucher pilot program for Cleveland went into effect, providing up to $2,225 per student. Nonprofit, private schools collected the state money and passed on an administrative fee to Brennan’s people. However, the model never expanded beyond Cleveland’s city limits, and profits proved marginal. One study found voucher students in Brennan’s private schools were even lagging behind academically.

By the late ’90s, Brennan abandoned voucher schools for a more lucrative education business model: charter schools.

Under the system established by the legislature in 1997, “any person or group” could start a charter school, upon approval by a public sponsor, like the state board of education or local school boards. Once this agreement was in place, the founders had to select a “governing authority,” or board. This board reported to the sponsor, but oversaw hiring, curriculum and management of the school. Board members subsequently entered into contracts with management companies, which handled day-to-day operations.

As the ink dried on the 1997 law, Brennan was ready. In early 1998, he incorporated (out of state) White Hat Ventures, LLC. Under this umbrella company, which housed a realty arm as well, was White Hat Management. White Hat immediately sought approval from the state board of education for charter schools in Cleveland and Akron.

Brennan met Robert Townsend sometime in 1998, as he combed urban centers for potential board members for Hope Academy Broadway Campus, which opened in Cleveland in 1999. If Brennan was looking for pliable candidates, Townsend was a good choice. He was a fixture on numerous Cuyahoga County boards during their times of peak inefficiency.

In June 1998, Townsend was a senior member of the Cuyahoga Metropolitan Housing Authority board when it came out that executive director Claire Freeman was turning in financial reports that listed her monthly mortgage payment as an “executive benefit.” When asked by the Plain Dealer if the board should have queried further, Townsend replied yes. “We made a mistake. I take that responsibility for myself.”

He also served on the board of Ward 1’s Amistad Community Development Corporation, which lost hundreds of thousands of dollars through bad investments, questionable hires and poor oversight (“Who’s Got the Money?,” Free Times, May 2, 2007). He has since moved to Oakwood Village, where he serves on the city council and is running for mayor.

Townsend told the Free Times in March that he signed on with White Hat “to give a choice.”

“No one can argue that Cleveland public schools have problems,” he said. “Charter schools are a way of helping to resolve their problems, because they deal with the word choice.”

When Townsend joined his first charter school board, White Hat was opening schools at a steady pace, with sponsors such as the University of Toledo and St. Aloysius Orphanage. Townsend soon was board president for 19 schools, one of which was more than three hours from where Townsend and other board members lived.

Attorney Robert DiCello, who represents Townsend and his co-plaintiffs, admits that they were chosen because White Hat wanted hands-off management. These folks weren’t educators, DiCello notes, and were “asked to run an entity that [they had] no prior experience running.”

He did not explain why they agreed to serve on the boards. But he defends White Hat’s asking Townsend to agree 18 more times.

“It’s much more economical for the kids,” DiCello says. Otherwise, imagine the chaos with 19 different school boards telling White Hat to go in 19 different directions. It’s not clear whether he understands or cares that the promise of charter schools was to offer parents more educational choices.

And he does not mention the other role that economics might have played. In 2006, the Plain Dealer reported, Townsend received almost $55,000 from White Hat for his charter school board service that year. Part of that money came from board members scheduling one meeting to discuss six or more schools at a time, and then collecting six or more fees.

A 1999 CONTRACT BETWEEN Townsend’s board and White Hat precluded the board from approving how money was allocated. In 2002, Townsend and his board agreed to let White Hat directly collect 97 percent of the available state funds, and thus put state money behind the wall of a private corporation.

“My clients didn’t have the resources to really vet the contract, to make sure the contract allowed the board to fulfill the mission of helping low-income kids,” DiCello says. Townsend and other board members trusted White Hat’s “package presentation”of the contract.

In December 2003, a report by the Legislative Office for Education Oversight (a government agency established in 1990 to provide independent evaluations for state-funded programs and abolished in 2005), reported 2001-02 test results for several charter schools, including Townsend’s first, Hope Academy Broadway Campus. An average of 11 out of 52 fourth-graders passed reading, math, science and citizenship exams. Of 29 sixth graders tested, an average of two passed the same exams. Writing was the only field in which Hope Academy Broadway’s students tested well.

Still, it was another two years, even by DiCello’s reckoning, before board members began to get tough with White Hat.

“The thing is,”he says, “you can be told as a board member, well, we’ll get to it in the next meeting. You can have six meetings in a year, and be told six times we’ll get to it, and a year is gone. From a point of view of sheer time, it looks pretty long in development. But I think it was a series of meetings, a series of rejections that ultimately leads to the 2005 point, when [the board] wanted more accountability.”

When board members finally stirred the pot in 2005, White Hat refused to answer their questions. In March 2006, board members reduced White Hat’s direct collection of state money to 96 percent. Then the board took away one bookkeeping contract.

“It was as if my clients were just polished figureheads,” DiCello says, “and they started to get frustrated with that, and they expressed their frustration.”

But even in trying to stake out their independence, the board members seemed to prove their own incompetence. They cut White Hat as their accountant and hired an outside firm, but the company they chose was reprimanded by the state auditor for lack of supporting documentation, purchases allocated to the wrong schools and incomplete accounting practices.

Townsend was also singled out for collecting almost $2,000 in improper, nonschool-related expenses. Cleveland Zoo tickets were purchased for $110. Registration fees, totaling nearly $1,600, were paid for Townsend and a guest to attend conferences hosted by the National League of Cities and National Black Mayor’s Conference.

The audit also took issue with several board members’ practice of collecting multiple fees for one meeting, a practice the audit labeled “abusive.” DiCello blames it on bad advice. “I don’t know if this issue snuck up on them, like we’ll get to it, we’ll discuss it later, no one is telling us it’s wrong, so therefore maybe it’s not.”

An official board response contained in the audit report offers a different excuse, only slightly more plausible: That downsizing at White Hat required board members to put in between 15 to 50 hours a week attending to school operations previously handled by the company. So the compensation for multiple meetings was in effect payment for excess hours over monthly time periods. (DiCello wonders about the timing of this audit report and hints at a conspiracy to make his clients look bad. “Is it a coincidence that the auditor is getting this information now?” he asks. “I certainly don’t think so.”)

APPARENTLY TIRED OF BATTLING with boards, White Hat ran to its powerful friends in Columbus, seeking changes to the system it had helped put in place. In December 2006, Republican legislators quietly slipped new charter school provisions into a bill that dealt largely with teacher background checks. The provisions barred anyone from serving on more than two charter school boards and allowed a management company to appeal to the charter school’s founding institution if the board tried to end its contract. If the decision was overturned, the board would be disbanded and the management company would choose a new one.

Led by Townsend, nine board members have sued on grounds that the law, which went into effect in March, is unconstitutional and deprives charter school boards statewide of the right to oversee management companies. DiCello says a decision in the case should be ready in a few weeks.

A spokesman for White Hat, Bob Tennenbaum, refused to answer any questions related to board members.

DiCello, meanwhile, seems to want to keep his clients’ options open.

“I really want to emphasize,” he says, “I really want this to be known: my clients do not have a desire to terminate White Hat at this time. And more importantly, we recognize that White Hat has considerable resources and skills for the kids, and remember, it’s about the kids.”

cgupta@freetimes.com