Ohio sues ECOT founder to recover state funds

In this file photo, hundreds of supporters of Ohio's largest online charter school, the Electronic Classroom of Tomorrow or ECOT, participate in a May, 2017, rally outside the Statehouse in Columbus.

COLUMBUS — The state on Tuesday filed suit to personally go after the founder and other principal players of the now-shuttered Electronic Classroom of Tomorrow for $62 million still owed the state.

Filed by Attorney General Mike DeWine in Franklin County Common Pleas Court, the suit names ECOT founder William Lager, Lager-affiliated companies that provided management and curriculum services for the school, the school’s insurance company, and five former ECOT business officers.

Mr. Lager, intricately involved in the state’s largest online school since 2000, yielded to temptation in the form of tens of millions of dollars from Ohio taxpayers, the suit alleges.

“William Lager, ECOT’s founder and public face, also founded companies that made millions of dollars doing business with that public school,” it reads. “Other ECOT officials stood by, or actively participated, as ECOT overbilled the public on a massive scale to keep the money flowing.

“Real harm resulted from that — every dollar of state funding ECOT received from overbilling came from school districts in this state,” it reads.

The total overbillings for two school years amounted to $79.6 million, of which $17.6 million has been recovered to date by the Department of Education. The school had a bank account of less than $2.3 million as of February, a few weeks after the school closed its doors at the mid-point of the school year.

The suit argues that Mr. Lager, the businesses, and the officers of the school were public officials directly involved in the collection of public money and, therefore, are personally on the hook for unauthorized disbursements of that money.

The Department of Education ultimately determined ECOT could not back up its enrollment numbers it had been supplying for funding purposes to the state with data demonstrating students had spent enough time logged into the system to qualify as full-time students.

Multiple courts have backed up the state’s move, including most recently the Ohio Supreme Court.

The school owes $60.4 million from the 2015-16 school year, 55.4 percent of what the school received that year, and $19.3 million for 2016-17, 18 percent of that year’s per-pupil aid.

“Those funds are now gone, having been disbursed without authority of law,” the suit states.

The school closed after its Toledo sponsor, the Educational Service Center of Lake Erie, pulled its support.

“My office has been in court for over two years working to hold ECOT accountable,” said Mr. DeWine, a Republican candidate for governor. “I will continue to be aggressive in seeking to recover public funds from ECOT, its affiliates, and Mr. Lager that they improperly received.”

A spokesman for the campaign of Mr. DeWine’s opponent, Richard Cordray, referred to a statement from the state Democratic party when asked for comment.

That statement, in part, characterized Mr. DeWine as scrambling “to separate himself from the massive GOP scandal by filing charges against the defunct e-school's leaders.”

"While Democrats have been traveling the state demanding accountability for ECOT and for-profit charter schools, Republican officials in Ohio took ECOT donations and looked the other way until literally weeks before a critical election," party Chairman David Pepper said in the statement.

Other Democrats have criticized the attorney general as being too slow in holding ECOT accountable.

“Because public pressure and bad headlines have backed Mike DeWine into the smallest political corner, he has only now felt it important to recover millions of stolen taxpayer dollars,” said state Rep. Teresa Fedor (D., Toledo), ranking Democratic on the House Education and Career Readiness Committee.

“When Ohio officials were fraudulently changing letter grades to get ECOT more taxpayer dollars for kids who never attended school, Mike DeWine did nothing and let the trail go cold,” she said. “But now, the books have already been cooked, the fraudsters have skipped town, and there’s likely next to nothing of taxpayers’ hard-earned money to claw back from the defunct and shuttered online charter.”

In addition to Mr. Lager, with addresses in Columbus, Senecaville, Ohio, and Key West, Fla., the suit names as defendants:

● Altair Learning Management, Inc., the Lager-affiliated school management and operating company.

● IQ Innovations LLC, the Lager-affiliated curriculum company.

● Rick Teeters, of Daytona Beach, Fla., ECOT’s superintendent.

● Michelle Smith, of Bristolville, Ohio, school treasurer.

● Christopher Meister, of Worthington, school vice president of accounting.

● Ann Barnes, of Grove City, director of the school’s Education Management Information System.

● Regina Lukich, of Upper Arlington, ECOT’s director of federal programs.

Contact Jim Provance at jprovance@theblade.com or 614-221-0496.