Imagine Schools, Inc., Pt. III of the Corporate Charter School Story

In this episode of the continuing corrupt adventures of crackpot, Dennis Bakke, and Imagine Schools, Inc., we find out how corporate charters in Texas are owned by corporate charters in Ft. Wayne, all of which are controlled by, that's right, by Dennis Bakke at the home office in Arlington, VA. Clips from the Ft. Wayne Journal Gazette:

FORT WAYNE, Ind. – On Feb. 8, 2008, a curious thing happened.

According to Texas Secretary of State records, Imagine Schools of Central Texas Non-Profit LLC of Georgetown, Texas, was established. That in itself was no surprise, because Imagine charter schools have been popping up all over the country.

What was curious was who owns the corporation and its twin, Imagine Schools of North Texas Non-Profit LLC of McKinney, Texas. The sole member of both limited-liability companies is Imagine-Fort Wayne Charter Schools Inc.

And the Texas entities get their tax-exempt status because each is a wholly owned subsidiary of the Fort Wayne company.

Imagine-Fort Wayne Charter Schools Inc. is the non-profit corporation that runs Imagine MASTer Academy, a charter school at 2000 N. Wells St. in Fort Wayne. Imagine MASTer Academy is a public school whose $2.9 million cost to operate last year was paid for with state taxes.

So why does a Fort Wayne charter school own two charter school corporations in Texas? It’s a question most board members here could not or would not answer, even though in January 2008 they secretly signed documents creating and governing the schools there and, as recently as August, made drastic changes to one of their entities in Texas.

All of these actions were done in secret: According to board meeting minutes provided by the Imagine-Fort Wayne Charter School board, Fort Wayne members never publicly discussed or voted to create the Texas schools, amend the agreements that govern the relationship between the schools or appoint board members to their Southern franchise.

They merely signed resolutions they thought exempted them from the Indiana Open Door Law, although their own bylaws say they are subject to its provisions. The state’s open meetings law does not allow public bodies to make decisions outside public meetings.

Asked about the Texas entities, most board members refused to speak about it. Some referred questions to Imagine Schools Inc., the for-profit management company based in Arlington, Va., hired by the charter schools to handle day-to-day operations. Others didn’t seem to know what they had signed.

"It sounds sneaky and sleazy," said Trent Stamp, who served as the founding president of non-profit watchdog Charity Navigator for seven years.

"Any time something doesn’t pass the basic smell test for a layperson, there’s a problem there."

Not only does the Fort Wayne charter school own the two school corporations there, but the "company agreement" – the contract between the Texas and Fort Wayne corporations that explains how their relationship will work – also gives the Fort Wayne entity the sole power to appoint and remove the Texas board members.

And when board members at the McKinney school objected to the amount of control Imagine’s board would have over their school, they were pushed off the board and new members were appointed, former McKinney board president Don Newsome said.

Newsome’s replacement: Don Willis, a local businessman who founded the three Imagine charter schools in Fort Wayne and is president of the Imagine-Fort Wayne Charter School board.

"I was approached by that board to come talk to them about how boards should be run in the business world," Willis said. "I said I don’t think you can be successful if the board is going to assume the mantel of staffing the school and determining curriculum. … That’s not our role."

What role the Imagine boards should play and do play is what’s in question. Internal Revenue Service regulations say tax-exempt organizations such as this one must have independent, local control.

Imagine Schools President Dennis Bakke said in a 2008 memo that local school boards exist only to give them advice and consent where legally required. And when it comes to using the Fort Wayne school’s tax-exempt status to expand Imagine’s charter schools into Texas, it appears that all the decisions were made by Imagine Schools Inc.

Like the contracts with the schools in Fort Wayne, the Texas contracts put Imagine Schools Inc. – not the local board – in charge of all major decisions. Where the Fort Wayne contracts give Imagine 12 percent of the schools’ revenue, the Texas contracts give Imagine everything left over after expenses. . . . .

. . . . Newsome, the former McKinney, Texas, board president and a former public school superintendent, said he was approached in 2007 by a group of people known as the "core founders" about serving on a charter school board in McKinney. Over the next two years, Newsome would find himself in a battle with that group after questioning the practices of Imagine Schools Inc.

Newsome was mainly concerned with signing an indefinite contract with Imagine after similar concerns were raised by an attorney with the Texas Education Agency.

"There were some things that just didn’t look right to me," Newsome said. "I could see where TEA was raising a question."

Imagine wanted the board to sign a contract that employed it as the management company for as long as the school existed. Newsome and other board members wanted to draft a contract that would be reviewed every couple of years, to allow for some accountability.

Even though those concerns were raised with members of the school’s founding group, Newsome said they didn’t care and just wanted to get a charter. The group eventually asked for Newsome’s resignation, saying he showed a lack of support for Imagine.

Newsome said he would comply but wanted his resignation letter, which would outline his concerns with Imagine, sent to all the parents who wanted to send their children to the school and posted on the school’s Web site. The group said no.

Newsome said he then received an e-mail that said if he didn’t resign by noon the next day, the founding group would begin the process of removing him from the board, enlisting the help of Willis and the Fort Wayne board.

After the founding group threatened to have a news conference announcing Newsome’s resignation in a negative light, Newsome said, he complied and jointly resigned with three other members of the five-person board. The board now has three members, including Willis.

Among the new board’s first orders of business was to approve the contract with Imagine Schools Inc.

"I see nothing functionally wrong with the contract," Willis said.

Newsome said the question was one of control.

"My concern all along was who’s going to run it and who’s going to have the final say-so," Newsome said. "Well, in my opinion, the organization of it needs to be the local people. … A board needs to have the final say-so, not some organization in Virginia or wherever they are."

ksoderlund@jg.net

dstockman@jg.net

Many thanks to Kelly Soderlund and Dan Stockman for some great reporting. Hope it earns you a Pulitzer.