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Decision in White Hat Case Could Force Charter School Companies to Open Books

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Friday, July 26, 2013 at 4:16 PM

A decision from the state Supreme Court this week could clear the way for the public to see how the for-profit companies that operate many charter schools spend their money.

Silver supreme court gavel

Andrew Scott / Flickr

A decision from the state Supreme Court this week could clear the way for the public to see how the for-profit companies that operate many charter schools spend their money.

The Supreme Court declined Wednesday to hear an appeal from White Hat Management, Ohio's largest charter school management company. The company is being sued by 10 Ohio charter schools.

Ohio charter schools are funded with state money and overseen by public boards. The charter school boards who filed suit hired White Hat to operate their schools. The boards paid White Hat 96 percent of the schools' state funding. In return, White Hat ran the schools: recruiting students, hiring teachers, renting space, buying supplies and so on.

In the suit filed in 2010, the school boards claimed White Hat violated its contracts with the boards by failing to use the money to run the schools properly. As part of the lawsuit, the schools wanted to see White Hat's financial records.

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"The schools were floundering," said Karen Hockstad, a lawyer for the schools. "We needed to see why all this money was being given to White Hat to manage the schools but the schools were failing."

White Hat and other for-profit charter school companies have to include general information about their spending in annual audits. That information includes total spending by category such as personnel or supplies. But unlike traditional public schools, for-profit charter school operators aren't required to disclose details about what public money was spent on or to whom it was paid--and most do not.

White Hat has maintained that since it is a private company, it does not need to disclose how that money is spent – not even to members of the schools’ boards.

But a Franklin County judge ruled in December 2012 that the company had to release financial records showing how the schools were run.

White Hat appealed that decision to the state Court of Appeals. The appeals court agreed with the Franklin County judge on the records issue.

Then White Hat asked the state Supreme Court to reconsider the Appeals Court's decision. The Supreme Court declined to hear the case.

So what happens now?

Lawyers for the charter school boards say that White Hat now must release the requested financial records. That would allow the charter schools to pursue their suit against White Hat and could eventually set a precedent forcing other for-profit charter school operators to open their books.

"They're out of excuses for not producing the records," said James Colner, a lawyer for the schools. "Their appellate avenues have run out and they have to produce their financial records to show the school boards exactly how every penny of public money has been spent."

An appeal of another issue in the case is still pending, said Charles Saxbe, a lawyer for White Hat.

"Although... the [Supreme Court] declined to accept this discreet issue in our longstanding case, there is still a pending appeal of another issue and the schools and White Hat have agreed to go their separate ways in the 2013-2014 school year," Saxbe wrote in an email.

The charter school boards that filed the suit no longer contract with White Hat to operate their schools. Nine of the school boards now contract with a different for-profit company; one school is managing itself.

In their place, White Hat opened new schools at the same locations but with different governing boards.

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