The founder of an Akron-area charter school company is accused of using thousands of dollars parents paid for student lunches and uniforms and millions more from Ohio and Florida taxpayers to fund home mortgages, plastic surgery, extensive world travel, credit card debt and more.
Criminal charges filed last week in Florida against Marcus May also allege he improperly used private and public funds earmarked for students’ education to expand his charter school empire in Columbus, Akron, Cleveland and Dayton.
Florida State Attorney William “Bill” Eddins brought the charges of racketeering and organized fraud against May, the founder of Newpoint Education Partners and Cambridge Education, a Fairlawn company that manages about 20 charter schools in Cincinnati, Dayton, Columbus, Akron, Youngstown, Canton and Cleveland.
In a prepared statement provided to the Beacon Journal on Friday, Cambridge Executive Director John Stack said: “My co-owners and I asked for and today accepted Mr. May’s resignation as managing member of Cambridge. We are now in discussions to remove him completely from ownership in the company because we feel it’s in the best interest of our schools.
“Despite this distraction, my colleagues at Cambridge and I will continue to focus on our core mission and the students we serve as we have always done.”
Cincinnati businessman Steven Kunkemoeller also was charged in the First Judiciary Circuit, a regional court in Florida. Kunkemoeller is a longtime business partner of May, according to a Beacon Journal/Ohio.com report from December and a multi-state investigation that included help from the Summit County Prosecutor’s Office.
Kunkemoeller was arrested Wednesday in Florida. May’s attorney has reportedly talked with authorities there. Neither man could be reached for comment.
The Florida prosecutor alleges that the men fabricated invoices, embellished enrollment, misappropriated public funds and created an elaborate network of limited liability companies in order to bilk the federal and state governments, as well as parents and students.
In Akron, where Cambridge manages Towpath Trail High School, Middlebury Academy and Colonial Prep Academy, school board members are taking caution but not jumping to conclusions.
“We are keeping a close eye on it and discussing alternatives if they are needed,” said Ron McDaniel, president of Towpath Trail High School. “But we need to be responsible and not make snap decisions. Our schools are running well and run responsibly. We verify things better than the Florida schools did from what I understand.”
The mark up
School and business records obtained by the Beacon Journal and detailed by a forensic accountant working on the case show that May and Kunkemoeller marked up the price of services and supplies provided to the charter schools they managed in Ohio and Florida, sometimes more than doubling the cost of school uniforms, desks, computers, chairs and website design.
Florida investigators questioned the vendors who sold the goods and could find “no apparent business reason” for the mark ups. May and Stack, Cambridge’s executive director, have said that the schools pay more upfront for more flexible financing terms.
Fabricated invoices
Items listed on invoices, from iPads to furniture, could not be found when Florida investigators swept schools for evidence of how public dollar were spent.
May’s company had walked away from some of the Florida schools in the middle of the last school year, leaving the boards that hired his company to piece together incomplete ledgers, according to the Tampa Bay Times.
Enrollment records that set state funding and boost management fees also appear to have been artificially inflated, according to Florida prosecutors. The court filing alleges that these “false and fraudulent” reports netted an estimated $3.7 million in federal grants from the Charter School Program, monies that in a separate matter Ohio had to return after a state education employee, who was later forced to resign, altered grades and fibbed on a federal grant application.
The investigation also alleges “kickbacks” and “rebates” for “above market” services and goods. Money for these transactions came from state dollars deposited into Ohio and Florida accounts that board members allegedly had no control over. The money was extracted by May and his associates before the schools could use it. The forensic accountant in Florida traced the public cash from private bank accounts to personal and business accounts at PNC Bank and FirstMerit (now Huntington).
Alleged misuse
Between 2010 and 2015, $350,000 was collected from students and parents for uniforms, and another $11,000 for school lunches, the Florida investigation found. Beyond Newpoint’s 18 percent management fee, millions more have been collected from inflated or allegedly fictitious invoices, according to court filings.
All told, the Florida Department of Education paid May’s schools $57 million from 2007 to 2016. The Ohio Department of Education pulls about $30 million annually from local school districts and sends it directly to May’s 20 charter schools.
What some of the money — the $1 million that can be accounted for — allegedly has been used for falls well outside the scope of public education.
Property and bank records reviewed by investigators showed May and his wife, Mary May, purchased a Florida home soon after “rebate” payments began. In 2014, two payments of $175,000 were applied to Kunkemoeller’s mortgage and the May’s home equity line of credit. Investigators traced the money to a laundry list of other non-public expenses, including $381,631 for credit cards, $207,415 for Marcus May and his family, $52,388 for a homeowner’s association fees (including swimming pool services), $4,735 taken as cash, personal loans to other people, a $10,000 jet ski from Barney’s Motorcycle Sales in St. Petersburg, $5,000 to the Fairlawn Country Club, $11,000 for plastic surgery and additional money for trips to Amsterdam, the British Virgin Islands, Brussels, Cancun, China, France, Hong Kong, Iceland, India, Japan, Los Cabos, the U.S. Virgin Islands and Italy.
Back in Ohio
State Auditor Dave Yost, who is running for Attorney General in 2018, is aware of the charges but wouldn’t say if there’s an investigation in Ohio.
“Our office is aware of the situation in Florida and it’s been on our radar for six months,” said Dominic Binkley, Yost’s public information officer. “I can say we are monitoring it but I can’t comment that we are taking any actions on it.”
Attorney General Mike Dewine, a 2018 gubernatorial candidate, said it’s Yost’s staff that must sound the alarm. Dewine spokesman Dan Tierney said the Attorney General can only investigate Medicaid and election fraud or organized crime, which he defined as “cross-jurisdictional matters.”
“We’re not aware of anything particulars to these allegations,” said Tierney, adding that local prosecutors who would bring charges against charter schools. His office simply collects mismanaged money discovered by the state auditor.
But James Pollack with Summit County Prosecutor Sherri Bevan Walsh’s office said a rico case like the one filed this week in Florida is within the arena of the Ohio Attorney General, especially since Cambridge is affiliated with companies in three states and has operations all over Ohio, not just in Summit County.
Pollack agreed with Tierney, though, that the appropriate place to begin is at the Auditor of State’s office.
When Binkley checked the Auditor’s records, he found no documented mismanagement of public money at Cambridge schools, which have been in operation in Ohio since about 2010, when charter schools in Cleveland and Akron fired White Hat Management and hired Cambridge.
Doug Livingston can be reached at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow on Twitter: @ABJDoug .