WATCHDOGS: Targeted firms still get tax money after charter raids

Days after federal agents swept into the headquarters of Concept Schools and a charter school it operates in Rogers Park in June 2014, top Chicago Public Schools officials took notice of the raids on the taxpayer-funded charter operator but decided to steer clear.

Jack Elsey — the CPS official in charge of overseeing publicly financed, privately run charter schools like those run by Concept — emailed the district’s top lawyer at the time, James Bebley, and copied then-schools CEO Barbara Byrd-Bennett about the federal investigation.

“James, any guidance on how we should react?” Elsey wrote, attaching a link to news coverage of the raids at Concept’s main offices in Des Plaines and its Chicago Math and Science Academy, at 7212 N. Clark. “My inclination is to see how this plays out.”

“At this point, I don’t know what we would be reacting to,” Bebley replied. “There is really nothing to say except that we will monitor events as they play out.”

“Good, just wanted to confirm my ‘gut’ on this one,” Elsey wrote back.

Byrd-Bennett responded, “Jack, Jack … Jack,” and closed her email with a backwards smiley face emoticon — (: — as she often punctuated more light-hearted email exchanges with other CPS officials. Elsey replied with a correctly executed smiley face: “:)”.

Byrd-Bennett quit as Mayor Rahm Emanuel’s top schools official last year amid an unrelated bribery scandal, pleaded guilty to federal corruption charges and awaits sentencing.

More than two years since the FBI raids brought the still-ongoing federal investigation involving Concept to light, the charter operator has continued to do business with contractors identified in court documents as allegedly having been involved in defrauding a government grant program, records obtained by the Chicago Sun-Times show.

The charter-management organization — which runs four taxpayer-funded charter schools in Chicago and dozens more across the Midwest — has paid more than $519,000 since the raids to companies federal authorities said were involved in the corruption probe and their subsidiaries, according to documents the newspaper obtained from individual Concept schools.

There has been no correspondence between CPS and Concept Schools — which gets millions of taxpayer dollars a year to operate its Chicago schools — regarding the federal probe, according to CPS and the charter operator.

A CPS spokeswoman declined to comment Friday, citing the ongoing investigation.

Similarly, a Concept Schools spokesman said: “Because [the investigation] is ongoing, we are limited in what we can discuss on the matter. Concept Schools’ commitment to excellence extends to every classroom, student and faculty member. It also extends to the management and operations throughout Concept’s network.”

Concept operates about 30 schools in Illinois and six other states, with four Chicago campuses that have a total of 2,220 students. They include the Chicago Math and Science Academy, known as CMSA, which opened in Rogers Park in 2004, and the 2-year-old Horizon Science Academy–Southwest Chicago Charter School, located at 5401 S. Western, both chartered by the Chicago Board of Education.

CPS rejected plans proposed by Concept to open two more schools in Chicago because of questions about students’ performance at CMSA. But the charter operator successfully appealed to the Illinois State Charter School Commission, which, in 2012, overrode the Board of Ed, authorizing them to open. As a result, the state commission, rather than CPS, oversees those two schools: Concept’s Horizon Science Academy–Belmont, 5035 W. North, and Horizon Science Academy–McKinley Park, 2845 W. Pershing.

A week after the 2014 raids, the charter commission’s deputy director spoke with Sedat Duman, Concept’s president, according to internal commission records.

“They ask that everyone withhold judgment until the conclusion of the investigation,” the commission’s deputy director at the time, Karen Washington, told Jeanne Nowaczewski, the state agency’s executive director.

At the commission’s board meeting the following month, Nowaczewski said the two schools overseen by the state hadn’t been raided, nor had they benefitted from the federal grant program that CMSA and other Concept schools were involved in, which is the focus of the investigation.

Nowaczewski also told her board that the commission’s lawyer had “reached out to the FBI for more information without success,” according to minutes of that July 2014 meeting.

On Friday, Hosanna Mahaley-Jones, the commission’s current executive director, said, “once findings and/or a decision is rendered in the case, the commission will proceed accordingly.”

Concept records show the two schools it operates in Chicago that are overseen by the state commission have paid a total of more than $533,000 in fees to the agency, which is funded by the schools it regulates.

After the FBI raids, all four of the chain’s schools in Chicago continued to do business with companies named in the federal search warrants that were served at Concept’s main offices, CMSA and other schools run by Concept in Peoria, Indianapolis and Ohio, records show.

The investigation has centered on Concept’s involvement in the federal “E-Rate” program, which funds the expansion of high technology in schools serving low-income families.

According to a sworn statement from Geoffrey Wood, a U.S. Department of Education investigator, the feds suspected that Concept and some of its schools “engaged in a scheme to defraud a federal program” for at least seven years. Court records show Wood told a judge that Concept violated government bidding rules by steering more than $5 million in E-Rate funds to companies with ties to the charter group.

“By giving work to related vendors, Concept was able to direct large portions of E-Rate program money away from the charter schools . . . and enrich those particular vendors,” Wood wrote.

Since the raids, Concept’s schools here have paid more than $102,000 to Advanced Solutions for Education, run by Ozgur Balsoy, a former Concept Schools executive and E-Rate program consultant. Authorities raided the firm’s Schaumburg offices as well as the Mount Prospect home of Balsoy, who has denied any wrongdoing.

According to court records, the biggest beneficiary of the alleged E-Rate fraud by Concept was Core Group Inc. of Mount Prospect, which got more than $2.8 million in federal funding through the program. The FBI raids included the offices of Core and the Elk Grove Village home of its president, Ertugrul Gurbuz.

Since the raids, Concept’s four Chicago schools have paid an additional $416,867.19 to Core and its subsidiaries, according to a Sun-Times review of financial records from the charter campuses.

Concept was founded in 1999 by Turkish immigrant educators with ties to Fethullah Gulen, a Muslim cleric who lives in Pennsylvania and has been accused by the Turkish government of conspiring to overthrow the government.

Despite the investigation, which federal officials say is continuing, Concept applied for and was approved for a grant of nearly $340,000 from the U.S. Department of Education last year, earmarked for Horizon Science Academy-Southwest Chicago.

CPS initially balked at releasing records involving the federal investigation of Concept. After the Sun-Times appealed to the Illinois attorney general’s office, which mediates public-records disputes, Chicago school officials turned over 363 pages from 2014. They said there are no more recent records regarding the investigation.

Soon after the raids, Concept canceled plans for a new school in Chatham that the Board of Ed had approved to open in the fall of 2014. CPS records show officials were instructed to tell parents the late-summer decision — which sent many families scurrying to find new schools in time for the start of classes — had nothing to do with the FBI investigation.

Still, CPS officials appear to have been leery of how their treatment of Concept might be viewed. When CPS decided in November 2014 not to extend a food-services contract with Concept’s schools in the city, top Byrd-Bennett aide Tim Cawley told her that going to the Board of Ed to get the deal approved would be “inviting yet more criticism of our relationship with Horizon Concept (and their FBI investigation),” records show.