Ohio Sues Cyber Charter Founder, Pursuing Millions in Disputed Funds

By Lauraine Genota — August 22, 2018 3 min read
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Ohio’s attorney general is suing the founder of the Electronic Classroom of Tomorrow on Tuesday, aiming to recover the millions of dollars in public funding that the state alleges wrongfully went to the cyber charter school.

The lawsuitnames William Lager, who founded ECOT, as well as two of his companies, Altair Learning Management I, Inc. and IQ Innovations LLC, both of which provided management and curriculum services to ECOT.

It also names five other ECOT officials--a superintendent, treasurer, vice president of accounting, a data-collection system director and a federal programs director--alleging that they’re also liable for ECOT’s improper disbursements.

The lawsuit, filed in the Franklin County Common Pleas Court by Ohio Attorney General Michael DeWine, targets the money paid under improper funding received by ECOT that wasn’t justified after the state calculated student participation and enrollment, as well as the profits Lager received from his companies’ ECOT contracts.

Lager founded companies that made millions of dollars doing business with ECOT, while other ECOT officials stood by or actively participated as the school “overbilled the public on a massive scale to keep the money flowing,” the state argues in the lawsuit.

A spokeman for the school did not immediately respond to a request for comment.

Before it closed in January, ECOT was one of the nation’s largest online schools, claiming an enrollment of more than 15,000 students. The decision to close its doors came after it started running out of money, the result of efforts by the Ohio Department of Education to recover about $80 million in disputed funds, as previously reported by Education Week. The closure forced thousands of students to scramble to try to find new schools.

At the time, a school spokesman for the cyber charter faulted state officials for rejecting an offer that would have allowed students to finish the school year. He said those officials were “more interested in settling a political score than in doing what’s best for students.”

A state review of student software-login records for the 2015-16 school year determined that ECOT had overstated its enrollment by more than 9,000 students, and thus was overpaid by more than $60 million.

ECOT was paid for 15,322 full-time students during the 2015-16 school year. But state officials said they could document just 41 percent of that total.

The school also had to repay an additional $19.2 million, based on a review of 2016-17 student-login records. To recoup the funds, the state withheld about $2.5 million from each of its monthly payments to ECOT during the 2017-18 school year.

ECOT challenged the funding determination process before the Ohio Supreme Court, which ruled earlier this month that the state had authority to use participation data and not just enrollment to calculate the school’s funding. The decision also allowed the state to seek repayment of the millions of dollars that went to the cyber charter school.

The lawsuit filed by the state this week claims that “real harm resulted” from ECOT’s overbilling. Since 2015, the online charter school’s overbilling totaled about $80 million, and had impacted “real districts,” like in Franklin County, where 16 districts lost a total of about $15 million in funding in that time period, according to the lawsuit.

The losses that other districts suffered are “concrete education opportunities lost” and could have funded about 171 teachers in three other districts, DeWine said in the lawsuit. DeWine, a Republican, is running for Ohio governor against Democrat Richard Cordray.

The state alleges that ECOT still owes the state about $62 million.

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A version of this news article first appeared in the Digital Education blog.