An Oklahoma County judge has set an August trial date as the state auditor’s office attempts to access financial records from a private company that manages a virtual charter school.
At a Wednesday hearing, Oklahoma County Judge Natalie Mai reviewed a request by the state chamber to enter the case in defense of the private company that manages Epic charter school. Mai told attorneys for the chamber they should refile their motion addressing “legal issues only.”
The chamber claimed that if Epic’s management company were forced to give up financial records it would set a precedent for any other private companies that do business with the government.
Mai also scheduled a hearing for Aug. 5
Epic’s attorney said state charter school rules allow for the practice of a private management company but Mai disputed it offered clarity in this case.
“I believe the (state) charter school statutes here are silent to this issue,” Mai said.
Tasked by Gov. Kevin Stitt to audit Epic virtual charter school, the office of the State Auditor and Inspector requested documents from Epic Youth Services, LLC, the private company that manages the virtual school.
But the private company has refused to comply with a public records request and subpoena from the state auditor.
The state auditor’s office argues that Epic’s private company is subject to public inspection because it disperses “learning fund” dollars, which are state funds that students can use for educational or extracurricular activities.
“We are seeking the records of how the money was used to fund the actual educational aspects of the school … and that amount of money since 2015 is about $69 million,” Niki Batt, an attorney representing the state auditor, said during Wednesday’s hearing. “If they are indeed public funds then the records should be open for the state to review.”
In just six years, Epic has grown into the state’s third largest school system with more than 32,000 students.
The school is currently under investigation by the Oklahoma State Bureau of Investigations and has been accused of embezzlement by investigators, but has not been charged.
Epic officials have denied any wrongdoing and say they have been transparent with investigators and state officials.
“In the last three years, we have endured over 40 audits and reviews by the various authorizers and regulatory authorities that have the ability to do that,” Epic co-founder Ben Harris said last month. “All of those reviews have been clean.”
However, those audits do not include the private company managed by Harris and David Chaney.
While it is common for public schools to pay private vendors for a variety of services, including for meals, transportation and technology, the criticism of Epic is that its private management company is not just working with a government entity, but rather operating as a government entity.
A common practice
The use of a private management company is becoming a common practice for virtual charter schools.
E-School Virtual Charter Academy uses a private company to manage many of its expenses, including paying its superintendent and assistant superintendent.
The bulk of the small virtual school’s state funding is paid to ESVCA, which is a private LLC.
The school’s superintendent and assistant superintendent were hired as independent consultants at $25 an hour. But while the school’s public board approved the consulting contracts, the school does not believe the contracts fall under the state’s open record laws because the fee is paid by the private company.
When The Frontier made a records request for the contracts, Phil Nichols, a spokesman for the school, said “seeing that their contracts are with the private management company we are not conceding that you are entitled to those records under the (Open Records Act) but are willing to provide them anyway as a gesture of goodwill.”
Nichols declined an interview request but through an email said the private company “handles staff salaries, technology, etc.”
‘It’s not about Epic’
Last month, the State Chamber of Commerce requested permission to file a friend-of-the-court legal brief in support of Epic’s fight against the state audit.
Three months earlier, Chaney, co-owner of the private company that manages the virtual charter school, gave $1,000 to the chamber’s political action committee. Epic is also a paid member of the state chamber.
Chad Warmington, president of the state chamber, said Epic’s dues had no influence in the decision to enter the lawsuit.
“It’s not about Epic, it’s about any business that is doing business with the state,” Warmington told The Frontier.
Warmington is worried that forcing Epic’s private management company to comply with a subpoena would risk the same standards on any company that does business with the state.
If the court ruled in favor of the the state auditor, Warmington said it could mean a construction company that builds a park for a city would then be subject to public review.
But Joey Senat, a media professor at Oklahoma State University and an expert on open record laws, said previous attorney general opinions have said companies that are entrusted with the expenditure of public funds or administering public property are subject to open records.
“So it’s not about building the public park, it’s about operating and maintaining the public park,” said Senat, responding to Warmington’s example.
The state auditor’s office has also pointed to previous attorney general opinions that say private entities that are “supported in part” by public funds are subject to public inspection.
In setting the August trial date, Judge Mai said she was specifically interested in whether Epic charter school placed any restrictions on how the private company could spend the money it received and what the process was for students and their guardians to request the use of learning funds.