Not a Day behind Bars for A3 Charter Grifters

12 Jul

By Thomas Ultican 7/12/2022

The A3 Charter School Conspirators fraudulently collected $400 million from the state of California, misappropriated more than $200 million and according to the Voice of San Diego’s Will Huntsberry outright stole $80 million. The two ring leaders were fined $18.75 million each, given four year jail sentences and credited with four years for time served while under house arrest awaiting court dates. Of the 11 people charged in the A3 charter school scam, the largest in California history, not one of them will spend a day behind bars.

In 2019, the San Diego County Grand Jury heard testimony from 72 witnesses and voted out a 67-count indictment against Sean McManus, Jason Schrock, Justin Schmitt, Eli Johnson, Steven Zant and six others. Their criminal scheme involved a network of 19 online charter schools enrolling thousands of students. For the plotters, their summer athletic programs which had no teachers or classes were particularly successful for purloining ill gotten gains.

Schrock and McManus established the Academic Arts and Action charter Academies in 2015; soon dubbed A3 charters. An early step in establishing the A3 empire came when Steven Zant, a former superintendent of the tiny Dehesa Elementary School District in San Diego County, brokered the sale of the online nonprofit charter school Mosaic Online Academy of Southern California to A3 for $1.5 million. The A3 non-profit tax filing for 2016 indicates that McManus received salary and benefits totaling $487,781 and Schrock collected $368,015. It shows A3 revenues of $14,205,716 and a profit of $10,587,203. The new non-profit business was lucrative from the start.

Before hooking up with McManus, Jason Schrock’s linked in page states he was principal at Valley Christian School in Cerritos, CA for seven years starting in 1999. He then became “Regional Advancement Director” for Iowa based Northwestern College affiliated with the Christian Reformed Church in America. In 2014, he became co-owner of Creative Arts Early Leaning Academy in Orlando, Florida and apparently is still associated with them. Also in 2014 he became CEO of Learning Re: Defined which catered to a Christian clientele. They appear to be defunct.

Sean McManus had been chasing charter school gold several years before partnering with Schrock. From 2009-2015, he was CEO of the Academy of Arts and Science Charter Schools (AAS). Network for Public Education Executive Director Carol Burris reports that it was here he developed his model for using cash-strapped small districts to authorize his online schools. The seed money for AAS was provided by the U.S. Department of Education’s Charter School Program (CSP). Eleven Academy of Arts and Sciences charter schools that used the for-profit K-12 curriculum received a total of $2,825,000 from the CSP state grant to California. Today, all 11 schools are closed.

McManus learned a lesson while running AAS. Some of the schools were hybrid models that had in class training which meant physical addresses. Los Angeles Unified School District sued AAS for opening classrooms in their territory without authorization. The A3 charters would be 100% cyber schools with no physical classes.

How the Scam Worked

Under California Education Law, small school districts had an incentive to authorize charter schools. They get 3% of the revenue. Schrock and McManus approached small districts throughout the state to establish cyber charters.

The chart above shows authorizing districts for each of the 19 A3 charter schools. To read the chart, follow the example of Dehesa Elementary District on right side second chartering district down. Dehesa served 138 elementary school students and was supervising 11,568 charter school students in four A3 schools. The largest district authorizing an A3 school was Acton-Aqua Dulce with 1085 students and supervising 14,734 charter school students. It is unlikely that any of these small districts had the bandwidth to monitor the schools they had authorized.

A Los Angeles Times article from 2019 listed some of the charges in the indictment. The following is a summary.

Sean McManus and Jason Schrock hid the fact that they essentially owned and operated the charter schools at the same time that A3 contracted with those schools. This allowed them to operate multiple businesses that charged their own charter schools millions of dollars for services and then channel the money from those businesses into their own charitable trusts and personal bank accounts. They used this scheme to invoice at least $83.3 million from the charter schools.

More than $8.18 million went into personal bank accounts, some in Australia, and into charitable trust accounts for McManus, Schrock and their wives, and $500,000 went to a family member of McManus. They used $1.6 million of A3 Education’s funds to buy a private residence for McManus in San Juan Capistrano.

The Los Angeles area was serviced by the A3 School Valiant Academy of Southern California. Its performance in both English and math testing was extremely low. The school’s performance was so poor that the California Charter Schools Assn., which advocates for charter schools, recommended closing it.

Those original reports underestimated the scope of the fraud. In July 2022, the San Diego Union reported that A3’s fraudulent activities totaled approximately $400 million of which only $240 million has been recovered.

No Time Behind Bars.

A news report from Santa Clarita noted,

“If convicted, McManus and Schrock each face up to 40 years in state prison. Sentences for the other nine defendants if convicted could range from 4-11 years.”

The report also said that Sean McManus had fled to Australia and that there was a $5 million bench warrant issued for his arrest. McManus is still in Australia and has only participated in court proceedings from his local lawyer’s office.  

The court case was handled by the highly respected San Diego Superior Court Judge Frederick Link. He was originally appointed to the Municipal Court in 1981 by Jerry Brown and was elected to the Superior Court in 1990. At his recent retirement party, fellow Superior Court Judge Michael Smyth praised him saying, “Forty-one years and he’s been crushing it as a judge, as they say, and he hasn’t lost a step.”  That makes the outcome in this case even more puzzling.

Some of the reasons for no jail time must have resulted from prosecutors making deals and the judge signing off on them. It seems that all of the minor figures have had their felony charges reduced to misdemeanors and were sentenced to fines and probation.

Accountant Robert Williams provided financial services and let his offices be used as A3’s business address. He pleaded guilty to one felony count of altering or falsifying corporate records with the intent to defraud. From 2019 leading up to his 2021 sentencing, he remained free on his own recognizance. Williams received a $300,000 fine and three years of unsupervised probation.

Last September, Judge Link sentenced McManus and Schrock to four years in prison for their guilty pleas to two felony counts, one count of conspiracy to misappropriate public funds and one count of conflict of interest. However, the Judge indicated the law required that he take time spent under house arrest into consideration. Therefore the four year prison terms were fulfilled. There must have been some kind of an agreement struck with the prosecutor to get this outcome.

Schrock has been serving his house arrest in Orange County and McManus in Australia. McManus attended the sentencing hearing over Microsoft Teams from his lawyers office. Judge Link said at the trial,

“Mr. McManus and Mr. Schrock were thieves. And I don’t like to dance with thieves. I think they should be punished. That being said, Mr. McManus and Mr. Schrock came forward and basically divulged everything they could come up with. Without the cooperation of Mr. Schrock and Mr. McManus, we would not be here today with the amount of money that the receiver has been able to recoup. Except for that, I would definitely be putting both of these fellas in prison for a significant period of time.” 

The judge’s sentiments sound heartfelt but do not tally. McManus and Schrock misappropriated $400,000,000 of which only $240,000,000 has been recovered and they stole $80,000,000. The large fines come well short of equaling the amounts stolen. Their four year prison sentences were satisfied by two years of house arrest and McManus has never returned to face his charges in person.

I cannot help wondering how that Australian house arrest was monitored.

Broken Legal System Must Be Reformed

This result was not a legal deterrent. Conspirators were able to fraudulently acquire so much wealth they could buy their way out of jail. Rich people hate fines but fear jail time. It is nice that some of the A3 theft was recovered but society would be much better served if moneyed racketeers faced certain jail time.

The A3 saga painfully highlights how unjust and manipulated in the favor of means our legal system has become. American style blind justice must be reinvigorated. Well-heeled scofflaws need to face jail time and large fines. The A3 outcome is an absurd miscarriage of justice painting the prosecutor and Judge in a bad hue.

One Response to “Not a Day behind Bars for A3 Charter Grifters”

  1. Sandra Forrest July 13, 2022 at 5:22 pm #

    Think of all the services that were denied to children in public schools because these funds were tax monies went to “pseudo schools.”

    Liked by 1 person

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