Concept Schools charter chain to pay $4.5 million to end federal investigation

Concept Schools Inc., a politically connected charter school chain based in the northwest suburbs, has agreed to pay $4.5 million to end a long-running federal investigation into allegations it improperly steered federally funded technology contracts to “chosen vendors.”

Concept Schools operates four publicly funded but privately run campuses in Chicago and dozens of other charter schools across the Midwest.

The civil settlement, announced by the Justice Department, comes more than six years after federal agents raided the charter operator’s headquarters and schools in Illinois, Indiana and Ohio.

According to the Justice Department, Concept Schools violated the federal False Claims Act “by engaging in non-competitive bidding practices” involving contracts funded with taxpayer dollars from the federal E-rate program, which subsidizes internet access for “needy public schools.”

The not-for-profit charter operator, which denied any wrongdoing, is based in Schaumburg and runs 30 taxpayer-financed schools in Illinois, Wisconsin, Indiana, Michigan, Minnesota and Ohio. All of its revenues come from managing government-funded schools.

Chicago Public Schools officials — who approved and have some oversight of two Concept campuses in the city — are providing about $17 million this year for those schools.

The two other Concept-run schools in Chicago are regulated by the state, which is giving them $22 million this school year.

Those four Chicago schools — Chicago Math and Science Academy, Horizon Science Academy Southwest Chicago, Horizon Science Academy Belmont and Horizon Science Academy McKinley Park — pay a total of $3.8 million a year to Concept in management fees, records show.

The federal investigation became public in June 2014, when agents raided Concept’s headquarters, then in Des Plaines, and the Chicago Math and Science Academy in Rogers Park.

Court records show federal authorities suspected a long-running “scheme to defraud a federal program” in which Concept funneled about $5 million in grant money to insiders and “away from the charter schools,” the Chicago Sun-Times reported in 2016.

The Justice Department said Concept gave its E-rate business to “chosen vendors without a meaningful, fair and open bidding process” and paid those vendors “higher prices than those approved by the [federal government] for equipment with the same functionality.”

Some of the equipment the government paid Concept for was “discovered missing,” the Justice Department said.

Concept Schools officials noted that the settlement didn’t result in criminal charges and blamed their E-rate consultants for being “not compliant with certain aspects of the application process.”

A spokesman said the charter operator is in good financial shape, can pay the settlement without additional assistance from its schools and that the money will come out of “savings.”

Concept also said in a written statement that it had been the subject of unfair allegations by “foreign actors” the company didn’t name.

The charter chain is run by Turkish immigrants and has faced criticism from the Turkish government. In a civil case in federal court in Chicago in August, the Turkish government sought information about Concept and “related individuals and entities.”

Turkey’s government has said Concept and other charter school networks in the United States “were created to siphon public, taxpayer funds away from the education of children in order to finance the international political activities of Fethullah Gulen, an exiled Turkish cleric residing in the state of Pennsylvania.”

Gulen was once a staunch supporter of Turkish leader Recep Tayyip Erdogan. But the two men have become bitter enemies, with Erdogan pressing the United States to extradite Gulen and Erdogan accusing Gulen of orchestrating a failed coup against him in 2016.

According to the court filing in Chicago, Turkey “has initiated an investigation within its own borders to determine whether the proceeds derived from these illegal activities in the United States are being unlawfully transported and transmitted to individuals in Turkey in violation of Turkish criminal law, including international money laundering and fraud.”

Christopher Hotaling, a Chicago lawyer representing Turkey, declined to comment.

Concept has tried to block the Turkish government’s legal efforts, saying it’s not affiliated with Gulen and has been the target of an “attempt to engage in further harassment and persecution of perceived political opponents,” according to court records.

In the past, Concept has played up its ties to Illinois House Speaker Michael Madigan, D-Chicago. In videos posted on social media, Madigan and his adult children Andrew and Nicole were seen visiting the Chicago Math and Science Academy in 2012 and praising the charter network. Andrew Madigan — whose employer has provided insurance for Concept’s Chicago schools — said he was “very impressed” by the students and teachers there.

The speaker and others traveled to Turkey four times between 2009 and 2012 — before Gulen fell out with Erdogan — as guests of a Gulen-led foundation and other Turkish groups in Chicago, according to Madigan’s financial disclosure reports.