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Ohio AG Mike DeWine files to recover millions from ECOT founder William Lager and others

August 21, 2018

Ohio AG Mike DeWine files to recover millions from ECOT founder William Lager and others

CLEVELAND, Ohio - Ohio Attorney General Mike DeWine today launched his formal attempt to recover about $60 million in overpayments to the ECOT online charter school, from its founder William Lager, from companies owned by Lager and from several former officials of the now-closed school.

At the center of the case are two companies Lager founded and owns that did about $200 million in business with the school over the years, Altair Learning Management and IQ Innovations. 

The filing argues that Lager was an officer and agent of ECOT, so it was illegal for the school to hire companies he owns. Because that would be a conflict of interest, the filing asks that “Lager be ordered to disgorge all profits he received from the Altair License Agreements and the IQ Contracts.”

Damages could be tripled if the state proves Lager violated the corrupt practices act, best known for civil action against organized crime.

In addition, it also suggests that multiple properties owned by Lager - including a $3.7 million home in the center of Key West, Florida, and a $433,000 lakefront house along Seneca lake, about an hour east of Columbus - could be taken if DeWine proves his case.

“To the extent that any profits he received from the Altair License Agreements and the IQ Contracts can be traced into any other property owned by Lager, that other property be declared to be held in constructive trust for the benefit of ECOT,” the filing also asks.

Lager would only lose those homes if DeWine can show Lager bought them with improper money from the IQ and Altair contracts - a case DeWine has not even tried to prove yet, beyond seeking to declare all IQ and Altair profits illegal.

Responses from lawyers for Lager, ECOT and the two companies were not immediately available. We will share them here when they are.

DeWine, who is the Republican nominee for governor for this November’s election, said that he will keep working to hold school officials accountable.

“I will continue to be aggressive in seeking to recover public funds from ECOT, its affiliates, and Mr. Lager that they improperly received,” DeWine said in a press release.

Democrats have criticized DeWine for not acting against ECOT sooner, saying that he could have stopped this alleged conflict of interest several years ago.

“Because public pressure and bad headlines have backed Mike DeWine into the smallest political corner, he has only now felt it important to recover millions of stolen taxpayer dollars,” said State Rep. Teresa Fedor, of Toledo, the ranking Democrat on the House Education Committee.

Two recent court rulings cleared the way for today’s filing - a procedural one Monday in Franklin County Common Pleas Court and a major Ohio Supreme Court denial earlier this month of ECOT claims that it did not really owe the money back.

The filing in Franklin County Common Pleas Court is nearly 400 pages of legal arguments and exhibits that draw connections between Lager, ECOT and the two companies to prove the conflict of interest. But DeWine and his staff distilled their main argument into two simpler paragraphs at its introduction:

ECOT was a public school and hence a public office. It was entrusted with immense amounts of public money, most of which came from other public schools. Those who operated ECOT were subject to the same fiduciary duties as the trustee of a private trust. The most fundamental of those duties is the duty of loyalty—to avoid any situation where they would be tempted to profit improperly from their position of trust.

The folks who ran ECOT yielded to that temptation. William Lager, ECOT’s founder and public face, also founded companies that made millions of dollars doing business with that public school. Other ECOT officials stood by, or actively participated, as ECOT overbilled the public on a massive scale to keep the money flowing.

At its peak, the Electronic Classroom of Tomorrow (ECOT) was Ohio’s largest charter school. With over 15,000 students, it took in more than $100 million a year in state tax money to educate students with classes online.

But the Ohio Department of Education and state school board found that the school could not document enough class participation and sought recovery of $80 million from the school - $60 million for one school year and $20 million for the next.

Unable to stay afloat while repaying that money, the school closed early this year. About $20 million was repaid, leaving $60 million still owed.

The filing targets lists the following officials of ECOT as defendants:

William Lager, of Columbus, Founder of ECOTAltair Learning Management I, Inc., of Columbus, which served as ECOT’s operator and management companyIQ Innovations, LLC, of Columbus, which provided ECOT with curricular materials and related servicesRick Teeters, of Daytona Beach, Florida; Superintendent of ECOTMichelle Smith, of Bristolville, Treasurer of ECOTChristopher Meister, of Worthington, Vice President of Accounting for ECOTAnn Barnes, of Grove City, Education Management Information System (EMIS) Director for ECOTRegina Lukich, of Upper Arlington, Director of Federal Programs for ECOT

Because all of these employees had control over ECOT money or its representation to the state of its students, the filing claims they are all “strictly liable for all improper disbursements of ECOT’s public funds made during the times that they were public officials of ECOT.”

The filing also seeks recovery from Travelers insurance, which insured Smith’s performance as treasurer of the school.

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