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Federal indictment fuels concerns about Pa. cyber charters

By Benjamin Herold for Education Week on Aug 27, 2013 01:02 PM

This is a reprint of an article that originally appeared at Education Week.

Federal investigators recently unveiled a grand jury indictment of Nicholas Trombetta, the founder and former CEO of Pennsylvania's largest cyber charter school, now alleged to have stolen nearly $1 million in public money and improperly diverted a total of $8 million to avoid federal income taxes.

The Cliff's Notes version of the indictment is that prosecutors allege that Trombetta created a byzantine network of companies and nonprofits, then used those entities to bilk PA Cyber Charter School — and taxpayers — by billing the school for work that was never done, using school employees to do work for the other companies, and redirecting funds to himself and family members. Prosecutors also allege that Trombetta took more than $500,000 in kickbacks related to laptop purchases for students and filed false tax returns in each year between 2007 and 2011. All told, Trombetta is facing 11 fraud and tax charges. His accountant, Neal Prence, was also charged.

On Friday, I talked with WHYY's Jennifer Lynn about the case on NewsWorks Tonight (listen above). The Associated Press has the summary, and the Pittsburgh Post-Gazette, which has been on top of the troubles at PA Cyber for well over a year, has all the details.

But what does Friday's indictment mean for Pennsylvania's troubled cyber charter sector, which, at 16 schools and 35,000 students, is the largest in the nation — and was already under fire for corruption allegations, system-wide poor academic performance, and growing complaints about what many see as an overly generous funding mechanism?

The U.S. attorney carefully sidestepped that question, according to the Post-Gazette, but with state lawmakers gearing up for another attempt at cyber reform, key stakeholders in the Keystone State are definitely paying attention.

The indictment "is certainly something that's going to affect the discussion relative to cyber schools and funding in the next legislative session," said Robert Fayfich, the executive director of the Pennsylvania Coalition of Public Charter Schools.

At minimum, said Fayfich, the allegations against Trombetta will increase the pressure on state lawmakers to finally seek to determine the actual cost of cyber education in Pennsylvania, and also to spur the state Education Department to take seriously the growing calls for it to strengthen its procedures for authorizing and monitoring cybers in the state.

Troubled sector

In 2012-13, 498 of Pennsylvania's 500 traditional school districts sent students to a cyber charter. Under the state's funding mechanism, those districts are required to pass along to the cyber about 80 percent of the funds they would otherwise have received to educate that child — an amount that last year worked out to an average of at least $10,000 per child. All told, the state's 16 cybers were poised to receive more than $366 million in taxpayer funds last school year.

With more than 10,000 students a year, PA Cyber alone has been receiving well over $100 million in public money annually, a portion of which prosecutors allege that Trombetta was using to fund businesses that functioned as his "personal ATM machine" and "personal retirement account."

For years, many have complained that the state's funding formula is too generous to cybers. Former state auditor general Jack Wagner, for example, made cyber funding an almost annual issue, calling for a statewide reimbursement rate closer to $6,500 per student to cybers.

Critics have also been concerned about the quality of the state's cyber charters. None of the dozen Pennsylvania cybers that received ratings in 2011-12 met their federally mandated academic performance targets.

And Trombetta isn't the first cyber charter honcho accused of massive fraud in Pennsylvania — in July 2012, Dorothy June Brown, the founder and former head of the Agora Cyber Charter, which enrolls more than 5,000 students, was charged by the feds with defrauding Agora and two other charters of more than $6.5 million between 2007 and 2011.

Friday's indictment is just another example in the long list of concerns about cyber charters held by Rhonda Brownstein, the executive director of the Pennsylvania Education Law Center.

"The claims [of wrongdoing by Trombetta] are another example that these schools have expanded with virtually no fiscal oversight," Brownstein said. "Until the state thoroughly addresses the numerous fiscal — and academic — issues with cyber charter schools, it should impose a cap on their growth and a moratorium on the approval of any new cyber charters."

A good option

But PA Cyber also demonstrates the value of online options for students.

Trombetta founded the school, based in Midland, Pa., after the town and its local school district faced a series of hardships. A small steel mill town in Beaver County about 35 miles north of Pittsburgh, Midland saw its population and tax base largely disappear after the steel industry collapsed and the local mill was shut down. In 1986, Midland closed its high school, then began a years-long search for someplace to send the community's secondary students. After most of the surrounding districts in Pennsylvania declined to take Midland's students in the mid-1990s, the district began sending its high school students across state lines, to East Liverpool High School in Ohio.

"That still is our high school," Sean Tanner, the superintendent of the 328-student Midland district, told me in May, when I still worked at WHYY/NewsWorks in Philadelphia and was working on a big piece about cyber charter funding in the state.

Tanner said back in May that the creation of the online school had been good for the Midland community.

"The option in Ohio is a good option. They've been a good partner for us. But it's in Ohio," Tanner said. "We don't have this strong stance against [cyber charters] because it's been customary for the district to pay [tuition elsewhere] for high school kids."

Proponents say full-time online schools are an important and valuable outlet for students with chronic or severe illnesses, who frequently travel, who have experienced bullying and other problems in traditional schools, and who can't find some course offerings in their home schools.

Whatever the reasons, enrollment in PA Cyber has grown quickly, reaching 10,443 students in 2012-13.

True costs of cyber charters?

Amid declining federal support and deep cuts in state aid to public education, though, many of Pennsylvania's traditional school districts have begun pushing back against the state's growing cyber sector, seeking funding reforms and more accountability. In each of the last three sessions of the Pennsylvania legislature, broader charter reform measures that have included changes aimed at cybers have been introduced and gained traction, but have ultimately failed to pass.

Fayfich of the Pennsylvania Coalition for Public Charter Schools said that cyber funding will almost certainly be an issue again this fall — and that this time, cyber detractors will have additional ammunition for their efforts to reduce the reimbursement levels for the schools. "Those who are opposed to cybers are going to say, 'See, we told you so, cybers are getting paid too much, we need to cut their funding,'" Fayfich said.

The coalition, he said, has a different stance:

"We have always supported investigating what the true costs are of providing a high-quality education through cyber schools, but what we have opposed is the false assumption that kids [in cyber charters] are just given computers and that's it and therefore the costs are lower. That may or may not be true. The analysis hasn't been done."

As for the accountability and oversight concerns, said Fayfich, many necessary changes shouldn't require legislation. In Pennsylvania, the state Department of Education is solely responsible for authorizing new cyber charter schools, providing oversight, and renewing existing cybers.

"I think there needs to be a close look at making sure [the state department] is a high-quality authorizer. If they're not, we won't have high-quality [cyber] schools," he said.

Fayfich said the department has made it a "very high priority to increase the quality of the authorization done for cyber schools." He pointed to the recent decision not to approve any of the eight proposals for new cyber charters hoping to open in the state next year.

Brownstein of the Education Law Center agreed.

"It was encouraging earlier this year to see [the department] take a more thorough and thoughtful approach to cyber charters by not simply rubber-stamping the latest round of cyber charter applications," said Brownstein.

"We'd encourage the department's new leadership to continue that approach and begin a more rigorous examination of fiscal and academic issues with the existing cyber charter schools," she added.

Timothy Eller, a spokesman for the department, did not immediately return a request for comment on the Trombetta indictment. Last week, he explained the department's stance on the pending cyber charter applications: "The applications that were submitted were deficient and lacked evidence that students would be offered quality educational programs."

Follow @BenjaminBHerold and @EdWeekEdTech for the latest news on ed-tech policies, practices, and trends.

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Comments (35)

Submitted by Anonymous (not verified) on August 27, 2013 1:19 pm
What makes cyber charters different than the brick and mortar charters? Nothing.
Submitted by Joe K. (not verified) on August 27, 2013 2:07 pm
Bingo !! Just one scam after another.
Submitted by True progressives (not verified) on August 27, 2013 3:27 pm
Advertisements. It is ridiculous how many TV and billboard ads K12 cyber buys with tax dollars. It is obvious why they are targeting the Philly market. Cyber charters should not be able to use tax money for ads.
Submitted by Laid off Counselor (not verified) on August 27, 2013 3:12 pm
It has gotten to the point where even Geico is jealous of their advertising. In the spring, I was at a public event at a park in the area, and one of the cyber charters had a huge Winebego "traveling classroom"
Submitted by Joe K. (not verified) on August 27, 2013 4:59 pm
Not much would surprise me anymore with these Gibronies !!
Submitted by Eileen DiFranco (not verified) on August 27, 2013 10:39 pm
There are bill boards advertizing cyber schools on I-95 paid for by our tax dollars. Why isn't this being covered by the media? This is a waste of tax payer money.
Submitted by Headstart teacher (not verified) on August 27, 2013 3:59 pm
Right you are and teachers working in brick and mortar neighborhood schools apparently need to pay for all this embezzling! No thank you.
Submitted by Joe K. (not verified) on August 27, 2013 4:07 pm
Totally Agree. Embezzling------------Perfect !!
Submitted by High School Teacher (not verified) on August 27, 2013 4:26 pm
Do cyber students take state tests? I'd love to know how they score. With too many of my students sneaking peeks at Twitter and FB on their cell phones in class, I can just imagine how little time these cyber kids spend on actual learning while Mom and Dad are at work, and the kid is home alone with the computer.
Submitted by Philly Parent and Teacher (not verified) on August 27, 2013 4:23 pm
No PA Charter has ever made AYP.
Submitted by Anonymous (not verified) on August 27, 2013 8:43 pm
Not true. Do your homework before you make statements!
Submitted by Anonymous (not verified) on August 27, 2013 9:00 pm
You do yours!!!! Based on the recalculations this year, no cyber charter made AYP. Look it up, idiot!
Submitted by Anonymous (not verified) on August 27, 2013 9:20 pm
No charter has EVER made AYP. That in not true. 21st century made AYP every year until last year! They aren't the only ones! Now who's the idiot?
Submitted by Anonymous (not verified) on August 27, 2013 9:56 pm
No need to call names, however you are incorrect.
Submitted by Anonymous (not verified) on August 27, 2013 9:26 pm
The statement was that "no pa charter (not just cybers) has EVER made AYP" and that statement is not true!!!!!
Submitted by Anonymous (not verified) on August 27, 2013 9:14 pm
Let's be adults here, this chain is based on the original comment about cyber charters. The rebuttal was about 21st century charter a CYBER school which has had its AYP results reconfigured. No charter and from the thread its obvious the user meant cyber has made AYP period. There are plenty of successful (whether ethical or not) charters. The discussion is about the waste of money on cybers and you were wrong. No big deal.
Submitted by Philly Parent and Teacher (not verified) on August 28, 2013 3:39 am
Yes, I mistyped. No cyber charter has made AYP. I was responding to the original post regarding cyber charters. (Obviously, many brick and mortar charters have made AYP - just as many public schools.)
Submitted by Go-Eagles (not verified) on August 27, 2013 9:25 pm
I did look it up. Anonymous from 21:14 time-stamp post is correct. 21st Century Cyber Charter did made AYP in 2011, but has a "Warning" from 2012. Here are the results from SDP. From what I've seen, the cyber school is outperforming SDP.
Submitted by Anonymous (not verified) on August 27, 2013 9:26 pm
Those numbers were based off of the old configuration, it needs to be updated on the website. There also should be an * on district scores where there was an admission of cheating in those years but I doubt the state would do that.
Submitted by Anonymous (not verified) on March 24, 2014 4:00 pm
Where do you get your inaccurate information?
Submitted by Proud PA Cyber Parent (not verified) on August 28, 2013 10:40 am
Yes cyber students are required to take all state testing, PSSA, Keystones, Dora/Doma. I have been involved with PA Cyber for 3 years and my children have learned above grade level, with my oldest daughter able to excel at her own pace and complete 2 grades in one year. The curriculum is more thorough and downright tougher than what they were getting at their public school, challenging them to learn more and excel. PA Cyber's scores are outstanding year after year. They have always met AYP, and I have checked into this and their scores far surpass our local public school district every year. My children do not sit around on Facebook and Twitter all day. THEY LEARN! In fact without all the down time, drama, drugs, and ridiculousness that goes on in public school, they spend much much more time learning a good education than public school students do. I understand cyberschooling is not right for everyone, but it is right for my family and I am thankful PA Cyber does an outstanding job.
Submitted by Natalie Gormont (not verified) on August 30, 2013 7:03 pm
YES... PACyber students do take ALL of the state mandated exams and do VERY well... my daughter scored proficient on her first attempts at the Keystone Exams! Scoring Proficient in Biology and Literature makes me very proud of her. Look at the statistics... I will stay with PACyber where my child is doing well and working hard! She is learning and not playing on the computer! There are ways to keep track of what your student is doing and not doing... they have to do their work and are kept on task by their Instructional Supervisor as well. Thank you PACyber for being there when we needed you and giving my daughter a chance to be herself and succeed in school as well.
Submitted by Anonymous (not verified) on August 27, 2013 7:55 pm
Tommy Two-step Corbett,republicans- you reading this? This is what "educational privateers and reformers" do with taxpayer money when they get their greedy hands on it. Scandal after scandal of corrupt charters, and privately managed schools using taxpayer money. Where are all the Tea Party and reformers now? I don't hear you? Another reason traditional schools have no money and you want to expand this mess.
Submitted by Maureen Fratantoni (not verified) on August 27, 2013 8:04 pm
Tax payers across our City need to use their VOICE and take a STAND!!! Otherwise these kinds of things will continue!!!
Submitted by Anonymous (not verified) on August 27, 2013 9:02 pm
I don't know the outcome for public schools but I do know that the popularity of charter schools will continue to grow. Parents and children continue to make a stand by enrolling and waiting on a list to enter charter schools.
Submitted by Anonymous (not verified) on August 28, 2013 12:50 am
I guess all of you morally upright individuals will be boycotting the Notebook. They have a great deal of cyber ads, as well as other ad funded by public dollars.
Submitted by Go-Eagles (not verified) on August 28, 2013 3:43 pm
Yep. PA Virtual Charter School - a cyber charter school. I was on their website and was surprised at the amount of socialization offered to the students.
Submitted by Victoria's Mom (not verified) on August 30, 2013 9:18 am
My daughter has been attending PA Cyber for five years, this year will be her sixth. I think it is every parent's right to send their child to whatever school they think is suitable for their student's needs. I don't bash the "regular" schools and I don't think it's fair that people that don't have experience with cyber schools personally should be able to bash those cyber schools. If you don't know it, don't speak about it! My daughter tests at or above her grade level on every test she takes, PSSA and Dora/Doma included. She's a good student. She is up early everyday to take care of her animals before classes, sits for 4 hours straight to take her classes, completes her homework assignments immediately after class is over and participates in many community and social activities, like church, Girl Scouts and dance. There are also "self-paced" classes that she must take along side her virtual classes. Unfortunately there was a man associated with our school that was greedy and is now giving our school a bad name. His actions should not reflect on the rest of the school, the teachers, the parents, the students, that did NOTHING wrong and are just trying to work, educate their kids and learn! His actions weren't right, he is going to be punished for it, but the school and those remaining there shouldn't be punished for it either. It's a shame that his bad behavior is putting our school in a bad light. I haven't had anything but a good experience here at PA Cyber. If things were to change, I know I have options. That's what every parent should want - the best options for their children. That should be the bottom line here. Not our school versus your school. That attitude is only hurtful to the students in the end.
Submitted by Rich Migliore (not verified) on August 30, 2013 10:02 am
You are correct. I agree. But may I start a collegial discussion of crucial importance to you as a parent and me as a taxpayer and concerned citizen? The problem I have is with the governance of such schools. Whose School Is It? Who owns that school? Do you even know? Is that school run as a public school or a private business? Are there schemes to pass money on to businesses owned or operated by officials of the school? Does it have a board of trustees? Who is on that board of trustees? How do they get "appointed or elected?" Are the board members elected by the stakeholders of the school? Is it run in any way publicly? Then, it is not a public school by any legal standard. Do they report to you a budget wherein every penny is accounted for? Is the budget ever disclosed to you? If not, then why not? How did that culprit get away with stealing your child's money?
Submitted by Victoria's Mom (not verified) on August 30, 2013 12:01 pm
Rich, thanks for your comments and for not flying off the handle like some people on this board. I know as much about the operations of PA Cyber as I know about our local school district, which is not much at all. I should become more informed and I will look into the questions that you asked. I would like to point one thing out regarding tax payer money and how it's distributed. Our local school district has had numerous articles published in the newspaper about how the cyber students are "stealing" the tax payer money by not attending their district schools. They never mention the tax dollars that they get to keep from all the students who attend private schools in the area. Our county is very conservative and there are lots of Christian, Catholic and Mennonite schools here, along with other private schools. The parents that send their children to these schools still pay taxes plus they have to pay tuition as well. And the school district is still getting their payment from the government for those students. What are they doing with that money if they don't have a student to educate with it? We can go round and round about this subject. I want to reiterate my belief that each parent should be the captain of their child's education and they should have the right to choose what's best for them and their family situation. This country was founded by people who left their homes for freedom of choice and I don't see why it should be any different today.
Submitted by Proud PA Cyber Parent (not verified) on August 30, 2013 10:27 am
Amen... couldn't have said it better!
Submitted by Anonymous (not verified) on August 30, 2013 9:56 am
NO school in the Pittsburgh Public school district made AYP either.. I've sat through science classes where the kids were taught NOTHING.. the teacher did nothing but yell at the kids who didnt pay him any attention except to throw their shoes at him and cuss him out.. These were 3rd graders...... Is everyone forgetting the people who embellized from from Public schools???? no one ever looked at those schools this way.. PA Cyber is giving my daughter a chance to actually learn. Her old school did nothing about the bullies who tormented her day in and day out. Most parents who cyber school are right there beside their child. they are not left home alone. kids learn more because they are doing it at their pace.They are not being bullied, they are not having to hear teachers yelling at other kids who are impeding their learning.. If they don't understand something they can get one on one attention and tutoring.. This cant be done in a class with 33 students for a 3rd grade class.. no way Please no the facts before you state anything... Just because this person was associated with the school doesn't mean the school is involved.. Look at how much PPS schools spend.. they spent 1 million dollars to change the letterheads and rename all their schools from Langley to Pittsburgh Langley. Brashear to Pittsburgh Brashear. A million dollars wasted to add Pittsburgh in front of the name. really??????
Submitted by Anonymous (not verified) on August 30, 2013 10:30 am
Submitted by Lee Moody (not verified) on September 4, 2013 2:41 am
It is really sad to know the Cliff's Notes version of the indictment is that prosecutors allege that Trombetta created a byzantine network of companies and nonprofits,
Submitted by Lisa Hayes (not verified) on September 4, 2013 2:28 am
It is really sad to know the Cliff's Notes version of the indictment is that prosecutors allege that Trombetta created a byzantine network of companies and nonprofits,

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