Between the future promise and the disappointing past of charter schools, there is Cambridge Education Group.
The Akron company and the 20 Ohio charter schools it manages are seeking to disentangle themselves from the likes of White Hat Management, a primordial force in Ohio’s charter school movement.
White Hat’s prominence is fading. The company has sold off its K-8 schools, downsizing amid competition from the state’s next generation of charter school companies, including Cambridge.
Cambridge has created a more autonomous environment for the publicly funded schools it runs. In an old Akron office building on West Market Street, the company’s second largest school, Towpath Trail High School, teaches the basics — plus art — to struggling students, some expelled from suburban public schools. About a third have children of their own. Most are poor. Many work or must balance school with raising younger siblings while their single parents work.
The dropout recovery charter school employs a family advocate who helps with everything from subsidized child care to transportation. A behavioral specialist treats the whole student. Refugees from war-torn Afghanistan, Rwanda and Nepal learn grammar from an English tutor with a thick Polish accent.
The school embraces the struggles of urban youths. It’s more than its board members could have imagined when White Hat ran the school. But the past is hard to shake.
Most Cambridge employees — its founder, nearly every executive and many teachers — once worked for White Hat. Its schools are relics of White Hat’s free-market influence on public education. Today 236 of the state’s 373 charter schools are run by private firms.
Few states rely so heavily on management companies.
Most, like Cambridge and White Hat, are tax structured to allow profits on taxpayer-funded education. Along with Summit Academy Management, which is headquartered on Mogadore Road, Akron companies now manage one in six Ohio charter schools.
But Cambridge claims to be different. It has no interest in owning school assets or signing property leases that make it hard for school boards to fire the management companies they hire.
For decades, White Hat controlled 95 percent of all its schools’ state and federal funding. Cambridge takes 18 percent, although processing payroll and steering its schools to vendors controlled by the company can double or triple Cambridge’s take.
Summit Academy, White Hat, Concept Schools of Illinois and Imagine Schools of Virginia have a tendency to buy the school buildings they manage, drawing revenue from rent and putting school boards at a disadvantage if they wish to shop around for a new operator. Cambridge school boards — starting with Towpath Trail High School on Market Street — are collecting property deeds, eliminating their use as bargaining chips.
But Cambridge, for all its promise, can’t shake a past rife with questionable business relationships.
How it spends
Through a public records request, the Beacon Journal reviewed hundreds of invoices, property lease and purchase agreements, vendor contracts, board minutes, court filings and other financial documents detailing how Cambridge spends much of the more than $30 million in state funding its managed schools will receive this academic year.
The paper also toured the company’s flagship school — Towpath Trail High School — and attended its latest board meeting to question the board and its legal counsel about their contract with Cambridge.
The company was born in 2012, founded by Marcus May, a former White Hat executive. Cambridge’s first three customers — dropout recovery high schools, like Towpath Trail, which is geared toward struggling 16- to 21-year-old students — had rebelled against White Hat after persistently low test scores and failing to get answers about how money was spent.
May saw unrest between White Hat and 10 schools over the next year as an opportunity. Without another company to help the breakaway schools acquire buildings and staff, “they would have drowned,” the schools’ attorney said.
May tapped friendships fostered through the years. School Warehouse, a Cincinnati business formed by Steve Kunkemoeller, a business associate of May’s, became the preferred vendor to furnish the schools. Most school boards sign no contract with School Warehouse, which holds a gentlemen’s agreement with Cambridge (enforced by May) to be the one-stop shop for all things furniture. The company serves as a middle man, marking up the price of desks and chairs in exchange for favorable financing terms that are hard to come by. Many banks, noting the high failure rate of charter schools, consider it too risky to lend them money. So Cambridge and Ohio charter schools find themselves turning to familiar faces or independent lenders that inflate interest rates to cover riskier loans.
Searching for vendors when the boards asked for bids, May took matters into his own hands. He founded Rearden Capital and d’Anconia Development to provide financing and line up private investors to purchase school property, often with an option for the schools to buy the property later.
“Rearden” and “d’Anconia” are the neoliberal protagonists in Atlas Shrugged, Ayn Rand’s ode to an unfettered free-market capitalism. Such is the philosophy May and others bring to public education.
For technology, a key component to deliver curriculum in dropout recovery schools, May turned to Suranjan Shome, who he met while launching a marketing firm named Mindgrab in the Akron Business Incubator. Shome built Epiphany Management Group (EMG) then bought May’s marketing firm. EMG now outfits Cambridge managed schools with technology.
Despite having an office in Fairlawn, the hub of activity for Cambridge is Towpath Trail at 275 W. Market St. May helped board members acquire and turn the old office building into a modern school. At the time of the property transfer, Donald Cureton, a board member at other Cambridge managed schools, was a part owner of the property through Bee Investments, according to records at the Summit County Fiscal Office.
A similar inside deal, involving unknown investors wrangled by May, was behind the purchase and opening of Wright Preparatory School in Canton this school year. The new Canton school board, which borrows members from sister schools, had no capital to buy the property. It turned to Cambridge, which called May for help.
These close-knit arrangements involving transactions that often lead back to May smack of self-dealing, so much so that a grand jury in Florida indicted School Warehouse and Newpoint Education Partners, May’s version of Cambridge in Florida, on charges of grand theft, money laundering and aggravated white-collar crime. A court filing details $40,000 in timed withdrawals and deposits that bounce between unknown bank accounts. The source and destination of the transactions remain a mystery as stakeholders in Ohio, including the schools’ boards, keep a close eye on the Florida case.
Invictus High School in Cleveland, the largest in the Cambridge family, sensed wrongdoing. It tore up its contract with the company and, like White Hat did before, is being sued again by the company it hired.
By law, charter school boards must have outside counsel and treasurers who are independent of the companies hired to run them. When she’s not managing her own charter school in Highland Hills, April Hart, one of two attorneys for Cambridge school boards, safeguards the boards from legal and financial ruin.
She “was pissed” to find out in December that a board member at Main Preparatory Academy — who she does not know — potentially sold the Towpath Trail property to her board in 2014, and that the name of that board member surfaced in the grand jury indictment filings in Florida.
And she knew nothing of the story behind Rearden Capital, which is owned by May and collects thousands each month from some schools. It would take an open admission by May or a lengthy investigation to uncover such details.
With his companies under indictment in Florida, May isn’t talking to the Beacon Journal, though Cambridge has. And Hart, who continues to fight White Hat over the separation years ago, can only tell her boards what she discovers.
“We can’t expect her to bill 30 hours a week and go out and find things,” said Towpath Trail board President Ron McDaniel, who added that, though only an allegation at this point, any wrongdoing in Florida would be grounds to fire Cambridge in Ohio.
Invictus, a Cambridge school Hart advises in Cleveland, “didn’t want to wait” for the outcome in Florida.
More disclosure
Compared to White Hat, Cambridge school board members undoubtedly have more access to financial records and a better understanding of how the company spends the money they give it.
Whereas White Hat school board members have said they have little control over tax dollars they receive, board members overseeing Towpath Trail dissect the academic and financial performance of their school on a monthly basis — and in great detail.
The board met in December at Akron-Summit County Public Library, where nine students would later attend a monthly graduation ceremony. Nine graduates per month are more than White Hat sometimes graduated in a year when it ran the schools.
The school board deliberated long on whether to get deeper into debt with Cambridge.
During the discussion, the board agreed to what will be a $300,000 — “no strings attached” — loan from Cambridge. Now, it can pay Tober Development, a general contractor, $240,000 for work done on a satellite site opening next school year.
The $240,000 payment, part of a $700,000 project, is only part of the outstanding bill. But the board approved the expenditure in hopes that it will keep the builder happy with 80 percent of the work done.
The satellite site at 1016 Canton Road is scheduled to open next summer. It’s in Springfield school district, where — because it’s not “academically failing” or in a large urban district — charter schools are barred from opening.
But an exception, Cambridge Executive Director John Stack explained, can be made for satellite sites. This one will include a career technology wing, something its parent school in Akron doesn’t have.
Doug Livingston can be reached at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow on Twitter: @ABJDoug .