Online charter school CEO indicted for misused funds. Do laws need tightening?

Nicholas Trombetta, former CEO of the Pennsylvania Cyber Charter School, has been charged with diverting more than $8 million of taxpayer money away from the school for a condo, airplane, and other expenses.

Darrell Sapp/Pittsburgh Post-Gazette/AP
Nick Trombetta, founder and then-CEO of a cyber-charter school that educates more than 11,000 Pennsylvania students, speaks during the 'STEM Summit' in Green Tree, Pa., in 2011.

Federal charges against Nicholas Trombetta, former CEO of the Pennsylvania Cyber Charter School, allege that he diverted more than $8 million of taxpayer money away from the school, used it for a condo, an airplane, and other personal expenses, and collaborated with his accountant to avoid paying taxes.

US Attorney David Hickton, who announced the charges Friday, was careful to note that “we are not indicting PA Cyber or cyber-education.”

PA Cyber serves more than 10,000 students and is the largest of the state’s 16 online charter schools. Mr. Trombetta resigned last June and “an internal evaluation and restructuring of our senior administrators” has enabled the school to maintain a strong reputation, the school’s CEO, Michael Conti, said in a statement.

But the case may draw attention to a concern that a number of researchers and educators have raised in recent years – that online charter schools have grown so rapidly that accountability measures haven’t kept up, leaving the door open to a range of unethical and perhaps even criminal activity.

“The virtual schools are just much more ripe for corruption because [of] the profit margins,” says Gary Miron, professor of education at Western Michigan University, who co-authored a report this year on virtual schools for the National Education Policy Center at the University of Colorado, Boulder.

Not only did many virtual schools do less well on academic metrics, but “we could not track where the money was going,” Professor Miron says. Because many of the schools are run by or subcontracted to for-profit companies, “a lot of details go behind the veil of privacy [and] proprietary issues.”

It took a ruling by the Ohio Supreme Court this summer, which let stand two lower court rulings, to give the boards of charter schools run by White Hat Management a right to know how the public money for those schools is being spent.

About 2 million students take online K-12 courses in the United States, and more than half the states offer virtual schools, many of them authorized through the charter systems that set up autonomous public schools. Pennsylvania and Ohio have some of the highest per-pupil funding levels in the country for virtual charter schools, Miron says.

Trombetta, who founded PA Cyber in 2000, is accused of funneling money to himself through Avanti Management Group, a for-contract company that did contract work for the National Network of Digital Schools, a nonprofit that manages the school. Prosecutors allege that Avanti had four “straw” owners whom Trombetta paid off so he could gain de facto control of the company.

“Virtual schools are being promoted as a less expensive way to provide public education and to customize education for individual students … but these opportunities are being expanded without sufficient monitoring mechanisms in place,” says Patte Barth, director of the National School Boards Association’s Center for Public Education. Some students start an online program and then drop out a few months later but aren’t reported by the virtual school in their data, for instance, she says.

In Pennsylvania, legislative proposals have been made to require charter schools to have the same kinds of annual audits and fund-balance caps that traditional public schools have, says Steve Robinson, spokesman for the Pennsylvania School Boards Association.

The Trombetta case could “help drive states to get serious about adopting quality standards,” says Susan Patrick, president and CEO of the International Association for K-12 Online Learning, a nonprofit in Washington. “We believe online courses and blended learning have the ability to open up doors … but we worry about the quality of operators. There are lots of good ones, but if we don’t do a better job of differentiating the quality of operators … we put the future of education innovation at risk,” she says.

Pennsylvania officials are certainly on notice. “The state Department of Education … will be carefully examining the contracts that PA Cyber has with other entities to ensure they are for the sole benefit of students and not for personal gain,” said Pennsylvania Department of Education spokesman Tim Eller in an e-mail to the Monitor. He also noted that “Governor Corbett … urges the General Assembly to work with him to amend Pennsylvania’s charter school law.”

Material from the Associated Press was used in this report.

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