Ohio Sues to Recoup Money From Defunct E-School

COLUMBUS, Ohio (CN) - Ohio filed a lawsuit Tuesday seeking to hold the founder of a shuttered online charter school personally liable for corruption, claiming he made millions of dollars by contracting with two businesses he owned for school services.

Ohio Attorney General Mike DeWine’s complaint in the Common Pleas Court of Franklin County alleges that Bill Lager, the founder of Electronic Classroom of Tomorrow, or ECOT, was CEO of both Altair Learning Management, the school’s operator and management company, and IQ Innovations, which supplied materials for the school’s curriculum.

"My office has been in court for over two years working to hold ECOT accountable. I will continue to be aggressive in seeking to recover public funds from ECOT, its affiliates, and Mr. Lager that they improperly received," DeWine said in a prepared statement.

The school operated for nearly two decades and offered classes through a web-based platform before closing its doors in January.

The lawsuit claims Lager created contracts with Altair Learning and IQ Innovations in violation of the Ohio Corrupt Practices Act and his fiduciary duties.

ECOT’s IRS reports covering the period between July 1, 2000, and June 30, 2017, show that it paid Altair more than $76.6 million under management and licensing agreements. Under its IQ Innovations contracts, ECOT paid the firm at least $122.5 million between May 1, 2009, and June 30, 2017.

DeWine notes that the school likely paid more in the period after June 30, 2017.

“Other ECOT officials stood by, or actively participated, as ECOT overbilled the public on a massive scale to keep the money flowing,” the complaint states.

The lawsuit also names as defendants former ECOT Superintendent Rick Teeters; former treasurer Michelle Smith; Christopher Meister, vice president of accounting; and directors Ann Barnes and Regina Lukich.

DeWine’s lawsuit is the latest salvo in a drawn-out battle to force ECOT to pay back $80 million in public funding.

ECOT is fighting repayment on multiple legal fronts, and earlier this month lost its appeal at the Ohio Supreme Court.  The state yanked funding based on the duration of time students spent on instruction and so-called “learning opportunities.” ECOT argued unsuccessfully that student enrollment is a more reliable measure of participation.

Ohio says the school inflated its enrollment numbers and sought to recover $60 million for the 2015-2016 school year and $20 million for the 2016-2017 school year.

The Ohio Department of Education has recovered about $18 million so far with nearly $62 million remaining, in addition to costs and interest, according to the lawsuit.

DeWine’s spokesman Dan Tierney said that the state’s recovery would go beyond the remainder of public funds to recover profits Lager received from the contracts with Altair and IQ.

Lager’s attorney Karl Schneider did not immediately respond Tuesday to a request for comment.

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