A charter school disaster — what can go wrong

What we had then were many as-yet unproven allegations, but allegations with sufficient documentation that we felt justified in bringing them to our readers’ attention. Two sources for the story, N. Judge King and Billy Binder, had been ousted from the Chiron Board of Directors for protesting its actions; among the board members ousting them was former Minneapolis mayor Don Fraser. The allegations included such very serious crimes as sexual abuse of two of the school’s female students by a male employee.

In a second two-part story in March of 2005, Peterson reported on the school’s closing for “financial problems” and “enrollment issues.” Now, over two years since the story first appeared, the allegations have taken the form of official state audit findings and felony charges issued by the Hennepin County Attorney’s office.

The findings appear to vindicate the beleaguered King and Binder. The sexual offender has been apprehended and punished, and others finally face prosecution for their crimes. We asked Isaac Peterson to provide a summary of these latest developments to bring some long-overdue closure to this story. His report follows.

The list of now-documented Chiron mismanagement and illegalities reads like a warning of all that can go wrong in the administration of a charter school (including the appointment of a seventh-grade student as board treasurer), and in the failure of the school’s sponsors and state government to provide adequate oversight. We hope that all involved in the growing charter school movement are paying attention and will learn from Chiron’s mistakes.

Allegations of Chiron’s mismanagement now public facts
The 39-page state auditor’s report on Chiron Middle School released August 25, 2006, is a thorough examination of the problems, financial and otherwise, that plagued Chiron Middle School. Some preliminary findings outlined in the opening section of the report are:

• “Chiron’s managing director falsely reported the number of students attending Chiron to the Minnesota Department of Education, resulting in over-payments to Chiron by the Minnesota Department of Education.”

• “The managing director falsely reported to the Minnesota Department of Education how federal grants were expended.”

• “The managing director did not provide the Chiron board with accurate financial information.”

• “The managing director paid herself [on several different occasions] in Chiron funds for unauthorized ‘payroll’ [sic] checks.” [Although the report does not refer to the managing director by name, the director was Kristin Laxton, as identified in our previous articles.]

The introductory section of the report noted instances of the managing director making unauthorized payments to herself as well as to several Chiron employees and board members. The section ended, “We found that adequate accounting and internal control procedures were lacking at Chiron.”

In a section concerning Chiron’s use of federal funds, the report notes that “The managing director was Chiron’s contact person on these grants... We found that Chiron misrepresented to the Minnesota Department of Education how Subgrant 3 funds were used.” Twenty-two instances of improprieties were then listed to support the allegations. [Subgrant 3 was a federal “implementation” grant for $150,000.]

Twelve further allegations regarding the mishandling of federal funds were also listed, elaborating on improper expenditures for “non-instructional supplies” [sic] and “evaluation and modification of Chiron’s curriculum.” One section elaborated on Chiron funds paid by Laxton to herself to pay back a loan she claimed to have made to the school, but for which there was no supporting evidence, as well as improperly reimbursing herself for undocumented expenses.

Laxton also allegedly used Chiron funds to give gifts to friends and family, such as laptop computers, a digital camera, and gift cards.

Laxton was not the only one to come under fire in the report, however; as mentioned above, mysterious payments were issued to several unnamed Chiron employees, the spouse of one employee, and to several Chiron board members.

After concluding that “lack of accounting and internal control procedures” at Chiron were lacking, the report then scrutinized the role played by Chiron’s board members in creating and perpetuating Chiron’s troubles.

One particularly troubling charge is quoted here in full: “Chiron’s Bylaws specified that the board must have a treasurer who shall have custody of all funds, subject to regulations that may be imposed by the board. According to the Chiron board meeting minutes, when Chiron was first formed, a 7th grade student was appointed Chiron’s treasurer. However, the student was removed from the board in July 2003, after being absent from meetings. Thereafter, the minutes do not clearly define who, if anyone, filled the role of treasurer.”

Chiron’s final sponsor, Pillsbury United Communities, also did not escape scrutiny. Pillsbury United stepped in to sponsor Chiron after the Minneapolis School District terminated its own sponsorship as of June 2004.

The auditor’s report noted that although Pillsbury United provided Chiron with its Charter School Policy and Sponsorship Guidelines that allegedly stated that “[o]ne of the primary responsibilities of the sponsor is to provide oversight to the school,” it goes on to note that “...the contract Chiron signed with Pillsbury placed the operation of Chiron with Chiron’s Board of Directors, and provided that Pillsbury had no authority, control, power, or administrative or financial responsibility over Chiron.”

The report further noted that “Unlike the reports the Minneapolis School Districts’ consultant prepared when the Minneapolis School District was Chiron’s sponsor, we found no reports from Pillsbury... It appears that between June 2004 and February 2005, a Pillsbury representative attended two [board] meetings...”

After a detailed examination of Chiron’s misrepresentation of its finances to the Center for Training and Careers, which had agreed to take over Chiron’s management and financial responsibilities, the report concluded with, “This report is being referred to the Minneapolis Police Department, and has been filed with the Hennepin County Attorney to institute such proceedings as the law and public interest require.”

It is not clear what action, if any, the Minneapolis Police Department might take. We were unable to reach Kristin Laxton for comment.

However, on September 1, the Hennepin County Attorney’s office issued to Kristin Laxton a Felony Complaint and Summons to Appear signed by District Court Judge Steven Lange. The document, numbered 06-4012, outlining the financial issues raised by the auditor’s office, contained seven felony charges in three categories:

False Student Counts

Count 1: Theft by swindle, over $35,000

Count 2: Forgery

Count 3: Presenting false claims to public body [Minnesota Department of Education]

False Grant Report

Count 4: Theft by swindle, over $2,500

Count 5: Forgery [falsified final report to Department of Education for Subgrant 3]

Count 6: Presenting false claims to public body [Department of Education]

Theft of Chiron funds

Count 7: Theft by swindle over $2,500 [managing director misappropriating school funds for own use]

In the meantime, the lawsuit filed by Chiron against whistleblowers N. Judge King and Billy Binder was quietly settled for terms the two sides say they are not at liberty to disclose.