Thursday, June 21, 2018
Education

A Times investigation: Documents point to inflated spending at troubled Pinellas charter schools

At one St. Petersburg charter school, taxpayers shelled out $4,300 to outfit a classroom with a teacher's desk, two cabinets, three tables and 25 chairs. Had the items been purchased from the Pinellas County School District warehouse, they would have cost about a third of that amount.

Another charter school in Clearwater bought 26 bean-bag chairs — for $99.50 each.

A third one in St. Petersburg hired a company to provide technology support, but no one signed the contract until two months after services began.

All three charters are managed by Newpoint Education Partners, the same company that was indicted this month by an Escambia County grand jury on charges that it laundered money and fraudulently billed three publicly funded schools for supplies, equipment and services.

Since then, Pinellas County officials have recommended closing three Newpoint schools, and the School Board will vote on their fates Tuesday. The district also is checking to see if the same or similar behavior occurred at any of the five local schools managed by the company.

Meanwhile, documents obtained by the Tampa Bay Times raise a number of red flags.

The records reveal several troubling patterns at Newpoint's Pinellas schools — from loose recordkeeping to indications that the company has been steering extra money its way, on top of its five-figure monthly fee.

According to invoices and other documents, three of the schools have used public funds to buy supplies and services, without bids, at often-inflated prices from a family of interrelated companies with ties to Newpoint and its 54-year-old founder, Marcus Nelson May.

At first glance, the purchases appear to have been made at arm's length, free of any favoritism. Newpoint was paying for furniture, computers, technology services and consulting from out-of-state companies with names like School Warehouse, Red Ignition and Epiphany Management Group.

But a closer look reveals these and other companies are connected to Newpoint in ways that raise questions about conflict-of-interest, self-dealing and price gouging. In one invoice, the buyer (Newpoint) and the seller were listed as having the same address.

In addition, Newpoint:

• Continued to collect its management fees in March, even after it disappeared with no explanation, leaving the four Pinellas schools to operate on their own and pick up the pieces.

• Left a trail of financial problems so severe that Pinellas officials have asked for audits and "corrective action plans."

• Showed signs of disorganization at two of the schools, with complaints about teacher turnover, dirty classrooms, inadequate curriculum and not paying vendors, among other problems.

One couple said their son had seven teachers in three years.

• • •

In recent weeks, Newpoint has largely gone dark.

Its website has been shut down, and executives for the company and its related entities did not respond to interview requests. Phone calls, emails and certified mail went unanswered.

The Times made inquiries to May, the founder of Newpoint; Eileen Quinlan, Newpoint's most recent president; David Stiles, a former Newpoint executive whose name appears on purchasing documents; Steven Kunkemoeller, the owner of School Warehouse and Red Ignition; and Suranjan Shome, the president of Epiphany Management Group.

And while Newpoint's lawyers responded to a summons in Escambia County, they have been out of touch with key people in Pinellas who have been trying to reach them — including school staff and district officials.

The four affected schools are Windsor Prep and East Windsor Middle Academy in St. Petersburg and Newpoint Pinellas Academy and Newpoint Pinellas High in Clearwater. They enroll more than 900 students and together take in $6 million in public money.

A fifth school, Enterprise High in Clearwater, quietly separated from Newpoint last year, though its contract with the company won't officially expire until June.

For the families involved, a school year that began normally turned into a fight to keep the doors open.

On a recent Monday morning, six parents gathered around a table at a McDonald's on Ulmerton Road, some in scrubs, others in business attire. Taking time off from work, they met for the first time to discuss how to rid Windsor Prep and East Windsor of Newpoint.

Chris Wenzel, a pharmaceutical salesman and father of a third-grader, said he would arrange a meeting with the district's charter school director. Jessica Ismoilov, a retired federal contracting specialist with one son in elementary and the other in middle school, drafted an email with talking points for the school's next board meeting. Dorothy Dulau, a dental assistant and the mother of a kindergartener, wanted to create something positive by changing the school's marquee and preparing breakfast for the teachers.

Bruce McWilliams, the owner of Brea's Coffee with a grandson and a daughter at Windsor Prep, explained why it was all worth it.

"It'd be sending my child a message that it's not okay to fight," he said.

The core group began mobilizing support. They spread the word at Chuck E. Cheese's gatherings for their kids and on a Facebook group called "Hope for Windsor."

"The first day I was in awe because the parents were so happy and it felt like a family," said Paige Jackson, who works in home child care and has a second-grader at the school.

The problems started showing during the 2014-15 school year. The principal left midyear. Textbooks were missing. No one had cleaned the cafeteria over the summer. Some teachers weren't hired until the first day of school.

"You just noticed a lot of change," said Mary Ann Knispel, a nurse with twin second-graders at Windsor Prep.

When news broke that Newpoint hadn't properly accounted for $75,000 in federal loan money for East Windsor, Knispel rallied support in the car line.

Tensions escalated after that. Parents packed the cafeteria for board meetings. Ismoilov began reviewing Newpoint's contracts.

When their schools were declared financially deteriorating by the district, parents began calling local media. And when Newpoint disappeared in March, they claimed victory.

• • •

The connections between Newpoint and the companies it buys from show up in state corporate records, social media and company website archives. And they all lead back to Marcus May.

In addition to being Newpoint's founder, May is also its past president.

Invoices and inventories show the company has spent tens of thousands of taxpayer dollars on furniture for its Pinellas schools from Red Ignition Inc., which once shared an address in Akron, Ohio, with Newpoint.

Red Ignition is owned by Steven Kunkemoeller, but a limited liability company of the same name is trademarked at the bottom of its website — and that company was previously registered to Marcus May and his wife, Mary Walker May.

Red Ignition and School Warehouse now share the same address in Cincinnati, according to public documents.

The potential harm to taxpayers is evident in the prices that those companies have been charging Newpoint schools.

All schools in Pinellas — charters included — are able to buy low-cost furniture and office supplies from the school district's warehouse, the Walter Pownall Service Center in Largo.

"We're trying to save the schools money by doing what we do," said warehouse coordinator Joe Zihala. "We don't mark up anything."

He said Newpoint schools have spent less than $300 on small orders for supplies such as prescription forms, board erasers and paper clips. Meanwhile, according to records, the schools have been buying larger items at much higher costs from Newpoint's related companies.

On Sept. 13, 2011, for example, Newpoint Pinellas High bought 50 rectangular classroom tables for $244.99 each from Red Ignition. The most expensive rectangular student table the district sells is $109.88.

On Aug. 5, 2014, Windsor Prep bought 43 round classroom tables, 48 inches across, for $239 each from School Warehouse — a product the district sells for $97.51.

"That's insane," Zihala said. "I could see where there could be a huge variety in seating, but when we're looking at a 48-inch round table … they could buy them all day long from us for 96 bucks."

The Times found dozens of similar transactions totaling hundreds of thousands of dollars.

Records also show Newpoint's connections to Epiphany Management Group, which received a large share of the schools' business for technology and marketing support. Between 2011 and 2013, Newpoint schools made dozens of payments to Epiphany ranging from $1,500 to $36,000.

Last year, Epiphany renewed its Ohio trade name as Mindgrab Media. Marcus May has been described on Mindgrab's website as the company's president and CEO.

Further, Epiphany's CEO, Suranjan Shome, was Newpoint's vice president for strategy and development under May back in 2008, according to archived Web pages listing the company's leadership team.

But the Newpoint-Epiphany connection was most obvious on dozens of unusual invoices examined by the Times. The documents listed Newpoint as buying the services and Epiphany as selling them. And the addresses under their names were virtually the same: the ninth floor at 526 S Main St. in Akron.

As of this month, Red Ignition, School Warehouse and Epiphany have one more thing in common. All three were indicted with Newpoint in Escambia County.

• • •

How was Newpoint allowed to operate for so long with no one spotting these problems?

While charter schools are publicly funded, state law says they are to be managed and operated privately. The setup was intended to spur innovation, but there is a downside. The schools are owned by nonprofit boards, which often are created by for-profit management companies that end up making many of the decisions.

School districts play a role by approving or denying a charter school's application. They also act as a charter school's sponsor and are charged with monitoring compliance.

But in large school districts like Pinellas, with 23 charters to oversee, a district department of four people must juggle oversight and processing new charter school applications.

"It takes time to dig," said the district's director of charter schools and home education, Rick Wolfe. "It takes time to read through accountability reports and all those audits." Often the problem begins on the front end.

For years, school districts shied from turning down a charter based on an applicant's background, fearing they would be overturned on appeal to the state. So school boards often made their decisions only on the merits of the application before them.

The Florida Legislature changed the law this year to require a more thorough vetting of applicants, but that came too late to prevent the current problems with Newpoint.

The company has had a dismal track record in Florida, where six of the 15 schools it has operated have closed. Another seven — including the five in Pinellas — have severed ties with the company, or plan to.

Hillsborough County closed Newpoint Tampa High in 2013 after three years. Jenna Hodgens, the district's director of charter schools, recalled that the school had problems with governance, exceptional student education, curriculum, safety and unexplained finances — especially regarding cafeteria expenses.

"They could never tell me how that money worked," she said. "I didn't have proof of where that revenue was going."

The School's Board members had no answers and "it became very apparent to me … that the board was not running the school," Hodgens said. "And it was definitely the management company."

In Pinellas, members of the schools' boards now concede they let Newpoint take the reins and were left in the dark on many matters. No one, they said, questioned the schools' purchasing decisions or finances.

"We were under the impression that we were getting the truth," said Robert Pergolizzi, the founding board chair of Windsor Schools Inc. As time went on, he said, "the more and more distrustful I became."

Times researcher Caryn Baird contributed to this report. Contact Colleen Wright at [email protected] or (727) 893-8643. Follow @Colleen_Wright.

 
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