San Diego County District Attorney Summer Stephan Wednesday announced criminal charges against an Australian man and his Long Beach-based longtime business partner, who are accused of conspiring with nine alleged co-conspirators, including a school district superintendent, to steal more than $50 million in public funds by opening 19 charter schools throughout California and using them to defraud the state.
A grand jury indicted Sean McManus, 46, Jason Schrock, 44, the CEO and president of A3 Education, and their co-defendants May 17 on charges of conspiracy, misappropriation of public funds, paying for student information and conflict of interest.
Prosecutors allege that as part of a wide-ranging scheme masterminded by McManus and Schrock, the defendants sought out small school districts with limited experience with state oversight and proposed that they authorize online charter schools to earn additional public funds in the form of oversight fees.
In addition to creating charter schools, McManus and Schrock allegedly operated another scam in which athletic organizations were paid for student information that was used to “enroll” pupils into a charter school in the summer time as regular students, for which A3 would collect funds from the state.
The defendants are accused of using names, report cards and student information of roughly 40,000 students around the state, including students from the Dehesa Elementary School District in El Cajon, to open the 19 online charter schools and siphon public funding for them into their own pockets between January 2016 and April 2018.
McManus and Schrock are both charged with more than five dozen counts and face more than 40 years in prison if convicted, while the other nine defendants, including Dehesa School District Superintendent Nancy Hauer, 57, would face sentences ranging between four and 11 years.
Multiple charter school employees are named in the indictment, including Richard Nguyen, 33, of Foothill Ranch, and Nyla Crider, 45, of Laguna Niguel, as well as Robert Williams, a 65-year-old accountant from Laguna Beach.
Stephan said the 235-page indictment is the result of a year-long investigation by her office. A grand jury subsequently spent six weeks hearing testimony from more than 70 witnesses.
“These defendants engaged in a devious, systemic public corruption scheme on the backs of students, their parents and the public that over time diverted millions of taxpayer dollars into their own pockets,” Stephan alleged.
McManus and Schrock opened the schools in partnership with small school districts, targeting them due to their lack of experience with state oversight, Stephan said. According to the indictment, McManus and Schrock would charge the schools, and the state, by extension, for millions of dollars in services through other businesses they owned. The two then allegedly collected the state funding and pocketed it for themselves and their co-conspirators.
According to the indictment, McManus and Schrock would obtain student records through local youth athletic programs and enroll them in their charter schools. The students and their parents often had little or no knowledge of the enrollment and students did not receive education services, nor were they assigned to a state-accredited teacher, according to Stephan.
A3 Education would receive between $2,000 and $5,000 per child from the state based on the schools’ average daily attendance, the metric the state uses to disperse education funding. In the Dehesa School District, which has fewer than 150 full-time students, A3 Education received funding for nearly 20,000 students during the 2017-2018 school year, Stephan alleged.
“The same fraudulent charter schools and their managers are set to receive, in contracts, another $200 million in the upcoming years, but for being stopped by this action,” the county’s top prosecutor said. “This would have been a continuing fraud that would have continued to empty the pocket books of our state education system that is struggling to meet the needs of our kids.”
A3 Education’s charter schools included three Valiant Academy locations in San Diego, Los Angeles and Santa Barbara; four CA STEAM campuses in San Bernardino, Sonoma and Santa Barbara; four Uplift California campuses, including in Monterey and Santa Barbara; the California Academy of Sports Science in Fresno; California Vanguard Fresno; three University Prep campuses, including one in San Bernardino; and two California Prep campuses.
Valiant Academy of Southern California was affiliated and authorized by the Dehesa School District, which also was responsible for oversight of six other charter schools, according to prosecutors, who said all three Valiant Academy schools are expected to close in the wake of the investigation.
Schrock and several other co-defendants appeared in San Diego Superior Court Wednesday afternoon for their arraignments. All pleaded not guilty and had their bail set at various amounts, although some were released on their own recognizance. Schrock’s bail was set at $1.5 million.
Most of the defendants are due back in court June 11.
McManus remains at large, but the District Attorney’s Office believes he’s in Australia and intends to have him extradited, according to Stephan.
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