Weak charter school laws, lax enforcement endangered students at Morningstar Academy

by David Safier

An anecdote is not proof of anything. But this story about a California charter school operator and an Arizona charter school is a damning cautionary tale about the abuses, financial and physical, that are possible when already lax charter school laws are minimally enforced.

First I'll tell the story in encapsulated, short-blog-post fashion. Then, if you wish, you can follow the link and read the entire sordid tale. I usually wouldn't say this, but with this story, it's worth your time to click on the link and read the whole story.

Here's the short version.

C. Steven Cox created California Charter Academy in 1999. In a few years, he was running a string of schools all over  California. In 2003 he created his only charter school in Arizona, Morningstar Academy, in Apache Junction.

In 2004, Cox was accused of skimming millions of dollars from his California charters into private companies he created for that purpose. His mismanaged and underfunded schools (teachers were underpaid and had too many students, classrooms lacked the necessary materials) collapsed under their own weight, leaving thousands of students to be absorbed by public schools and who knows how many teachers out of work.

The Arizona Charter School Board appeared to be unconcerned that one of its schools was being run by someone who had bled his California schools dry. Morningstar Academy continued to run without any serious investigation of the school's financial or educational practices.

In early 2005, a male Morningstar teacher was accused of molesting female students. His mother was principal. When a 15 year old girl complained to the principal/mother about her teacher/son, the principal accused the girl of lying and told her not to repeat the allegations.

After the girl went to the police a few months later and other girls complained about similar instances of abuse, the teacher was indicted on 22 counts, and his mother the Principal was charged with failing to report child abuse. She entered a no contest plea and was given probation, a suspended sentence and a $2,500 fine. Yet she continued as the school principal for at least two more years. The Department of Education said their hands were tied because she didn't have a teaching certificate (her son had no certificate either). Cox saw no reason to fire her.

In 2007, Cox was indicted in California on 112 counts of misappropriation of funds and grand theft. Only then did the Arizona Charter School Board take an active interest in the matter. FInally, in June, 2008, Morningstar Academy closed its doors.

The behavior of Cox, the principal and the teacher are appalling. But for me the most unforgivable thing is that the Arizona Department of Education and the Charter School Board failed to do everything in their power to protect the children attending Morningside Academy. I would call it criminal neglect on their part, except in the world of charter schools, it's all perfectly legal. And that's a crime.

Read the longer version by clicking on the link below.

Now here's the long version, with the details included.

(All my facts, by the way, come from newspaper stories, audits and minutes of school board meetings. This is the first time all the details have been brought together in one place.)

C. Steven Cox had no educational experience when he founded California Charter Academy in 1999. He convinced a number of California school districts to allow him to set up charter schools. Soon he had about 60 schools, mainly operating in storefronts or in buildings on church property, and thousands of students. Like Arizona's charter schools, they were all public schools. No tuition was charged to the families. The state gave Cox a set amount of money for each student enrolled in his schools.

Cox figured out a surefire way to make money from the schools. He set up three separate businesses to supply materials and services to the schools at inflated rates. One of his companies, Educational Administration Services Corporation, contracted with the schools, taking 13% of the schools' funds for administrative services available from other companies at 2%-7%. His school supply company sold textbooks and other materials to the schools at about a 50% markup. And his insurance company charged the schools double what the insurance cost to purchase.

Cox's wife, daughter-in-law and son-in-law were on the payroll. Others got hundreds of thousands of dollars for doing little work. Local politicians, the school's boards and the people running the companies were intertwined in an incestuous and extremely profitable arrangement.

In 2004, Cox's educational empire collapsed under its own weight. He had drained too much money for his own profits, and the schools were heavily in debt. In 2005, a state audit found he had illegally funneled over $5 million to his private businesses. It would take until 2007 for him to be indicted on 56 felony counts of misappropriation of funds and 56 felony counts of grand theft.

In 2003, before all these alleged crimes came to light, Arizona granted Cox a charter to open Morningstar Academy in Apache Junction, a small town east of Mesa, though not without some initial controversy. The school shares an address with the Community Christian Church, and the state board was concerned there was some religious instruction built into the curriculum. Then the school began operating without an approved charter. But those problems were soon resolved.

Something like a year later, in 2004-2005, Cox's California charter schools fell apart because of his theft and mismanagement. I don't know if the Arizona Charter School Board was aware of the situation in California, since, so far as I can tell, the story wasn't reported in Arizona papers, though it was widely covered in California. I could find no evidence that the Board showed any concern that Cox was running Morningstar Academy using the same Educational Administrative Services Corporation that had been used to drain taxpayer money from his California schools. Maybe it was because they were ignorant of the situation. Or maybe they knew what was going on in California and chose to ignore it.

However, 2005 brought Morningstar Academy into the media spotlight. A 15 year old girl told the police she went to Principal Carolyn Kennedy's office and told the principal that a teacher had been making advances, kissing the girl forcibly a few times and touching her breast. The teacher, Bobby Kennedy, was the principal's son. Carolyn Kennedy didn't report the accusation to the authorities as she is legally mandated to do. The girl told the police she was accused of lying by the principal and told not to repeat the accusations.

In May, 2005, the girl went to the police and two other girls claimed they had similar encounters with Bobby Kennedy. He was arrested, indicted on 22 counts, and was freed on $150,000 bail. He skipped bail and disappeared for two years.

Carolyn Kennedy was charged with failing to report child abuse. She denied any wrongdoing but pled guilty to the lesser charge of failing to report neglect of a minor. She received a two year probation, a 90 day suspended sentence and a $2,500 fine.

Despite the clear evidence that she had put concern for her son above the welfare of her students, Kennedy continued as principal of Morningstar Academy.

At a time when the allegations against mother and son were well known and Cox's California problems were in the open as well, the Department of Education and the State Charter Board reacted with mild dismay but said there was nothing they could do. Their hands were tied.

The problem was, Carolyn Kennedy didn't have a teaching certificate, which would have been required if she were principal of a traditional public school. That meant the investigative unit of the state Board of Education had no jurisdiction over her. And the Charter School Board couldn't take away her fingerprint clearance card, which would have meant she could no longer work at a charter school, because failure to report abuse or neglect isn't one of the actions that would deny her the card.

Apparently, the Board and the Department of Education washed their hands of the whole situation. So far as I can tell, neither agency actively pursued other possible reasons to close the school. I have seen nothing to indicate that educators did a formal, on-sight evaluation of the school to see if it was doing an adequate job of teaching its students. And no one seemed concerned about any financial problems that could have indicated Cox was working the same fraudulent schemes he pulled in California — even though audits in 2005 and 2006 revealed that Cox's Educational Administrative Services was operating at a $174,050 loss and owed almost $34,882 in state and federal taxes. During that same time, an employee embezzled $27,640.

Cox, meanwhile, didn't see any reason to remove Kennedy as principal, nor did he put her on paid or unpaid leave. He said it looked to him like she was being harassed and the charges were trumped up.

It wasn't until 2007, when Cox was formally indicted on 112 counts in California, that the Arizona Charter School Board decided to take action. It suspended Cox's fingerprint clearance card. The Board said it would talk with Cox about some way that the ownership of the school could be transferred to someone else. Once again, the Board only seemed marginally concerned with the seriousness of the situation.

At the June, 2008 Charter School Board meeting, the Board accepted the voluntary termination of Morningstar Academy's charter contract.

What happened to Bobby Kennedy? It's not important to the charter school saga, but it makes for good reading. According to accounts, when Kennedy disappeared, he married a woman who had been the secretary at the Morningstar Academy and lived with her and their son in various locations. He was arrested on March 18, 2008 in Oklahoma. In a turn of events that borders on the unbelievable, he was freed soon after on $150,000 bail, even though he left town in 2005 when his bail was that same amount. I guess the court didn't consider him a flight risk.

C. Steven Cox's lawyer has effectively stalled the California case concerning his 56 felony counts of misappropriation of funds and 56 felony counts of grand theft. Cox is supposed to return to court in February, 2009.

The most important part of the story is the way students were endangered by the negligence of Arizona's Board of Education and Charter School Board. At the very least, the children could have been receiving substandard education if Cox had been draining money from the school as he did in California. At worst, students' personal safety was endangered because a principal who had demonstrated her lack of concern for her students' welfare was left in charge of the school.

This story points to a host of problems with the current charter school laws as well as lax enforcement by the Charter School Board, which is clearly more interested in promoting charter schools than in regulating them. If the problems aren't dealt with, variations on the Morningstar Academy theme will occur again and again. It's time for the legislature and Education Superintendent Tom Horne to take notice.