Eye on Education

Judge Says White Hat Must Open Its Books, UPDATE: White Hat Filing Motion for Reconsideration

The state’s largest for-profit charter school operator, White Hat Management, is being asked by a judge to open its financial books — again.

Ida Lieszkovszky / StateImpact Ohio

White Hat management is named for the white hats its founder, David Brennan, is known for wearing.

In October of 2010, the school boards of ten White Hat managed charters sued the for-profit company. The schools have to turn over to White Hat 96 percent of the state funds they receive, and they want to see how the company is spending that money.

Franklin County Common Pleas Court Judge John Bender filed a decision in the fall that said since charter schools operate on public funds, they are essentially “public officials” and accountable as such. Then, in November, Judge Bender questioned if he even had the right to rule over the case. Following briefs submitted by White Hat, the school boards, the Ohio Department of Education and the State Auditor, Judge Bender decided right before Christmas that he does indeed have jurisdiction. He also reiterated his previous decision to ask White Hat to open their books.

Attorney Karen Hockstad represents the school boards. She says the ruling is good news for them, but one of the biggest questions now is who owns the buildings these schools are in.

She says White Hat and the school boards are likely to part ways when their current contract extensions are up at the end of June.

More specifically: “We anticipate that White Hat is applying for new charters to run different schools in the same locations where the plaintiff schools currently operate,” Hockstad says. ”We have some critical timing issues with regard to getting some decisions from the court on the rights of the parties.”

Critical timing because the school boards must notify White Hat by March if they do not want to negotiate another contract.

The school boards have to submit a revised list of exactly what information they want by January 6. White Hat then has until January 13 to file any objections.

UPDATE: Thursday, December 29, 2011 at 11:00 a.m.

White Hat’s lawyer, Richard Saxbe, says he was surprised by Judge Bender’s latest decision. In fact, Saxbe says, “surprise is an understatement.”

Saxbe’s surprise stems from what he says is “an obvious misunderstanding” by the court that White Hat is responsible for filing the financial documents with the Ohio Department of Education on behalf of the schools.

He says “the contract and the law specifically require the schools to maintain and file this information with the auditor and the contract specifically provides that this is not a role of White Hat.”

What’s more, Saxbe says the court seems to believe that White Hat is the schools’ fiscal agent, when he says in fact the schools have a fiscal agent of their own.

Saxbe says he plans to file a motion for reconsideration by the end of the week. It’s unclear how that will affect Judge Bender’s request of the school boards to submit an updated list of what information they want to see from White Hat, and White Hat’s subsequent option to file any objections by mid January.

“In order to go forward everybody needs to be on the same page factually and while White Hat and the parties may be (on the same page) the court needs to be as well,” Saxbe says.

As for concerns around property ownership, Saxbe says that is an issue that may well arise in the coming months, since the contract between the schools and White Hat is up, and the extension is expiring soon as well. Saxbe says he does not know exactly what White Hat plans to do with the buildings these schools are in, some of which are actually leased from a third party.

You can read the new decision here:


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