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Ohio Supreme Court: Are Millions In Public Charter School Dollars Private?

Sep 24, 2014

White Hat Management was founded by former Ohio State University trustee David Brennan

The Ohio Supreme Court will now decide whether a private management company that was paid tens of millions of dollars in tax money to run charter schools is -- at least to some extent -- a public entity. 

M.L. Schultze of member station WKSU in Kent has more on the first day of arguments over how much White Hat Management should have to account for its academic and financial performance.

Ohio’s law says charter schools must be overseen by nonprofit entities, but can be managed by for-profit companies. And over five years, White Hat collected $100 million in state tax money to run 10 such schools in Akron, Cleveland and other Ohio cities. 

The lawyer for the schools, Karen Hockstad, told the high court justices that all was far from well. 
“When the governing boards of these schools questioned why the schools were failing – and the majority of them were within three years’ time, they were rebuffed. White Hat said, ‘It’s none of your business, schools. We’re not going to tell you how we spent the money.’” 
White Hat’s lawyer, David Paragus differed in the description of the tone and some of the details. But he argued that White Hat would have been perfectly within its rights to say just that. 
“The money ceased being public money once it was paid as reasonable compensation for services rendered.” 
In White Hat’s mind, the case is a simple contract dispute – not a wide-ranging question of whether private businesses that make big money from—and carry out—government functions are essentially public entities. 
So when the schools ended their deal with White Hat, Paragus says it made sense for White Hat to claim ownership of most of the equipment and supplies at the school. 
It’s a point on which Justice Paul Pfeifer pressed Paragus. 
“What is in dispute is the property we purchased with our own money to deliver the educational model. 
“Give me an example.” 
“Desks, furniture, computer. 
And you say ‘our own money,’ but it was the state’s money that the schools paid to White Hat.” 
Paragus acknowledged: “That’s correct. And that’s what the court of appeals found. ” 
The justices weren’t letting the school’s attorney, Hockstad, off easy either. Chief Justice Maureen O’Connor noted that each of the schools has a school board. And O’Connor pushed Hockstad on the question of their responsibility. 
“The school board was aware of the failing grades their school was getting. And that didn’t cause them to examine what was going on with White Hat?” 
“It did; there were questions raised all along the way. 
“However, there’s a statute not at issue in this case that was passed a couple years after the contract was signed that says if a governing authority chooses to terminate its management company or even just let a contract expire …, the management company can appeal to the sponsor and have the board members removed and then the management company can put in their own board members so that it’s a more friendly relationship.” 
The case is being watched by charter school advocates and foes throughout Ohio and nationally. But it’s also being watched by other kinds of contractors who make a living from public money but argue for their rights as private businesses. 
The schools’ attorney, Karen Hockstad, maintains they aren’t performing an essential – in Ohio’s case constitutionally mandated public function—teaching kids. 
White Hat operates more than 30 schools in Ohio.