Audit questions California charter school chain's use of bond funds

LOS ANGELES — An audit into a corporation that runs four charter schools in northern California raises questions about the use of $68 million in tax-exempt revenue bonds and the handling of public funds.

The state’s Fiscal Crisis & Management Fiscal Assistance Team conducted the audit of Tri-Valley Learning Corp. at the request of Alameda County Superintendent of Schools Karen Monroe.

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The audit found that TVLC’s management may have “diverted, commingled and/or misappropriated funds with various private entities, including tax-exempt bonds totaling $67 million and contributed to an environment of significantly deficient internal controls.”

It also said that TVLC management failed to disclose numerous conflicts of interest.

“The lack of internal controls coupled with financing schemes designed to divert millions of dollars by Batchelor and others through relationships fostered between board members, close associates and other professionals with his nonprofit public and private companies created an environment that made it possible for the essential elements of fraud to occur,” according to the audit.

Given the extent of the findings, Monroe said in a statement, she has passed the audit and all supporting materials onto the Alameda County District Attorney’s office for review.

No charges, related to any financial wrong-doings, have been filed, said Teresa Drenick, a spokeswoman in the DA’s office.

The audit mentions former TVLC chief executive officer Bill Batchelor by name. It raised questions about whether the charter schools' bank accounts and Batchelor’s personal bank accounts became comingled.
Batchelor stepped down as TVLC CEO in late 2015, but runs a private charter school co-located on property with one of the TVLC schools.

Nathan Ballard, a spokesman for Batchelor, said his client is “innocent of any wrongdoing whatsoever and the audit is riddled with inaccuracies and draws vague conclusions.”

Before becoming embroiled in the controversy surrounding TVLC, Batchelor had no black marks on his reputation, Ballard said.

“He is a very well-regarded businessman, who is widely respected,” Ballard said.

They plan to review the 74-page audit and come up with a more comprehensive response tackling the specifics of the report in coming weeks, he said.

Monroe said she provided a copy of the report to the Livermore Valley Joint Unified School District, where two of the schools are located, the state schools superintendent, state controller, state treasurer, and U.S. bankruptcy trustee “to inform that fraud, misappropriation of assets, or other illegal activities may have occurred, so that each agency may act within their respective authority.”

TVLC. a 501(c)(3) nonprofit public-benefit corporation, has been in bankruptcy since November. The operator of four charters schools has defaulted on its bonds.

The Alameda COE conducted an investigation into school district finances before asking FCMAT to conduct the audit to determine if there was “reasonable suspicion that such illegal fiscal practices may have indeed occurred.”

It issued $27.5 million through the California School Finance Authority, a state treasurer conduit issuer, in 2012 and sold an additional $15 million in Qualified School Construction Bonds through the American Recovery and Reinvestment Act of 2009. It also issued $25.5 million through another conduit issuer, the California Statewide Communities Development Authority, in 2015.

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