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FORT WAYNE, Ind. – On Feb. 8, 2008, a curious thing happened.
According to Texas Secretary of State records, Imagine Schools of Central Texas Non-Profit LLC of Georgetown, Texas, was established. That in itself was no surprise, because Imagine charter schools have been popping up all over the country.
What was curious was who owns the corporation and its twin, Imagine Schools of North Texas Non-Profit LLC of McKinney, Texas. The sole member of both limited-liability companies is Imagine-Fort Wayne Charter Schools Inc.
And the Texas entities get their tax-exempt status because each is a wholly owned subsidiary of the Fort Wayne company.
Imagine-Fort Wayne Charter Schools Inc. is the non-profit corporation that runs Imagine MASTer Academy, a charter school at 2000 N. Wells St. in Fort Wayne. Imagine MASTer Academy is a public school whose $2.9 million cost to operate last year was paid for with state taxes.
So why does a Fort Wayne charter school own two charter school corporations in Texas? It’s a question most board members here could not or would not answer, even though in January 2008 they secretly signed documents creating and governing the schools there and, as recently as August, made drastic changes to one of their entities in Texas.
All of these actions were done in secret: According to board meeting minutes provided by the Imagine-Fort Wayne Charter School board, Fort Wayne members never publicly discussed or voted to create the Texas schools, amend the agreements that govern the relationship between the schools or appoint board members to their Southern franchise.
They merely signed resolutions they thought exempted them from the Indiana Open Door Law, although their own bylaws say they are subject to its provisions. The state’s open meetings law does not allow public bodies to make decisions outside public meetings.
Asked about the Texas entities, most board members refused to speak about it. Some referred questions to Imagine Schools Inc., the for-profit management company based in Arlington, Va., hired by the charter schools to handle day-to-day operations. Others didn’t seem to know what they had signed.
"It sounds sneaky and sleazy," said Trent Stamp, who served as the founding president of non-profit watchdog Charity Navigator for seven years.
"Any time something doesn’t pass the basic smell test for a layperson, there’s a problem there."
Not only does the Fort Wayne charter school own the two school corporations there, but the "company agreement" – the contract between the Texas and Fort Wayne corporations that explains how their relationship will work – also gives the Fort Wayne entity the sole power to appoint and remove the Texas board members.
And when board members at the McKinney school objected to the amount of control Imagine’s board would have over their school, they were pushed off the board and new members were appointed, former McKinney board president Don Newsome said.
Newsome’s replacement: Don Willis, a local businessman who founded the three Imagine charter schools in Fort Wayne and is president of the Imagine-Fort Wayne Charter School board.
"I was approached by that board to come talk to them about how boards should be run in the business world," Willis said. "I said I don’t think you can be successful if the board is going to assume the mantel of staffing the school and determining curriculum. … That’s not our role."
What role the Imagine boards should play and do play is what’s in question. Internal Revenue Service regulations say tax-exempt organizations such as this one must have independent, local control.
Imagine Schools President Dennis Bakke said in a 2008 memo that local school boards exist only to give them advice and consent where legally required. And when it comes to using the Fort Wayne school’s tax-exempt status to expand Imagine’s charter schools into Texas, it appears that all the decisions were made by Imagine Schools Inc.
Like the contracts with the schools in Fort Wayne, the Texas contracts put Imagine Schools Inc. – not the local board – in charge of all major decisions. Where the Fort Wayne contracts give Imagine 12 percent of the schools’ revenue, the Texas contracts give Imagine everything left over after expenses.
Willis said the Fort Wayne school does not own the Texas corporations, and he said it will "slip out" of the picture as soon as the Texas schools get their own tax-exempt status.
He also said that – despite an operating agreement and incorporation papers giving appointment power only to the Fort Wayne school – it was parents in Texas who appointed him to the board there.
Documents that Willis released Friday show Fort Wayne board members signed a resolution Aug. 19 amending the company agreement to allow an out-of-state board member to serve on the North Texas board and appointing Willis to serve on it until 2011.
Other documents released Friday show Fort Wayne board members signed a resolution removing Imagine-Fort Wayne Charter School Inc. as the sole member of the Central Texas school corporation by Jan. 31, 2010, and of the North Texas corporation by July 31, 2010.
The proposed schools in Texas have been granted charters but have not yet been allowed to open. The Georgetown corporation has split with Imagine Schools Inc., and it is unclear what is happening with the board there. Board members refused to take phone calls from The Journal Gazette and did not return messages.
But at the McKinney charter, the power held by Imagine Schools Inc. – and the view the company holds of local board members – is laid bare.
As part of the charter application process, the Texas Education Agency had objected to provisions in the McKinney school’s contract that gave Imagine Schools too much power over the school and not enough to the local board.
"The current terms and conditions of the contract usurp the authority of the Charter Holder Board and the CEO/Superintendent of the school," Texas officials wrote on the application. "It appears not to be drafted in the best interests of the Texas charter school."
Local board members passed those concerns on to Imagine executives, plus a few of their own – like the amount of money Imagine was to be paid under the proposed contract, Newsome said.
So the local board members were asked to resign, Newsome said, and they were replaced with new members more amenable to the Imagine way, including Willis.
Fort Wayne board member Joe Jordan, executive director of the Boys & Girls Clubs of Fort Wayne, doesn’t remember voting on lending non-profit status to the Texas corporations.
"I don’t recall partaking in that unless it happened at a meeting that I didn’t attend," Jordan said.
Jordan remembered signing a resolution but couldn’t remember whether it was in a public meeting. No resolution was provided to The Journal Gazette when the Fort Wayne board turned over its meeting minutes, and no meeting minutes note any discussion of opening schools in Texas. No vote on the issue was ever recorded.
"I don’t know much about the schools," Jordan said. "All I know was we were allowing them to use our (non-profit) status to apply for schools and then eventually they would get their own."
Jordan said he never voted on appointing new board members at the McKinney school corporation and wasn’t aware that Willis was named the board chairman there. Jordan was among the seven board members who signed the Aug. 19 resolution taking those actions.
Board members Trish Fox and Dacia Michael, Willis’ daughter, would not discuss the Texas entities. Fox referred all questions to Imagine Schools Inc. Michael acknowledged she knows about the Texas corporations but wouldn’t answer questions about them.
Bill Brown, who sits on all three boards in Fort Wayne and is also an Allen County commissioner, said all he knows is that "we signed some charter paperwork."
He was unaware the school here owned the proposed schools in Texas, did not know the board members here have the only authority to appoint and remove Texas board members, and did not know Willis had been appointed to the McKinney board. He, too, signed the Aug. 19 resolutions.
When asked who appointed Willis if it wasn’t the board in Fort Wayne, Brown said he would have to start asking some questions.
"(Willis) is chair of our board, I know that," Brown said. "I’m going to have to check on that."
He first said he was certain the Texas schools had been discussed and voted on in a public meeting, but he later said he was unsure and would have to check. He said he was told Imagine Schools Inc. owned the Texas entities and the Fort Wayne board just needed to approve those corporations’ contract with Imagine.
Brown also said he was unsure how approving measures by signature outside of public meetings could comply with Indiana’s Open Door Law. Brown said he couldn’t remember who approached the board with the idea of opening Imagine charter schools in Texas.
"It sounds like I need to do a little bit of research," Brown said. "I assumed all these things were vetted by legal counsel and proper protocol was followed."
Board member Stan Robinson could not be reached for comment after three phone calls. Board member Vince Robinson did not return two calls and an e-mail seeking comment.
When asked Oct. 20 why the board never voted on the Texas schools, Willis said they might have been approved by resolution. The board had previously approved changing its bylaws and setting up a special-education co-op by signing a resolution outside its public meetings. There was no indication board members had any say in the Texas matter until Willis released the resolutions with their signatures Friday.
The resolutions say the board members waive the notice of the time, place and purpose of the meeting and vote in favor of the resolution.
Indiana Public Access Counselor Andrew Kossack said there is no provision in the state’s open meetings law that would allow such action.
State law requires all public bodies to do all their work in public at a public meeting. Because there was no meeting, Kossack said, it appears there was no vote. Under state law, those actions could be challenged in court and reversed.
"Under Indiana law, they’re not present (at a meeting), so they can’t vote," Kossack said. "No one was present, so no one voted."
When officials at Ball State University, the authorizing agency for most Indiana charter schools, became aware of the Fort Wayne board’s attempt to lend its tax-exempt status to the Texas school corporations, attorneys were notified, said Larry Gabbert, director of the university’s Office of Charter Schools.
"We didn’t want it to go that way. Apparently there was nothing illegal. We did tell the Imagine people that we wanted to make sure they were two separate non-profit organizations," Gabbert said.
"In an ideal world, my feeling is that each entity should have its own (non-profit) status because if something happened in … Texas, then there might have been some implications at the school in Fort Wayne."
Gabbert said he was told by Imagine officials "some time ago" that their attorney was working with Ball State’s attorney to separate the Fort Wayne board from the Texas schools. Gabbert said Monday he contacted Ball State’s attorney after being interviewed by The Journal Gazette last month to check on the status of that claim but didn’t know where it stood.
Newsome, the former McKinney, Texas, board president and a former public school superintendent, said he was approached in 2007 by a group of people known as the "core founders" about serving on a charter school board in McKinney. Over the next two years, Newsome would find himself in a battle with that group after questioning the practices of Imagine Schools Inc.
Newsome was mainly concerned with signing an indefinite contract with Imagine after similar concerns were raised by an attorney with the Texas Education Agency.
"There were some things that just didn’t look right to me," Newsome said. "I could see where TEA was raising a question."
Imagine wanted the board to sign a contract that employed it as the management company for as long as the school existed. Newsome and other board members wanted to draft a contract that would be reviewed every couple of years, to allow for some accountability.
Even though those concerns were raised with members of the school’s founding group, Newsome said they didn’t care and just wanted to get a charter. The group eventually asked for Newsome’s resignation, saying he showed a lack of support for Imagine.
Newsome said he would comply but wanted his resignation letter, which would outline his concerns with Imagine, sent to all the parents who wanted to send their children to the school and posted on the school’s Web site. The group said no.
Newsome said he then received an e-mail that said if he didn’t resign by noon the next day, the founding group would begin the process of removing him from the board, enlisting the help of Willis and the Fort Wayne board.
After the founding group threatened to have a news conference announcing Newsome’s resignation in a negative light, Newsome said, he complied and jointly resigned with three other members of the five-person board. The board now has three members, including Willis.
Among the new board’s first orders of business was to approve the contract with Imagine Schools Inc.
"I see nothing functionally wrong with the contract," Willis said.
Newsome said the question was one of control.
"My concern all along was who’s going to run it and who’s going to have the final say-so," Newsome said. "Well, in my opinion, the organization of it needs to be the local people. … A board needs to have the final say-so, not some organization in Virginia or wherever they are."
