A Wellington charter school has been ordered to recoup more than $37,000 in taxpayer dollars that it steered to the school’s founder in the guise of a loan repayment, an extraordinary financial arrangement exposed by a Palm Beach Post investigation last summer.
Saying that Eagle Arts Academy’s financial dealings violated the school’s charter, Palm Beach County Schools Superintendent Robert Avossa this week ordered the school to recover the money from Gregory James Blount, the school’s founder and executive director.
Failing to do so by the end of the school year, Avossa warned, could lead the school board to shut the school down.
The finding is the latest blow for the K-8 school, which enrolls about 780 students. The school’s state grade fell to a D this summer, and its principal, Ann Simone, abruptly resigned during the first week of school last month.
Avossa’s order is a result of a long-stalled school district investigation launched after The Post revealed last year that Eagle Arts had paid more than $175,000 to three companies owned by Blount, who founded the school, served stints as its chairman, then became its executive director earlier this year.
Among the transactions uncovered by The Post: more than $37,000 being steered to Blount’s companies as a loan “repayment,” even though Blount had never loaned money to the school. The school also paid Blount an additional $9,600 in “interest,” records show.
Instead of a traditional loan, The Post found that the school’s board of directors approved the payments to compensate Blount for money he said he had spent while putting together an application to open the school.
But several problems with the arrangement emerged. For one, the amount of money that Blount asked to be compensated was far more than what experts say it normally costs to assemble a charter school application.
Also, Blount provided little documentation of how he had spent the money he claimed, and the records he did provide included expenses as well as payoffs of other loans, raising questions about whether he had double-billed the school.
The decision to pay Blount was approved without debate in May 2015 by just two members of the school’s board of directors, board minutes showed.
Immediately after approving the payout, the board’s then-chairman William “Patch” Paczkowski, a business professor at Palm Beach State College, resigned from the board and nominated Blount to replace him.
Blount assumed the chairmanship just moments after winning the payout. Charter school rules ban board members from profiting from the school, but the payments to Blount began to flow during the next year, including the extra $9,623 interest payment.
Charter school experts said that even if Blount’s expenses had been fully documented and vetted, it would still be inappropriate for the school to use taxpayer dollars to cover them since the expenses occurred years before the school’s charter was approved.
School district officials this week agreed, concluding that the school charter prohibited any compensation for start-up costs preceding the school’s opening in 2014.
“Many of the costs that were reimbursed were for charges connected to preparing the application and not the start-up of (Eagle Arts),” Avossa wrote. “The allowable start-up costs are only those costs incurred after (Eagle Arts’) application was approved by the school board.”
In a rebuttal letter released by the school Thursday, Eagle Arts pushed back against the school district’s findings, saying that Blount expended the money out of his own pocket to start up the school.
In the letter, school chairman Tim Quinn argued that Blount “used personal funds to pay for these necessary startup costs with the expectation of being reimbursed once the school had opened.”
The school district pointed out, though, that the school could provide no written evidence of any loan agreement before the board of directors’ May 2015 vote.
“The alleged loan by (Blount’s businesses) was never formalized by an agreement and (Eagle Arts) has yet to produce any written documentation evidencing the loan’s existence,” Avossa wrote.
The school district also ordered the school to recoup any interest payments made to Blount, meaning that he could be required to pay back more than $46,000 in all.
The district uncovered other financial and management problems at the school.
Proper financial documentation was missing for more than $1 million of the school’s spending, Avossa wrote, and Eagle Arts “failed to meet generally accepted standards of fiscal management.”
The school district also concluded that the school’s former vice chairman, C. Ron Allen, steered $25,000 to Toni Marshall, a public relations specialist who was Allen’s business partner at the time of the transaction.
Reached Thursday, Allen disputed the finding, saying that he and Marshall did not become business partners until after Marshall’s work for the school ended.
The school district also concluded that the school’s former management company, iSchools, bought more than $467,000 in school supplies from a supply vendor “owned and operated by the same parties.”
Avossa wrote that the two “related-party transactions” demonstrated the board of directors’ “lack of oversight,” which “failed to prevent their occurrence.”
“This lack of oversight must not be repeated,” Avossa wrote.
The school board’s inspector general is still finalizing its own investigation of the school.
What The Post Reported
The founder of Eagle Arts Academy, Gregory James Blount, turned profits on insider deals such as selling student uniforms from a foundation in name only and steering a contract worth more than $125,000 to his own company. The school later directed an additional $48,000 in public money to another of his companies for what it called repayment of a “start-up loan.” See The Post’s investigation at mypalm beachpost.com/eaglearts