Charter School Managers Pocketed Millions in Scam: Lawsuit

By Brett Snider, Esq. on October 10, 2013 | Last updated on March 21, 2019

Managers for the Options Public Charter School are accused of diverting millions of dollars in government funds toward their own businesses, and the District of Columbia is suing them for it.

According to The Washington Post, the Options school was intended to serve "the District's most troubled teens and students with disabilities," but at least $3 million earmarked for the school were allegedly siphoned away by sophisticated contracting scam.

The District's complaint claims these school managers funneled state money into their own private contracting businesses and much more.

Options Charter School Falls Prey to Scam

One of the people named in the lawsuit, the Post reports, is local D.C. news fixture J.C. Hayward, who has been accused of helping the three ex-Option managers to incorporate one of the private contracting companies through which federal money was diverted away from the school. Hayward has since been suspended from WUSA Channel 9 pending further investigation.

Like in most cases of self-dealing, the District is alleging that by granting these for-profit contracting companies lucrative contracts with the Options school for transportation (buses) and management which violated their duties to the school.

Aside from just the general crumminess of misusing money meant for children with disabilities, the complaint alleges that the Options funds were also used to rent and furnish offices for these colluding corporations.

Although no criminal charges have currently been filed, a spokesman for the U.S. Attorney told the Post that prosecutors are aware of the allegations and will "continue [their] review of this matter."

D.C. Code and Injunctive Relief

Based on the allegations of self-dealing and practical embezzlement of Options school funds, the District has pleaded for rescission of the contracts between Option and these corporations and to place all disputed funds in a constructive trust.

Luckily for the District, there is a perfectly crafted D.C. Code section that calls for just such injunctive relief in the event that a non-profit corporation acts "contrary to nonprofit purposes" or "exceed[s] or abuse[s]" its authority granted by D.C. law.

It may not be a stretch of the imagination to think that the purpose of the Options school was not to make three of its managers filthy rich by granting contracts to their own corporations, so the District may have a point.

D.C. Attorney General Irvin B. Nathan stated in a press release in early October that his office will take swift action against those who are supposed "to serve vulnerable D.C. youth" instead of "us[ing] the school as a cash-generating machine."

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