Tuesday, September 23, 2014


from Politico Morning Ed | http://politi.co/1B3VccL

23 Sept 2014  ::  WHEN PUBLIC FUNDS FUEL PRIVATE GAIN: The Ohio Supreme Court today will hear an intriguing case involving White Hat charter management, which operates 33 schools in three states. At issue: Whether the for-profit company owns the furniture, books, computers and other property it bought with public funds for use in its public charter schools. The tangled tale starts in 2005, when several charter boards hired White Hat to run virtually every aspect of their schools. The schools passed 95 percent of their public funding - tens of millions of dollars - on to the company. But when the schools performed dismally year after year, board members demanded information on how White Hat was spending the money. White Hat refused to open its books. So the schools sued, demanding accountability and asserting a legal right to all school property purchased by White Hat.

- White Hat won the most recent round. The Franklin County Court of Appeals last year ruled the company owned most of the property, except for a few items titled in the schools' names. It cited precedent in explaining that "once public funds are paid to a private entity, [the funds] lose their public character." The court also rejected the schools' argument that it would be unfair for White Hat to keep the property on top of the profits built into its management fees. "There is no case law we are aware of that caps a private entity's level of income based on the sole nebulous reason of it being 'unfair,'" the court wrote. Read the decision: http://bit.ly/1mBpXEN

- The plaintiffs argue that White Hat should have given the schools title to the property in the first place. A ruling in favor of White Hat "threatens the public accountability that ordinarily accompanies the use of public funds," they write, and also 'threatens to insulate management companies such as White Hat from any degree of oversight or public scrutiny." A win for White Hat could also make it extremely tough for future charter school boards to fire a low-performing management company, as they would risk losing all the property they'd need to keep operating the school under new management. The plaintiffs' brief: http://bit.ly/1sUOyB9

- The case also has political implications. Ohio Attorney General Mike DeWine backed the schools in the early rounds of litigation but has declined to file an amicus brief before the Supreme Court. His Democratic opponent, David Pepper, has tried to make that a campaign issue, suggesting DeWine backed off because White Hat founder David Brennan is a big-time Republican donor. More on that angle: http://bit.ly/ZC4WiS

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