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Orange County Board of Education Approves Charter School Under Investigation for Fraud; Anaheim School District Files Lawsuit

ANAHEIM, CALIFORNIA — Anaheim Union High School District and Anaheim Elementary School District filed suit today in Orange County Superior Court, challenging a decision by the Orange County Board of Education (OCBE) to approve EPIC charter school, despite it being under investigation for fraud in Oklahoma and despite the school board’s own staff recommendation to reject the petition as “educationally unsound.”

The lawsuit seeks a permanent injunction preventing Excellence Performance Innovation Citizenship (EPIC) from continuing to operate its K-12 virtual school, and ordering the Orange County Board of Education to revoke its charter.

“EPIC was illegally authorized by the Orange County Board of Education in violation of the Charter School Act,” AUHSD Superintendent Michael Matsuda said. “The county school board failed to exercise its oversight duty when the flawed petition first came before them. Instead, they approved it with conditions that were never met. The OCBE’s actions have left us with no recourse other than to seek this injunction.”

Supporting the two Anaheim school districts in seeking the injunction is constitutional scholar and founding dean of the UCI Law School, Erwin Chemerinsky.

“In approving EPIC’s petition, the Orange County school board acted in a manner that was contrary to law,” Chemerinsky said. “In light of the many ways that EPIC is not complying with the law, the approval of the petition violates state education requirements and amounts to an improper use of public funds.”

In recommending denial of EPIC’s petition, OCBE staff members raised concern over EPIC’s lack of valid parent signatures, governance issues, and potential civil liability involving the school and the OCBE, stemming from the fraud probe in Oklahoma.

Moreover, the Anaheim elementary district noted in its original rejection of EPIC’s petition that it:

  • Failed to specify how special education services would be provided.
  • Failed to outline the types of supports or interventions they would provide at-risk students.
  • Failed to include an adequate plan for English learners.
  • Failed to fully identify its financial and operational plans.

Based in Oklahoma—where it operates as a for-profit business—EPIC is under criminal investigation by the Oklahoma State Bureau of Investigation for allegedly falsifying records to receive payments from the Oklahoma Department of Education. The fraud investigation was under way when OCBE conditionally approved the EPIC application in November 2015.

”Since the individuals managing EPIC’s Oklahoma program are the same individuals managing the program here in our county, you can see why we have serious concerns regarding EPIC and their operational plan,” Anaheim Elementary Superintendent Linda Wagner said.

With the conditional approval, the county board cleared the way for EPIC to open its doors this fall at a storefront location in Anaheim. In September, Anaheim Union  sought to have the OCBE rescind EPIC’s charter, arguing it had not met the conditions that had been outlined. At the same meeting, David Boyd of the OCBE questioned why EPIC was marketing itself on its website as being accredited by the Western Association of Schools and Colleges (WASC), when it can take several years to be accredited and EPIC was a start-up.

EPIC co-founder Ben Harris, who flew in from Oklahoma to attend the meeting, told Boyd the WASC claim was a mistake and the firm had removed the claim from the website.

Boyd—who describes himself as pro-charter—was the sole vote against approving EPIC’s charter. He said recently in the Orange County Register that revoking a currently operating charter “almost takes an act of God.”

EPIC now has about 60 students enrolled in the K-12 online charter, with plans to grow to more than 850 students in the near future. In Oklahoma, EPIC is the biggest and fastest-growing virtual charter, nearly tripling its enrollment over three years to almost 8,500 students, with plans to climb to 10,000 students by the middle of this school year.

EPIC’s ambitious growth model drew scrutiny in October from Oklahoma’s Statewide Virtual Charter School Board, which oversees the state’s online schools, questioning if educational quality would be sacrificed for the sake of growth.

“These large numbers of kids coming in—it’s disturbing and overshadows the good it (EPIC) can do,” virtual charter board Executive Director Rebecca Wilkinson said in September in an Oklahomawatch.org story.

One way virtual charters maximize enrollment is through aggressive recruitment. In marketing to families, EPIC touts a “learning fund,” a school-controlled account that gives every family $1,500 to “spend” on “educational items.” Parents must select a particular curriculum for their students, and that cost is deducted from the fund.

Any remaining money can go toward items such as laptop rental or extra-curricular activities provided by vendors, which qualify as physical education. As noted by OCDE staff in recommending the rejection of Epic’s petition, “more affluent students who already own computer equipment and have internet access at home would be able to use the student learning fund for additional learning materials, while less affluent students would have to use the student learning fund to purchase computer equipment and internet access.”

“This inequitable model violates California’s requirement for a system of free schools,” OCDE staff noted.

Additionally, EPIC has added a $100 referral fee into the learning fund when the family is successful in convincing someone else to enroll.

In June, the National Alliance for Public Charter Schools issued a report sharply critical of virtual charter schools and urged states to curb enrollment growth and close low-performing virtual campuses.

“Most striking and troubling … is the large-scale underperformance by full-time virtual charter schools,” the alliance said.

Oklahoma rates schools on an A-F scale. In 2016, its letter grade for EPIC’s high school is a C; and its middle school and elementary school both a D+. Its graduation rate is 25 percent.

Mr. Harris was quoted in September in an Oklahoma newspaper as saying the graduation rate measurement should be expanded to six years instead of four.

EPIC’s abysmal graduation rate bolsters critics’ concerns that virtual charter schools are more concerned with enrolling students than educating them.

The Oklahoma Virtual Charter School Board is planning an audit to see if there are specific times during the school year that students are exiting the online schools, such as right before spring testing, or after October 1, when the state measures enrollment for funding purposes.

Critics point out that the funding for the students who drop out stays with the virtual school for that academic year. EPIC officials have said that about one-third of their students fail to return the following year.

Controversy has followed EPIC since 2010, when childhood friends Harris and David Chaney established it. Chaney is both superintendent of the non-profit EPIC Charter Schools and CEO of EPIC Youth Services, the for-profit firm that manages the school for 10 percent of the gross revenue.

Last year, according to an Oklahoma audit report, EPIC received $29.2 million in funding.

Controversy over EPIC’s business practices came to light last month in an audit prepared by the Fiscal Crisis & Management Assistance Team (FCMAT), which provides California school districts with financial and management support.

The FCMAT audit alleges that Sue Roche, the founder of Oxford Preparatory Academy, which has two charter campuses in Orange County, formed an education management company called Edlighten Learning Solutions to launder school funds for personal profit.

The audit lays out substantial financial ties between Edlighten and EPIC Youth Services, such as the fact that EPIC Youth Services received $5,000 a month from Edlighten for consulting services. The report contains emails between Roche and Harris, EPIC’s co-founder, in which they discuss moving personnel between Oxford Preparatory and their management companies to skirt legal issues.

The audit suggests that law enforcement officials be notified because “fraud, misappropriation of assets, or other illegal activities may have occurred.”