UPDATE: State Auditor & Ohio Dept. of Ed Say Judge Does Have Jurisdiction in White Hat Case
Ida Lieszkovszky / StateImpact Ohio
White Hat management is named for the white hat's its founder, David Brennan, is known for wearing.
Last month, Franklin County Common Pleas Court Judge John Bender threw a curve ball in the middle of the White Hat lawsuit when he began to question whether or not he even has jurisdiction to decide the case. His argument was that the Auditor of State already has financial oversight of charter schools, including all of the White Hat schools.
The lawsuit, filed by ten White Hat school boards, asks the private and for-profit White Hat management company to release the financial details of how they run their schools. White Hat has insisted all along that they share as much as is required by state law.
Judge Bender asked the Ohio Department of Education and the State Auditor to file amicus briefs on whether or not they believe he has the right to decide the case. Yesterday, the Department of Education submitted its brief in support of the judge’s jurisdiction.
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The ODE’s argument is that the common pleas court has jurisdiction “over all civil cases exceeding the monetary jurisdiction of the municipal court.” It goes on to conclude, “jurisdiction presumably exists here because this is a civil case involving millions of public dollars. There is no legal or practical basis for deviating from this presumption.”
In a nutshell, the ODE’s argument is the same as the schools, and as Judge Bender’s initial decision: White Hat may be a private company, but it deals with public funds and runs public schools. As such, it is subject to public scrutiny of its spending practices.
This all sounds like another victory for the ten White Hat school boards. But April Hart, a lawyer for the school boards says, via email, “the delays in this case are not so good.”
Hart says she’d prefer the case proceed in Court rather than getting hung up on questions of jurisdiction. “It seems that our focus is on how White Hat can wiggle out of ways to avoid accounting,” she says in an email.
While I am very pleased that ODE supports the fact that the Court should hear our claims, I am unsure why the Court has “second guessed” itself other than to say that the funding issues are very complex and the Judge wants to be absolutely sure he is following the correct legal process.
I would not think that ODE and the Auditor would want to take on the responsibility of unraveling White Hats complicated shell corporations and winding money trail. They have enough work to do monitoring state agencies and the schools. If they were in the business of auditing for-profit companies no government tasks would ever get done!
Hart says she’s unsure what the Auditor will file in its amicus brief, expected to be filed next Monday.
StateImpact Ohio has reached out to White Hat’s lawyer, but we have not received a response.
This hasn’t been a particularly good week for White Hat. Increasing competition from other charter schools has squeezed the state’s largest for-profit charter school operator financially, forcing founder David Brennan to tell his employees they are “in a fight for our lives.”
UPDATE, 12/07/11
Charles R. Saxbe, the lawyer representing White Hat Management, responded via email last night to a request for comment on the progress of this case. He continues to question the timing of the lawsuit, and more specifically why the school boards didn’t bring up their concerns earlier.
My clients ( White Hat organizations ) have maintained that the General Assembly has created a specific statutory scheme for governance of community schools, giving authority over financial matters to the Auditor. In the five years that the management agreements between the schools and the White Hat management companies were in force neither the schools nor the Auditor took exception or challenged the detailed accountings by White Hat which were in fact incorporated into the schools’ annual audits. The schools have had detailed accountings every year, budgets have been prepared every year and the schools never sought to enforce the contract which provided a dispute resolution procedure if differences arose. Only after the contracts were to expire did the schools initiate this dispute in the court. As is pointed out in our brief, the court cannot be expected to assume the duties and responsibilities of the Dept of Education or the Auditor of State which is what the ODE and plaintiffs are seeking.
You can read the Ohio Department of Education’s argument here.
UPDATED (AGAIN), 12/12/11
The Auditor of State submitted their amicus brief, and agreed with the Ohio Department of Education that Judge John Bender does indeed have jurisdiction in this case. That means the case can proceed.
The Auditor also stated that any previous audits of White Hat stand, that they cannot be called into question, and that the Auditor cannot be forced to perform an additional, special audit in this case.
You can read the full amicus brief below, and stay tuned for more updates in this case.
