Thomas Ultican reviews the story of Inspire Charters, the California operation that ripped off taxpayers and families. Reposted with permission.
Inspire Charter Schools looked like the next district attorney target when Sean McManus and his A3 charter empire were officially charged with “Theft of Public Funds.” The San Diego Union’s Kristen Taketa reported October 9, 2019 that Inspire was subject to a new state audit. She focused on it with several articles over the next year. The only reason Inspire did not lead to sensational stories of greed, unethical practices and fraud was no DA pursued them.
Former Los Angeles Unified teacher, Herbert “Nick” Nichols, created Inspire schools through his corporation, Provenance, originally called Inspire Charter Schools. Adhering to the use-small-school-districts strategy, his first school was authorized by the Acton-Agua Dulce Unified school district (Los Angeles County) July 1, 2014. It grew from 151 students in the 2014-15 school year to 4,321 students in 2018-19 and then closed up shop on June 30, 2019.
Why?
Taketa reported:
“Nichols’ annual salary is $380,000, Inspire’s spokesman Chris Bertelli said. In 2016, Nichols was paid $514,197.”
A deeper look at tax records revealed Nichols compensation was in 2015 ($120,305), 2016 ($514,197), 2017 (missing), 2018 ($614,391) and 2019 ($442,136). During that missing year, Inspire Charter Schools charter management organization (CMO), called Inspire District Office (EIN: 46-4743375), became Provenance (EIN: 82-1672890) and compensations were apparently not reported to the IRS.
Things imploded rapidly. In early October, 2019, seven county education superintendents called for the Fiscal Crisis Management and Assistance Team (FCMAT) to audit all Inspire schools. That followed the California Charter Schools Association rescinding Inspires membership. Nick Nichols took a leave of absence in September and resigned as CEO in October, 2019.
Nichols helped create all of the Inspire schools, effectively controlled by his corporation, Provenance. As CEO, he became sole statutory member of Inspire schools, with the only vote for selecting school boards and changing operations. He selected charter school board members, who then voted to hire Provenance to guide their schools. Only Nichols could sign checks for the various charter schools. It was a nasty and illegal arrangement.
In 2019, Taketa reported:
“The Union-Tribune emailed questions to Inspire about it being the sole statutory member on July 16. Within five days, the Inspire school boards changed their bylaws to remove Inspire Charter Schools as the sole statutory member, according to their board agendas.”
Before these questions, Inspire seemed to be full speed ahead. State records show them opening five home-school or primarily virtual charters on July 1, 2019. All are still in business.
Remnants are Profiting
On November 20, 2023, FCMAT finally submitted their report. Auditors were not able to conclude whether fraud occurred, largely because Inspire’s records were in such poor condition. The report stated:
“On October 11, 2019, Nichols and the CMO signed a separation and release agreement removing Nichols from his duties over the Inspire network. The agreement includes the following:
“Nichols has been on unpaid administrative leave since September 20, 2019.
“Must repay outstanding payroll advances totaling $1,055,834; however, $195,910.89 has been repaid, leaving an outstanding balance of $859,923.11.”
…
“This was the beginning of the Inspire network’s eventual end, with each Inspire Charter School rebranding itself and becoming its own independent charter school under its own nonprofit public benefit corporation as presently established as of this report.”
On September 20, 2020, Granite Mountain Charter School sued Provenance (aka Inspire Charter Schools, aka Inspire District Office) for breach of contract, breach of fiduciary duty and constructive fraud, unfair business practices and more. They claimed Provenance, which controlled their bank account, had moved more than $70,000,000 in and out of it. Granite Mountain believes Provenance purloined between $5 million and $10 million.
Provenance also registered Granite Mountain’s domain name and claimed ownership of their logo. They offered to sell them back for $200,000. The suit, filed in a Los Angeles County Court, seeks the return of the domain and at least $5 million.
In May, 2022, Granite Mountain filed a suit against Yosemite Valley Charter School and Director Laurie Goodman in Fresno County. A Fresno judge ruled since the money involved was related to the LA trial, that case had first jurisdiction. The main point here is one charter school suing another charter school was caused by Provenance commingling money.
Granite Mountain’s charter petition was approved by Lucerne Valley School District January 10, 2019. Nichols was the only person that could use their checking account. In August, Granite Mountain school board voted to remove Nichols from the account and replace him with its treasurer and Provenance Chief Financial Officer, Chris Williams, as check signer.
The law suit claims this did not happen.
All about the Money
Since each school is a non-profit public benefit corporation, they must file IRS 990 tax forms. Granite Mountain Charter School (EIN 83-3660999), Monarch River Academy (EIN 83-4510641) and Yosemite Valley Charter School (EIN 84-2358972) were reviewed.
Two items stood out: they are profitable and salaries are amazing.
These people live in relatively low cost areas of the state. The salaries would be big in San Diego or Los Angeles but are giant in Fresno and surrounding areas where the cost of living is much less.
Though these charters are all mostly virtual schools, by California Law they must hire credentialed teachers. What became clear when interviewing teachers is that quality of education was not the first priority. Keeping parents happy was paramount. Keeping average daily attendance money arriving is the main goal.
Teachers at these organizations have no unions and receive almost no support when parents complain. I heard stories of educators being pushed out when one Christian mom did not like their openness to gay students. Another episode involved a teacher getting complaints for pushing too hard to cover state standards and was fired. The school did not care about meeting state standards. They were only concerned with keeping parents happy.
When asked about changes that have come since the demise of Inspire, one teacher said, “Now we have multiple Inspires with each school being a location where families and friends are being hired into high paying jobs that they are not qualified to hold.” Another described the utter incompetence of an administrator holding professional development training on material the admin did not understand.
Inspire charter schools has transitioned from being a fraudulent entity setup to scam money from the state of California into a hook-up club of admin-heavy schools. In both cases, the education product has been horrible with terrible academic results.
This is more evidence for shutting down cyber charter schools. County education agencies provide cyber services and maintain education integrity. The incentives for this type of school are all wrong for quality education provided by private business.
