LOS ANGELES — A northern California charter school operator wants to convert its bankruptcy from reorganization to liquidation.
The conversion to Chapter 7 liquidation comes eight months after Tri-Valley Learning Corp. entered Chapter 11 bankruptcy on Nov. 8.
The organization closed its two Stockton, Calif. schools, Acacia Elementary and Acacia Middle, in March, then struggled to keep its remaining two schools — Livermore Valley Charter School and Livermore Valley Charter Preparatory School — open through the end of the school year.
Tri-Valley Learning asked U.S. Bankruptcy Judge Charles Novak to convert to liquidation because “the debtor has no ability or realistic intention to reorganize and confirm any plan of reorganization,” according to papers filed Thursday in the U.S Bankruptcy Court’s northern California district.
A hearing is scheduled for July 6.
Despite issuing $68 million in tax-exempt bonds to construct school buildings, the charter school company “believes that the furniture and fixtures located at the debtor’s Livermore campus likely represent the only assets that are not subject to liens or avoidable liens,” according to the filing.
The state’s Fiscal Crisis & Management Fiscal Assistance Team released an audit June 8 that raised questions about use of bond funds and public money by the charter school company. The audit was conducted at the request of Alameda County Superintendent of Schools Karen Monroe.
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.”
The audit found that the lack of internal controls coupled with financing schemes designed to divert millions of dollars by former school officials “created an environment that made it possible for the essential elements of fraud to occur.”
While the charter school “might hold claims against third parties that could, if successful, realize value for the benefit of the estate — there are not sufficient assets to fund an investigation into or prosecute such claims,” its chief executive officer, Lynn Lysko, said in court documents.
The charter school company, a 501(c)(3) nonprofit public-benefit corporation, issued $27.5 million in tax-exempt bonds through the California School Finance Authority in 2012 and sold an additional $15 million in Qualified School Construction Bonds.
It also issued $25.5 million through another conduit issuer, the California Statewide Communities Development Authority, in 2015.
The charter school has defaulted on its bonds. It made an unscheduled draw of more than $324,000 on debt reserves in October on the 2012 bonds and then missed its June 1 debt service payments, according to filings on the Municipal Securities Rulemaking Board’s EMMA web site.