Shuttered Online Charter Being Sued by State of Ohio

• By Dian Schaffhauser
• 05/22/18

An online charter in Ohio that was closed earlier this year is being sued by the state's auditor on charges of fraud. ECOT, the "electronic classroom of tomorrow," a charter school based in Columbus, was sponsored and suspended by the Educational Service Center of Lake Erie West (ESCLEW) in Toledo at the end of last year.

The school was founded in 2000 and by 2015 had a student enrollment of 14,453, making it the state's largest charter. By 2016, while ECOT had the "single-largest graduating high school class" in the country, it also had the worst failure rate. As the New York Times reported, "for every 100 students who graduate on time, 80 do not."

Now, Ohio State Auditor Dave Yost is pursuing fraud charges against virtual school officials, seeking repayment of $250,000 — just a fraction of what the school generated for founder William Lager and his company, Altair Learning Management. Lager is accused of funneling state money paid for school operations to a number of for-profit companies that he controls. For example, the Times stated, "in the 2014 fiscal year, the last year for which federal tax filings were available, the school paid the companies associated with Mr. Lager nearly $23 million, or about one-fifth of the nearly $115 million in government funds it took in."

In the latest set of charges, according to the auditor's office, ECOT administrators inflated the amount of time it claimed its students were engaged in learning.

ECOT was accused of reporting data on how long student computers were turned on whether or not they were being used for school work, in order to pump up the amount of money it was paid from state coffers. Yost also accused Department of Education officials of not doing enough "to stop it."

Audit staff received a break in the case, which was already under investigation, when an employee of the school contacted the auditor's office, saying he had information showing how the school was manipulating data to increase its funding.

Among the auditors' findings: Nearly all of the data on time ECOT submitted to state education officials to support its claims for funding came from ActivTrak (unaffiliated with Altair Learning), an employee monitoring program that records all activity on a computer, including which websites, documents or programs a user accesses and for how long. ECOT failed to include this data in what it submitted to ODE. What it did report was a spreadsheet detailing an engagement date, start time, end time and duration in seconds. What it didn't provide was detailed information about the program, application or website a student was spending his or her time using.

In one extreme example, the school reported that a particular student had 8,857.89 hours of ActivTrak time during fiscal year 2017. That's nearly 98 hours more than what's possible in a year. (One year is equal to 8,760 hours.)

Yet, with the exception of "a minor variance," the Ohio Department of Education expressed no concerns about ECOT's claims for time usage. Despite a state mandate describing how student learning should be tracked, the department paid the school for 81.5 percent of its request for funding without the necessary documentation.

"With the level of incompetence displayed by both the school and ODE, the regulator, it's amazing that any money went to education whatsoever," Auditor Yost said in a public statement. "The Department of Education did not require proof that the students were engaged in learning, and ECOT was more than happy to oblige in providing watered-down information that the department inexplicably accepted, even though they knew more-detailed information was available."

The $250,000 being sought in recovery by the state auditor is linked to political advertising supporting ECOT that ran in 2017 through a media company paid via a circuitous route by other companies controlled by Altair Learning. A spokesman for the school told a reporter at that time that public funds were being used to fund the advertising, and Yost sent a letter to ECOT demanding that the school "cease using tax dollars" for that purpose.

"We believe those who controlled the purse strings at ECOT and its affiliated businesses were trying to find a way to disguise the fact ECOT was using tax dollars for an improper purpose because we were asking questions," explained Yost. "ECOT's spokesman said they were using tax dollars for the political advertisements and, after a protracted battle to subpoena records, we believe ECOT used tax dollars for the political advertisements by funneling the money through its various companies."

The auditor's office has also referred its audit findings and documentation to the U.S. Attorney and the county prosecutor for potential criminal prosecution.