Oregon charter school founders accused of $20M fraud

According to The Oregonian, Tim King and Norm Donohoe, who ran a chain of taxpayer-funded charter schools across small-town Oregon from their headquarters in Clackamas, have scammed the state out of $17 million and must repay that plus $2.7 million more, the state said in a recent court filing. The legal claim, brought by the Oregon Department of Justice in Marion County Circuit Court, accuses the pair of racketeering, money laundering and other fraud from 2007 to 2010.

King and Donohoe, who were the director and president, respectively, of a nonprofit they named EdChoices, submitted false, incomplete, and misleading records about how many students were enrolled in the schools and how they were spending the state’s money, state prosecutors say in the complaint.

“It’s not true,” Donohoe said when reached recently. He said EdChoices’ attorney would need to speak for him but was not available after hours. King could not be reached for comment.

The pair opened and operated at least 10 charter schools that went by various and changing names, including Baker Web Academy, Estacada Early College and Sheridan AllPrep Academy. Most were launched under the name AllPrep. They existed under agreements with the school boards in Estacada, Sisters, Baker City, Sheridan, Burns and Marcola, but enrolled students from across the state in their online programs.

The state provided startup grants of up to $450,000 per charter school. The State Department of Education also paid about $6,000 a year for each student enrolled, relying on the charter school operators to document the number. The state now says those records were “erroneous, false and misleading.”

King was the front man for AllPrep when the schools’ unraveling finances prompted state regulators in the education and justice departments to begin asking questions in spring 2010. He quickly stepped down. Donohoe said Friday that he does not know how to reach him.

Some of the schools abruptly closed during the school year, leaving students and teachers in a lurch. Others have since stopped operating. Still others operate under new auspices.

The state is demanding that King and Donohoe repay all the money their schools received in grants and per-student funding, on the grounds it all was obtained under racketeering and false claims, even though the schools did legitimately educate some students. That adds up to $17 million. In addition, the claim demands $2.7 million in damages for breach of contract plus attorney fees and the costs of investigation and litigation.

Source:  The Oregonian, 1/4/13, By Betsy Hammond

[Editor's Note:  In its complaint in Oregon v. King, Donohoe, and EDChoices filed on January 3, 2013, the State of Oregon alleges violations of the Oregon Racketeer Influenced and Corrupt Organization Act, the Oregon False Claims Act, along with claims of breach of contract, negligent misrepresentation, breach of fiduciary duty, breach of duty of good faith and fair dealing, and unjust enrichment. ]

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