OUSD Brief to ACOE Re AIMS Sans Exhibits (5/7/2013)

7/30/2019 OUSD Brief to ACOE Re AIMS Sans Exhibits (5/7/2013)

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May 7, 2013

VIA PERSONAL DELIVERY

Sheila Jordan, SuperintendentAlameda County Office of Education313 W. Winton AvenueHayward, CA 94544

Alameda County Board of Educationc/o Teresa Kapellas, Executive Director,

Administrative ServicesAlameda County Office of Education313 W. Winton Avenue, Room 372Hayward, CA 94544

Re: American Indian Model Schools: Appeal of Oakland Unified School Districts Revocationof ChartersPublic Hearing Date: May 14, 2013

I. INTRODUCTION

A. OUSD Board Decision to Revoke

On March 20, 2013, the Oakland Unified School District (OUSD or District) Board voted to

revoke the charters of the American Indian Model Schools (AIMS). The OUSD Board reached this

decision after making two key sets of factual findings. First, the District found that AIMS Board and

Founder had violated the law and AIMS charters, committed fiscal mismanagement, and failed to

follow Generally Accepted Accounting Principles (GAAP). (Record for Appeal, Exh. O, OUSD 7216-7218;

Exh. G, OUSD 6251-6268.)1 Second, the District found that AIMS had failed to adopt sufficient

remedies in response to the Districts Notice of Violation or make good faith efforts to take the remedial

steps identified by the District in the Notice of Violation. (Record for Appeal, Exh. O, OUSD 7219

7223.)

1 Exhibit 1 to this Brief is an Index to the Record of Appeal submitted by OUSD.


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Alameda County Office of EducationMay 7, 2013Page 2 of 22

Chief among the Districts reasons for the revocation was the fact that AIMS had violated

conflict of interest laws through contracts with its Founder, Ben Chavis (the Founder). As a result of

these interested-party transactions, the Founder personally profited in a sum exceeding $3.8 million.

(Record for Appeal, Exh. O, OUSD 7217-7218.) Despite the fact that the Founder wrote checks from

AIMS bank accounts to companies that he owned (Record for Appeal, Exh. E, OUSD 1964, 1966; Exh.

G, OUSD 6285-6292), the AIMS Board refused to recognize or acknowledge that these payments and

contracts were improper and violated the law. (Record for Appeal, Exh. P, OUSD 7397 7398; Exh. E,

Binder 3 Chart No. 3.) Moreover, the AIMS Board refused to institute any meaningful institutional

reform to prevent recurrence of these types of violations. (Record for Appeal, Exh. O, OUSD 7218-

7222.) In short, the AIMS Board offered no meaningful reassurance that it had either the capacity or

the willingness to prevent future violations of law or financial improprieties.

B. Post-Revocation Events at AIMS: Employee Terminations, Turnovers, and Instability

Post-revocation events at AIMS demonstrate that AIMS still has not made progress in remedying

the violations that led to the revocation. At the AIMS Board meeting on April 12, 2013, the AIMS Board

terminated Interim Director Sylvester Hodges and Site Administrator Jennifer Avelinoboth of whom

had advocated for reforms identified by the District. (Record for Appeal, Exh. S, OUSD 7414.) Toni

Cook, AIMS Board President, who had also advocated for these reforms, resigned in protest. (Record

for Appeal, Exh. T, OUSD 7419-7420.) This pattern of retaliation against those who speak out is not

new. In the past 12 months alone, seven leaders have left AIMS or been removed/terminated after

advocating for reform and/or sharing dissenting views:

Kaytena Beckford, Site Administrator

Michael Rodriguez, Board Member2

Chris Stember, Board Member

2 At July 17, 2012 meeting, the AIMS Board voted to remove members Stember and Rodriguez, who had advocated for a

third-party investigation into the findings in the FCMAT Report. (Record for Appeal, Exh. O, OUSD 7360-7361.)


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Jason Chu, Site Administrator

Jennifer Avelino, Site Administrator

Sylvester Hodges, Interim Director

Toni Cook, Board Member and Board President

In addition, a number of established charter school consultants, such as charter school

attorneys Paul Minney and Jennifer McQuarrie, and Charter Schools Development Center Executive

Director and Founder Eric Premack, were retained by AIMS for a brief period lasting no longer than a

month. The continued instability and turnover in leadership at AIMS validate the Districts decision to

revoke the charters.3

This brief is intended to provide a high-level summary of the substantial evidence on which the

revocation is based, as well as a roadmap of the revocation proceedings before the OUSD Board. The

substantial evidence supporting revocation is complex and extensive and is not discussed in full detail

in this brief. Rather, this brief will summarize the primary grounds for revocation and will incorporate

by reference the underlying Notice of Violation (Record for Appeal, Exh. D), Notice of Intent to Revoke

(Record for Appeal, Exh. G.), and the OUSD Board Resolution revoking the charters (Record for Appeal,

Exh. O).4

3 Jennifer McQuarrie was retained by the AIMS Board on June 19, 2012. Ms. McQuarrie subsequently advised the District

Charter Office that she voluntarily terminated the day after AIMS Board Directors Rodriguez and Stember were removed from

the Board.

Paul Minney was retained by AIMS from September 7, 2012 to October 8, 2012. The records provided to the District indicate

that Mr. Minney conducted a governance workshop for the AIMS Board at its 8/31/12 meeting and that the contract to retain

him was approved at the September 7, 2012 AIMS Board meeting. Mr. Minney also attended a meeting on September 20,

2012 with the Districts Charter Office and legal counsel for the District, John Yeh, to discuss the NOV. On October 8, 2012, in

response to an e-mail inquiry from legal counsel for the District, Mr. Minney advised the District that he no longer represented

AIMS.4 Note that the OUSD Board Resolution is attached as Exhibit 2 to this brief. The Notice of Violation and Notice of Intent to

Revoke are exhibits to the Resolution and are therefore included in Exhibit 2 as well.


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II. FACTUAL AND PROCEDURAL BACKGROUND

A. AIMS Charters

AIMS currently holds three charters granted by OUSD:

1. American Indian Public High School, Renewal Term July 1, 2011 July 1, 2016 (CaliforniaDepartment of Education Charter No. 01-61259-0111856);

2. American Indian Public Charter School, Grades 6-8, Renewal Term July 1, 2011 July 1,2016 (California Department of Education Charter No. 01-61259-6113807);

3. American Indian Public Charter School II, Grades K-8, Renewal Term July 1, 2012 June 30,2017 (California Department of Education Charter No. 01-61259-0114363).

B. June 12, 2012, the Fiscal Crisis Management Assistance Team (FCMAT) Issued an

Extraordinary Audit of the American Indian Model Charter Schools

In June 2012, FCMAT issued an Extraordinary Audit of the American Indian Model Charter

Schools, detailing findings of conflict of interest violations, fiscal mismanagement, and improper use of

public funds. The County Superintendent referred the FCMAT report to the Alameda County District

Attorney, and as a result of the FCMAT findings, effective July 1, 2012, the California Department of

Education terminated After School Education and Safety Program (ASES) funding to AIMS and the

California Finance Authority found AIMS in default of the Charter School Facilities Grant Agreements.

C. September, 2012 Notice of Violation

In September, 2012, the District issued a Notice of Violation to AIMS under Education Code

Section 47607(d). (Record for Appeal, Exh. D, OUSD 65-124.) The Notice of Violation, which had been

approved by the OUSD Board on September 27, 2012, was based on numerous violations, including but

not limited to the following:

1. Allowing the Founder to personally profit in the sum of approximately $3.8 million in publicfunds through contracts between AIMS and companies owned by him and/or his spouse inviolation of conflict of interest laws; and

2. Failing to maintain financial or operational control over AIMS operations, which resulted inthe following: inappropriate use of AIMS credit cards; forgery of an attendance record;non-compliance with teacher credentialing requirements; and violation of the After SchoolEducation and Safety (ASES) Program grant terms;


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3. Failing to follow Generally Accepted Accounting Principles (GAAP), including failing tomaintain documentation of fiscal transactions and failing to disclose losses, such as thosefrom an improper real estate escrow transaction;

4. Failing to make an adequate record of the AIMS Board's actions, including failing to maintainboard minutes for all meetings and failing to conform board agendas and minutes to therequirements of the Brown Act;

5. Failing to follow its own rules of governance, including rules regarding selection of newboard members.

The Notice of Violation stated that [i]n its written response, AIMS will be expected to address

the violations addressed herein and identify remedial steps in the areas raised in the Notice of

Violation, including but not limited to the following:

1. Management of the AIMS organization to ensure compliance with applicable legalrequirements, including enrollment and teacher credentials;

2. Changes to [the] structure and operation of [the] AIMS governing board to ensure greaterfiscal and operational control;

3. Identification of responsible agent for AIMS fiscal operations;

4. Institution of conflict of interest enforcement procedures;

5. Appropriate separation of Founder and spouse from all aspects of AIMS operations.(Record for Appeal, Exh. D, OUSD 118-119.)

The District provided AIMS 60 days to remedy the violations and to provide a written response.

D. Remedy Period and AIMS Response

AIMS submitted its written response (November Response) on November 26, 2012. (Record

for Appeal, Exh. E.) AIMS response included the following primary contentions (among others):

The contracts at issue did not violate any laws because the AIMS Board knew that theFounder had a financial interest in the contracts at the time that they approved them(Record for Appeal, Exh. E, Binder 3 Chart);

The AIMS Board maintained control over the charter schools fiscal affairs because thecredit card expenses were appropriate and related to school business and theorganization properly documented its transactions (id.).


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E. January 24, 2013 Notice of Intent to Revoke

The District conducted an extensive review of AIMS November Response and found substantial

evidence that the charter school ha[d] failed to refute [the violations] to the chartering authority's

satisfaction, or remedy a violation identified in the Notice of Violation. (Record for Appeal, Exh. G,

OUSD 6242; Cal. Admin. Code Tit. 5, 11968.5.2(d).) The primary grounds for this conclusion

included the following:

1. AIMS did not acknowledge that its Founder, Ben Chavis, committed conflict of interestviolations, nor did AIMS take steps to address those conflicts of interests.

2. AIMS failed to institute acceptable institutional reforms to safeguard against futureviolations.

3. AIMS failed to institute acceptable changes in its financial and operational procedures toensure that future fiscal mismanagement does not occur.

4. AIMS failed to engage sufficient institutional expertise, such as a charter managementorganization, to implement the necessary institutional and organizational overhaul of itsoperations.

5. AIMS failed to address in an acceptable manner any means or process for defining the roleof the Founder or achieving the necessary separation of him from the organization.(Record for Appeal, Exh. G, OUSD 6242.)

At its January 23, 2013 meeting, the OUSD Board approved the issuance of a Notice of Intent

to Revoke, which was served on AIMS the following day. (Record for Appeal, Exh. G, OUSD 6241 -

6292.)

F. February 27, 2013 Public Hearing and AIMS Supplemental Response

As required by Education Code section 47607(e), the District held a public hearing on whether

evidence exist[ed] to revoke the charter and heard comments from many individuals, including then-

Interim Director Sylvester Hodges and then-Board President Toni Cook. (Record for Appeal, Exh. K.)

AIMS also submitted a supplemental response (February Supplemental Response) to the

Notice of Violation on February 27, 2013, consisting of a list of 48 steps that the charter school claimed

constituted remedies to the violations identified in the Notice of Violation and accompanying exhibits.


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(Record for Appeal, Exh. L.) Although the 60-day remedy period ended on November 28, 2012, the

District allowed AIMS to submit its February Supplemental Response and evaluated the 48 measures

identified by AIMS as part of its assessment of whether substantial evidence existed to revoke the

charters.

G. March 20, 2013 Revocation Decision

Upon considering AIMS November Response and the February Supplemental Response, OUSD

Superintendent Anthony Smith recommended to the OUSD Board that it revoke the AIMS charter

because of substantial evidence that AIMS violated the law and its charter, committed fiscal

mismanagement, failed to follow generally accepted accounting principles, and failed to remedy the

violations listed in the Notice of Violation. (Record for Appeal, Exh. M.) The OUSD Board voted to

revoke the charters at its March 20, 2013 meeting. The factual findings supporting the OUSD Boards

revocation are contained in its Resolution No. 1213-0124 Revoking the Charter of the American Indian

Model Schools (Resolution). (Record for Appeal, Exh. O.) The OUSD Board made the revocation

effective June 30, 2013, to allow current students to complete the school year.

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III. SUMMARY OF SUBSTANTIAL EVIDENCE SUPPORTING REVOCATION

This section provides an executive summary of the evidence supporting the OUSD Boards

decision to revoke the AIMS charters. The evidence supporting revocation is discussed in more detail

in the Notice of Violation (Record for Appeal, Exh. D), Notice of Intent to Revoke (Record for Appeal,

5 The District worked hard to ensure that ifthe AIMS charters were revoked the AIMS students would have a multitude of

school placement options. To that end, OUSD provided several opportunities for AIMS families to find alternative school

placements for their children. Beginning in February, OUSD held three school enrollment fairs. The fairs allowed AIMS

parents to explore OUSD schools as well as the many charter schools located within the OUSD border. Many charter schools

attended these enrollment opportunities at the request of OUSD and have since enrolled many AIMS students. OUSD reached

out to AIMS parents through a variety of ways. Notices were placed in local Chinese language newspapers, fliers were

created in several languages and sent directly to the students homes, AIMS schools were given fliers to pass out to their

students, and meetings were held with community leaders.


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Exh. G.), and the Resolution to Revoke (Record for Appeal, Exh. O), all of which are incorporated

herein by reference.

A. Scope of County Board's Review

Under Education Code Section 47607(f)(2), the County Board's review of the revocation

decision is limited to determining whether the revocation was based on substantial evidence. The

County Board can only reverse the revocation if the county board of education determines that the

findings made by the chartering authority. . .are not supported by substantial evidence. (Ed. Code

Section 47607(f)(2).)

B. Substantial Evidence Standard

Evidence is substantial if any reasonable trier of fact could have considered it reasonable,

credible, and of solid value. Substantial evidence is relevant evidence that a reasonable mind might

accept as adequate to support a conclusion. Kearl v. Board of Medical Quality Assurance, 189

Cal.App.3d 1040 (1986); Estate of Teed, 112 Cal.App.2d 638, 644, 247 P.2d 54 (1952); Polanski v.

Super, Ct 180 Cal.App.4th 507, 537 (2009). A conclusion may be supported by substantial evidence

even if reasonable people could disagree as to the conclusion. Kearl v. Board of Medical Quality

Assurance, 189 Cal.App.3d 1040 (1986); Estate of Teed, 112 Cal.App.2d 638, 644, 247 P.2d 54 (1952);

Polanski v. Super, Ct 180 Cal.App.4th 507, 537 (2009).

C. Substantial Evidence Supports OUSDs Findings That AIMS Committed Violations ofLaw and Charter, Engaged in Fiscal Mismanagement, and Failed to Follow GenerallyAccepted Accounting Principles

1. Violations of Law and the AIMS Charters

AIMS violated conflict of interest laws, including the Political Reform Act (Government Code

Sections 87100 et seq.) and Government Code Sections 1090 et seq., by entering into contracts with its

Founder and his spouse, all of which resulted in direct payments from AIMS to the Founders


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companies and/or his wifes companies. The Founder wrote and signed checks from AIMS bank

accounts to his own companies. (Record for Appeal, Exh. E, 1964, 1966; Exh. G, OUSD 6285-6292.)

The contracts between AIMS and its Founder included the following:

Leases at all three school sites between AIMS and companies in which the Founder hadan ownership interest.

Construction contracts between AIMS and companies in which the Founder held anownership interest (i.e., ADS, Lumbee).

A contract to pay OASES, a company in which the Founder had an ownership interest, a15 percent oversight fee to administer the After School Education and Safety Program(ASES) Grant.

Contracts for fiscal and administrative services between AIMS and A & A BusinessSolutions LLC and AAFS, companies in which the Founders spouse had a financialinterest. (Under community property laws, the Founder therefore had a financialinterest in the property too.)

The contracts between AIMS and its Founder violated the Political Reform Act. The Political

Reform Act prohibits public officialsincluding officers and employeesfrom entering into any contract

in which they hold a financial interest. The regulations implementing the Political Reform Act contain

an eight-step test to determine whether a conflict of interest exists. As shown below, all eight steps

apply to the Founders contracts with AIMS. The contracts, therefore, violated the Political Reform Act.


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Step Criteria Application1: Is a public official involved? Yes: The Founder was director

of AIMS schools, and a board

member briefly.6

2: Is the public official making, participating in making, orinfluencing or attempting to influence a governmentaldecision?

Yes: The Founder wrote checksfrom AIMS bank accounts to hisown companies.7

3: Does the public official have an economic interestinvolved in the decision?

Yes: AIMS funds were paiddirectly to the Founderscompanies.

4: Are the public officials economic interests directly orindirectly involved in the decision?

Yes: The Founder directlybenefited from contracts.

5: What materiality standard applies? Yes: The Founders financialinterest was material.

6: Are public officials economic interests materially affectedby the decision? Are they important enough to trigger aconflict as defined by the Political Reform Act?

Yes. The Founder was directlypaid through the contracts.

7: Does the Public Generally exception apply? No. The Founder and his spousewere the sole parties receivingpayment from AIMS under thesecontracts.

8: Is the public officials participation legally required? No. No steps were taken torecuse or abstain. In fact, theFounder wrote checks to himself.

The AIMS charters expressly state that the Board will comply with the Political Reform Act.

Because the contracts violated the Political Reform Act, the contracts violated AIMS charters as well.

Government Code Section 1090 prohibits public officialsincluding officers and employees

from entering into any contract in which they hold a financial interest. Government Code Section 1090

applies even where a public official or employee does not participate in the execution of the questioned

contract. (People v. Sobel, 40 Cal.App.3d 1046, 1052 (1974).) Under Government Code Section 1090,

the AIMS Board was prohibited from entering any of the contracts with the Founders companies.

6

SeeGovernment Code Section 82048 (including employees under the Political Reform Act); Wilson v. State Board of

Education(1999) 75 Cal.App.4th 1125 (charter school officials are public officials); FPPC Advice Letter 98-234 (charter school

officials subject to Political Reform Act).)7 Record for Appeal, Exh. E, 1964, 1966; Exh. G, OUSD 6285-6292.


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Through the contracts described above, the Founder and/or his spouse personally profited in

the sum of approximately $3.8 million:

Beneficiary Nature of Services Dates Amount

ADS/Lumbee (Ben Chavis,Owner)

Lease, Construction 2007-2008 $ 348,500

American Delivery Systems(Ben Chavis, Owner)

Construction 7/1/09-12/31/11 $ 38,000

AAFS (Marsha Amador,Owner)

Financial Services 7/1/09-12/31/11 $ 325,833

Lumbee Holdings(Ben Chavis, Owner)

Rent and Storage 7/1/09-Present $1,338,065

American Delivery Systems

(Ben Chavis, Owner)

Rent and Storage 7/1/09-Present $1,109,495

SAIL Summer MathematicsProgram

7/1/09-12/31/11 $ 458,000

OASES ASES Grant Administration 7/1/10-12/31/11 $ 105,000

Lumbee Holdings (BenChavis, Owner)

Unrecovered EscrowDeposit

1/1/09 9/30/09 $ 30,000

Ben Chavis Wages 7/1/09 12/31/11 $ 130,265

Ben Chavis Unsupported Credit CardCharges, including AZcharter formation

7/1/09 12/31/11 $ 25,748

Marsha Amador Financial Services 7/1/09 12/31/11 $ 30,000

TOTAL $3,939,336

AIMS violated other provisions of law as well, including but not limited to the prohibition against

charging tuition set forth in Education Code Section 47605(d)(1) by assessing a financial penalty on

students for absences from the SAIL program.

2. AIMS Committed Fiscal Mismanagement and Violated GAAP

AIMS committed fiscal mismanagement and violated GAAP, including failing to implement

policies to prevent credit card misuse; losing a $30,000 escrow deposit in a failed real estate

transaction with Lumbee Holdings, the Founders company; and failing to prevent an employees

forgery of a teachers attendance report.


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D. Substantial Evidence Supports OUSDs Findings that AIMS Failed to RemedyViolations in the Notice of Violation

Substantial evidence supports the findings of the OUSD Board that AIMS Board failed to remedy

the violations set forth in the Notice of Violation:

1. AIMS failed to institute acceptable institutional reforms to safeguard against future conflictof interest violations.

a. AIMS did not unconditionally acknowledge the conflict of interest violations,8 and itsnew conflict of interest policy did not sufficiently safeguard against future conflict ofinterest violations.

b. AIMS did not institute an adequate system of checks and balances to prevent future

conflicts, and did not implement any permanent or ongoing training regardingconflicts, or implement a sufficient procedure for clearing conflicts in advance oftransactions.

2. AIMS Board failed to engage sufficient institutional expertise, such as a chartermanagement organization.

a. In the February Supplemental Response, AIMS stated that it requested and receiveda contract with the Charter School Management Corporation (CSMC) for

comprehensive back-office services and charter vision access. According to CSMC,AIMS, however, never entered into a contract with CSMC, and, in fact, CSMC told theDistrict that it would not have entered into an agreement with AIMS unless AIMS

had made significant governance changes.

b. In contrast, in its November Response, AIMS denied the need for a CharterManagement Organization, citing the cost. (Binder 3.) Therefore, not only was

AIMS February Supplemental Response misleading, it contradicted the statement inthe November Response that AIMS declined to retain a CMO for financial reasons.

3. AIMSBoard failed to institute acceptable changes in its financial and operational proceduresto ensure that future fiscal mismanagement did not occur.

a. In its February Supplemental Response, AIMS stated that it had a contract with Mr.Patrick Martin to ensure productive fiscal management of AIM Schools. (Record for

Appeal, Exh. L, OUSD 6316.) The representation by AIMS that Mr. Martin had over10 years of experience in financial procedures with charter schools (id.) was

8 The AIMS Board has never acknowledged that the contracts violated conflict of interest laws. At the February 27, 2013

Public Hearing, then-Interim Director, Sylvester Hodges, appeared to make a qualified admission that the contracts constituted

a conflict of interest. (Record for Appeal, Exh. K.) However, as is described above, Mr. Hodges was later terminated.

(Record for Appeal, Exh. S, 7414). In its appeal document, AIMS once again denies that the contracts were illegal. (Record

for Appeal, Exh. P, OUSD 7397 7398.)


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exaggerated as his rsum demonstrated that he had little more than two years ofexperience in charter school finance.

b. Other steps taken by AIMS to institute changes to its financial and operationalprocedures were also insufficient. AIMS has retained new personnel in the area offiscal operations but the new staff members had little experience in the public sector.

AIMS retained a new auditor, Vavrinek, Trine & Day LLP, but the auditor isresponsible for annual financial audits, not everyday financial operations.

4. AIMSBoard failed to institute structural or permanent changes to the governing board.

a. None of the measures identified by AIMS constituted the significant institutionalreform required to remedy the violations leading to revocation. The AIMS Board hadundergone significant turnover, and Board members who shared dissenting viewshave been removed. The AIMS Board was unable to sustain a relationship with any

of the attorneys and consultants that it retained. (Record for Appeal, Exh. O, Exh. 7thereto, OUSD 7359-7361.)

b. Moreover, as is set forth below, AIMS submitted misleading information to theDistrict during the revocation proceedings.

5. AIMSBoard failed to adequately ensure a proper separation between the Founder and theorganization.

a. The AIMS Board has not indicated any intent to file lawsuits against the Founderand/or his spouse or to take any other steps to disgorge any of the funds arisingfrom the interested contracts, as was urged in the Districts January 24, 2013 Notice

of Intent to Revoke.

b. AIMS claimed that it sent a letter dated June 23, 2012 to the Founder addressing theissue of separation. As is noted immediately below, this letter is contradicted byinformation in AIMS Board meeting minutes, which casts doubt on its authenticity aswell as post revocation activities by the Founder, which are discussed below, thatdemonstrate the Founders continuing day-to-day involvement at AIMS.

6. AIMSBoard submitted potentially misleading documentation in response to the Notice ofViolation.

a. AIMS submitted a letter dated June 23, 2012 from the AIMS School Board

President that purported to notify the Founder and his spouse that they must ceaseinteracting with the AIMS community. (Record for Appeal, Exh. O, Exh. 4 thereto,OUSD 7349.) The District could not verify the authenticity of this letter, and thedocumentation in the record suggests that the letter is not authentic:

i. Minutes from the June 24, 2012 Board meetingwhich took place one day afterthe letter was purportedly sentshow that no letter had yet been sent regardingthe separation of the Founder. (Record for Appeal, Exh. O, Exh. 5 thereto, OUSD7350 - 7353.)


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ii. The letters authenticity is further undermined by the fact that AIMS did notsubmit the letter in its November 26, 2012 response to the Notice of Violation,even though the date of the letter preceded the November Response by five

months.

b. AIMS submitted a written statement signed by three former AIMS Board membersclaiming that the AIMS Board approved the contracts with the Founder s company(ADS) with full knowledge of his financial interest. This claim is not supported by

AIMS own board agendas and minutes, which show that the contracts were noteven considered during those meetings. Moreover, not all of the individuals signingthe statement were in attendance at those meetings. (SeeRecord for Appeal, Exh.G, Exh. Rev-A thereto, OUSD 6277 - 6283.)

c. AIMS submitted a memorandum dated July 15, 2011 that purported to reprimandformer AIMS director Sophath Mey for being out of contact with the school during an

out-of-state trip, and to reassign her to the position of Site Administrator. AIMSsubmitted the letter to demonstrate that it had remedied the misuse of the schoolscredit card. In fact, Mr. Mey never received the July 15, 2011 memorandum. (SeeRecord for Appeal, Exh. O, Exh. 8 thereto, OUSD 7364 - 7369.)

d. AIMS claimed that the Founder sent a November 18, 2010 memorandum to Meystating that OASES would not charge AIMS the 15 percent administrative fee foradministration of the ASES grant. AIMS had submitted this documentation insupport of its claim that it did not exceed the threshold for administrative services inspending the ASES grant funds. Mey stated that she never received thismemorandum. (See Record for Appeal, Exh. O, Exh. 8 thereto, OUSD 7364 - 7369.)

AIMS submission of questionable and misleading documents in response to the Notice of

Violation provides substantial evidence that it failed to remedy those violations.

E. AIMS Failed to Rebut the Districts Findings and Conclusions

On appeal, AIMS submits several arguments denying the violations, and denying that AIMS

failed to remedy the violations. (Record for Appeal, Exhs. P and Q.) Although OUSD addressed many

of these arguments in the Notice of Intent to Revoke and Resolution, the District provides an executive

summary of OUSD's responses to specific arguments made in the AIMS appeal in Exhibit 3 to this brief.

IV. DISCUSSION OF STATUTORY FACTORS

The County Office has asked the District to address the three factors cited in the revocation

regulations governing the County Boards consideration of AIMS appeal. Cal. Admin. Code Tit. 5,


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Section 11968.5.4 contains the following standards under which the County Board must assess a

charter schools appeal from a district revocation:

In determining whether the district chartering authority's factual findings are supportedby substantial evidence, the county board of education shall consider whether thedistrict chartering authority provided the charter school's governing body as described inthe school's charter a Notice of Violation, a reasonable opportunity to remedy theidentified violation(s), a Notice of Intent to Revoke, a public hearing, and Final Decision,pursuant to Articles 2 and 2.5 and Education Code sections 47607(c) through (e),inclusive.

If the charter school submits a response to the Notice of Violation pursuant to section11968.5.2(c), the county board of education shall, in determining whether the districtchartering authority's factual findings are supported by substantial evidence, consider

whether the charter school complied with the procedures set forth in that section.

The county board of education shall also consider whether an alleged proceduraldeficiency negatively impacted the charter school's ability to refute or remedy thealleged violation or the chartering authority's ability to comply with its proceduralobligations or authorizing duties.

The District will discuss these requirements below:

A. Provision of Notice of Violation, Reasonable Opportunity to Remedy, Notice ofIntent to Revoke, Public Hearing and Final Decision

1. Notice of Violation

The OUSD Board approved the Notice of Violation on September 27, 2012. (Record for Appeal,

Exh. D.) The Notice of Violation provided AIMS with 60 days to remedy the violations set forth therein,

and even identified the specific areas that required remedy:

a. Management of the AIMS organization to ensure compliance with applicable legalrequirements, including enrollment and teacher credentials;

b. Changes to structure and operation of AIMS governing board to ensure greater fiscaland operational control;

c. Identification of responsible agent for AIMS fiscal operations;

d. Institution of conflict of interest enforcement procedures;

e. Appropriate separation of Founder and spouse from all aspects of AIMS operations.


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AIMS did not contend in its response to the Notice of Violation or in subsequent proceedings

that the 60-day remedy period was not reasonable.

2. Notice of Intent to Revoke

On January 23, 2013, the OUSD Board approved the issuance of the Notice of Intent to Revoke,

which was served on AIMS the following day. (Record for Appeal, Exh. G.) The OUSD Board reached

this decision after a detailed evaluation of AIMS response to the Notice of Violation and after hearing

public comment from the AIMS community, including statements made by the AIMS Board President at

the time, Jean Martinez. (Record for Appeal, Exh. G.)

3. Public Hearing

The OUSD Board held the statutorily-required public hearing on February 27, 2013, at which

then-Interim Director Sylvester Hodges and then-Board President Toni Cook spoke on behalf of AIMS.

(Record for Appeal, Exh. K.) On the same day, AIMS submitted a supplemental response to the Notice

of Violation, even though the remedy period had ended on November 28, 2012. (Record for Appeal,

Exh. L.) Although not required to do so, the District evaluated and considered AIMS February

Supplemental Response in making the recommendation to revoke the charter to the OUSD Board.

4. Revocation Final Decision

Lastly, the findings of the OUSD Board were contained in its March 20, 2013 Resolution No.

1213-0124 Revoking the Charter of the American Indian Model Schools and accompanying

documentation. (Record for Appeal, Exh. O.)

5. Additional Due Process

The District not only met all legal requirements during the revocation proceedings, it provided

AIMS due process beyond what was required by law. The additional steps that the District took

included the following:

Counsel for the District, John R. Yeh of Burke, Williams & Sorensen, LLP, and theDistricts then-Charter School Coordinator, Gail Ann Greely met with then-AIMS Boardpresident Jean Martinez, AIMS Board member Nedir Bey, and AIMS then-attorney Paul


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Minney to hand deliver the Notice of Violation and to discuss the revocation process onSeptember 20, 2012, one week before consideration by the OUSD Board;

Identified five specific areas in the Notice of Violation in which the District would requireAIMS to take remedial measures;

After the OUSD Boards approval of the Notice of Violation on September 27, 2012, Mr.Yeh and Ms. Greely advised Mr. Minney that the District would be willing to meet withAIMS during the remedy period to discuss potential remedies;

Invited Sylvester Hodges, AIMS Interim Director at the time, to meet to discuss theNotice of Intent to Revoke;

Granted AIMS request, on February 5, 2013, to continue the public hearing to allowAIMS to obtain legal counsel (Record for Appeal, Exh. F);

Allowed AIMS to submit its February Supplemental Response to the Notice of Violationafter the conclusion of the 60-day remedy period on November 28, 2012 (Record for

Appeal, Exh. L);

Communicated to AIMS that District staff was willing to meet with AIMS leadershipduring the revocation proceedings to discuss potential remedies, even after theconclusion of the 60-day remedy period;

Conducted a meeting between then-Interim Director Hodges and the OUSD BoardPresident, David Kakishiba;

Conducted a meeting between then-Interim Director Hodges and OUSD GeneralCounsel, Jacqueline Minor and OUSD Executive Director for Quality and Charter Schools,David Montes de Oca.

B. Whether the Charter School Complied with Procedural Requirements in Respondingto the Notice of Violation

While AIMS submitted a great deal of documentation in response to the Notice of Violation13

binders in totalmuch of it was redundant and nonresponsive to the violations identified by the

District. Despite the great volume of documents, AIMS failed to adequately recognize, acknowledge, or

address the serious institutional issues raised by the District. Specifically, the District found as follows

in its Notice of Intent to Revoke:

1. AIMS did not acknowledge that its Founder, Ben Chavis, committed conflict of interestviolations, nor did AIMS take steps to address those conflicts of interests.

2. AIMS failed to institute acceptable institutional reforms to safeguard against futureviolations.


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3. AIMS failed to institute acceptable changes in its financial and operational procedures toensure that future fiscal mismanagement does not occur.

4. AIMS failed to engage sufficient institutional expertise, such as a charter managementorganization, to implement the necessary institutional and organizational overhaul of itsoperations.

5. AIMS failed to address in an acceptable manner any means or process for defining the roleof the Founder or achieving the necessary separation of him from the organization.(Record for Appeal, Exh. G, p. 2, OUSD 6242.)

A more detailed discussion of the Districts assessment of AIMS remed ies is contained in the

Notice of Intent to Revoke (Record for Appeal, Exh. G, OUSD 6271-6274) and the Resolution (Record

for Appeal, Exh. O, OUSD 7218-7223).

In addition, the District found it troubling that AIMS submitted misleading and inaccurate

documentation in response to the Notice of Violationespecially given that the District had identified

AIMS failure to document its activities as an area of violation in the Notice of Violation. (Record for

Appeal, Exh. D, OUSD 97 106; Exh. G., OUSD 6269.)

In conclusion, despite the volume of its response, AIMS failed to fully address the violations

identified, failed to acknowledge most of the violations, and failed to submit documentation that

demonstrated that it had instituted acceptable remedial measures.

C. There Were No Procedural Deficiencies that Negatively Impacted AIMS Ability toRefute or Remedy the Violations

As has been noted above (Section IV(A)(5)), the District provided AIMS with due process well

beyond that required by law. In addition to the statutorily-required Notice of Violation and Notice of

Intent to Revoke, the District conducted face-to-face meetings with AIMS leadership and counsel as

discussed in Section IV(A)(5). The District also granted AIMS an extension of the public hearing, and

provided AIMS the opportunity to provide its February Supplemental Response after the conclusion of

the 60-day remedy period. AIMS had every opportunity to address and remedy the violations identified

by the District, and failed to do so despite such opportunities.


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AIMS identifies only two alleged procedural omissions or errors in the revocation process: 1)

that the District relied solely on the findings of the FCMAT Report; and 2) that Education Code Section

47607 requires the District to consider pupil academic achievement as the most important factor in

determining whether to revoke the charter. (Record for Appeal, Exh. Q, OUSD 7406-7409.) Both

arguments are addressed here.

1. FCMAT Report

The FCMAT report was initiated in response to a whistleblowers report of fiscal misconduct at

AIMS by a former AIMS employee. After the reports release in June, 2012 (Record for Appeal, Exh. A),

the District conducted its own independent investigation, resulting in the Notice of Violation, which was

accompanied by 1010 pages of exhibits. (Record for Appeal, Exh. D.) The Notice of Intent to Revoke

also contained the Districts independent findings of fact and conclusions of law and included

supplemental exhibits. (Record for Appeal, Exh. G.) The Resolution contained a summary of

substantial evidence supporting revocation, based on the Districts independent investigation and

evaluation of the underlying facts. (Record for Appeal, Exh. O.)

Further undermining AIMS argument is the fact that the evidentiary basis of the revocation

included evidence of conduct not addressed in the FCMAT report, such as the failure of the AIMS Board

to maintain fiscal control over the organization, the institutional instability caused by significant Board

turnover and removal of members who advocated for reform measures, AIMS submission of

questionable and misleading documentation as part of the revocation process, and AIMS failure to fully

acknowledge prior misconduct or take meaningful remedial measures to correct the misconduct.

2. Student Academic Achievement

SB 1290, which took effect January 1, 2013, amended Education Code 47607 to add the

following provision:


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The authority that granted the charter shall consider increases in pupilacademic achievement for all groups served by the charter school as themost important factor in determining whether to revoke a charter.

The amendment defines all groups of pupils served by the charter schools as numerical ly

significant pupil subgroups in the following categories: ethnic subgroups, socioeconomically

disadvantaged pupils, English learners, and pupils with disabilities.

This portion of the statute does not prohibit a district from revoking a high-performing charter.

Rather, it is a procedural requirement that obligates the District to consider academic achievement as

the most important factor. The Resolution addressed the Districts consideration of AIMS record of

student achievement. First, the District noted the high academic achievement of the schools:

WHEREAS, the three AIMS charter schools achieved the following scoreson the 2012 Academic Performance Index (API) Test:

AIPCS: 974 API

AIPCS II: 981 API

AIPHS: 928 API

(Index. Exh. O, OUSD 7215-7216.)

Then the District weighed this factor against other relevant factors:The District has considered increases in pupil academic achievement forall groups of pupils served by the charter school under Education CodeSection 47607(c)(2). Although the performance of AIMS students is animportant factor in its decision, the Staff believes that AIMS failure toremedy the conflict of interest violations, its failure to institute sufficientchanges to the management of the AIMS organization, its failure toinstitute structural or permanent changes to the governing board, itsfailure to take action to recover the public funds intended for AIMSstudents paid to Dr. Chavis, and its lack of complete candor in responseto the Districts revocation proceedings, outweigh all other factors in

considering whether to revoke the AIMS charters, including the schoolsacademic performance. (Index. Exh. O, OUSD 7215-7216; 7222-7223.)

In revoking the AIMS charters, the District acknowledged that the AIMS charter schools have a

track record of high academic performance. (Record for Appeal, Exh. M, OUSD 7206.) But in the end,

the OUSD Board determined that the egregiousness of the conflict of interest violations and the


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institutional indifference of the AIMS Board to following conflict of interest laws or adopting appropriate

remedies outweighed the schools academic performance.

V. POST-REVOCATION EVENTS AT AIMS

Events subsequent to the March 20, 2013 revocation by the OUSD Board further demonstrate

the dysfunction and institutional resistance to reform that pervades the AIMS Board.

Continued Involvement of Founder. In direct contradiction of AIMS contention that ithad achieved separation of its Founder from the organization, the Founder, Ben Chavis,was present and actively involved at the AIMS April 12, 2013 Board meeting. Forexample, the Founder was observed advising the Board on the length of time that eachpublic speaker should be given. Since the revocation, the Founder was seen at one ofthe AIMS schools berating a staff member in the presence of other children andemployees, causing the staff member to break down in tears. When asked by a staffmember not to yell or curse in front of the students, the Founder refused. In short, the

AIMS Board continues to permit the Founder to be involved in the day-to-day operationsand management of the organization.

Continued Instability. As discussed above, Ms. Avelino, Site Administrator, and Mr.Hodges, Interim Director, were both terminated after advocating for the adoption ofneeded reforms. Other staff members were also reportedly fired after advocating forreforms as well. (SeeRecord for Appeal, Exh. S, OUSD 7414; Exh. U, OUSD 7421-

7424.) The significant turnover in AIMS Board members, attorneys, and consultants issymptomatic of an institutional resistance to dissenting views and change.

These post-revocation developments further demonstrate that the Districts decision to revoke the

AIMS charters was appropriate.

VI. CONCLUSION

The revocation of the AIMS charters by the OUSD Board followed a six-month proceeding in

which AIMS was provided multiple opportunities to remedy the violations that led to those proceedings.

Despite these opportunities, AIMS has failed to recognize or acknowledge violations identified by the

District and failed to institute any meaningful institutional reform to prevent their recurrence. For these

reasons, the OUSD Board decided to revoke the AIMS charters. The County should uphold that

decision.


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OUSD Brief to ACOE Re AIMS Sans Exhibits (5/7/2013)

Documents