Pensacola, Florida
Sunday December 17th 2017

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Newpoint: Charges and Possible Cover Up

By Rick Outzen

Marcus May, the founder and owner of the Newpoint Education Partners charter schools in Escambia and six other Florida counties, and Steven Kunkemoeller, owner of School Warehouse, Inc. and Red Ignition, Inc., were charged on June 19 with racketeering and organized fraud in connection with fraudulent schemes involving public charter schools.

Inweekly first broke this story in March 2015 when it reported on possible grade-tampering and missing funds at Escambia County’s Newpoint Academy and Newpoint High School. School Board member Jeff Bergosh, currently the county commissioner for District 1, brought the allegations to the newspaper

A local whistleblower, Letha Morris, who worked at NEP’s Five Flags Academy and had children enrolled the NEP charter schools, provided information supporting the allegations. Once Inweekly published its articles, other current and former NEP employees from around the state contacted the newspaper.

The Escambia County School Board later canceled the schools’ contracts for NEP’s middle and high schools. In June 2015, NEP closed all three charter schools in Escambia County, leaving the teachers without their final paychecks.

Statewide Schemes
The alleged fraudulent schemes involved Newpoint-managed charter schools in Escambia, Bay, Broward, Duval, Hillsborough, Holmes and Pinellas counties. According to court documents, May obtained more than a $1 million of public funds from a pattern of thefts from the Florida Department of Education, six school districts, and 15 Newpoint charter schools.

The documents also allege that May used the proceeds to establish or operate multiple Florida and Ohio LLCs, which he used to acquire residential and business properties in Florida and Ohio.

In May 2016, an Escambia County grand jury indicted three entities—Newpoint Education Partners LLC, School Warehouse, Inc. and Red Ignition, Inc. The indictments were for committing aggravated white collar crime, grand theft, and money laundering, related to the theft of public education funds and charter school grant funds received by Newpoint’s Escambia County charter schools for furniture, computers, equipment, and services.

Further investigation uncovered, according to the affidavit, a similar pattern of schemes at other charter schools run by Newpoint around the state. The schemes were allegedly instigated by May in concert with Kunkemoeller. May solicited Florida charter school agreements with school districts by falsely representing that Newpoint had been successfully running schools in Ohio using its “state of the art technology and innovative, proven education methods.”

May created charter boards for each school and filled them with people with little experience in running a school. He received a management contract to manage the schools for 18 percent of FEFP revenue and reimbursement for expenses incurred on behalf of the schools.

The schools opened bank accounts, leased facilities, hired staff and contracted with vendors selected by May for bookkeeping, auditing, and legal services. May had side relationships with many of the vendors. As required by law, the charter school boards had member authorized as signers on the bank accounts, but they did not have access to withdraw funds.

The bookkeeping company hired by May swept all bank accounts weekly to NEP’s accounts, leaving only about $1,000 in the each school account. The funds were commingled and spent on items outside the school districts that provided the charter schools the funds.

Collusion With Vendors
May also allegedly had undisclosed ownership or financial interest, or an agreement to kick back part of the sales proceeds with the schools’ vendors. Many of the vendors selected by May appeared to have been created solely to do business with the Newpoint-managed charter schools.

The price of products, such as computers, were allegedly marked up when they passed through May’s companies to the schools.

For example, Apex Learning, a Washington company selected to provide an online curriculum, was paid an “elevated” price negotiated by May, who, in turn, was paid a rebate of $229,756 on services provided in Bay, Duval, Escambia, and Pinellas counties.

Many of the items purchased for specific schools were re-directed to other Newpoint-managed schools. The Newpoint schools in Escambia County paid School Warehouse $152,000 for 160 refurbished iPads (a markup of 115%). The district audit only found 51 of the 160 iPads (32%) at the schools. Investigators later found 47 of the missing iPads at Newpoint schools in Bay County.

The investigation also found that May overestimated the enrollments of his charter schools to receive more funds from the Charter School Program. In 2011, he estimated that Newpoint would have 225 students and received $325,000.00 Its actual enrollment was 72 students.

Overpayments are required to be reimbursed upon reconciliation of the enrollment. However, no reconciliation was ever made, and no funds were reimbursed to the district.

According to the court documents, May even took the collections for student lunches and the school’s “store” for his personal use. The funds were deposit into a non-school account owned by Newpoint but was not on the corporation’s books. The funds paid for a jet ski, country club dues and a down payment on a Toyota.

Tip of Iceberg?
County Commissioner Jeff Bergosh said News Talk 1370′s “Pensacola Speaks” that the charges against May and Kunkemoeller were the “tip of the iceberg,”  He has called for a federal investigation of School Superintendent Malcolm Thomas and his administration regarding whether they covered up the scandal.

“The whistleblower was sending emails and calling the school district office and saying, ‘Look they’re cheating, they’re cheating.’ And they got money from the state, the governor comes and gives them a check,” Bergosh said.

The former school board member said that at least three district employees told him that Thomas ordered them not to inform the school board of the complaints.

“They were told, ‘Do not tell the school board.’ They were admonished when they tried to put it in the report,” Bergosh said.

“Why was student safety jeopardized for a year? Why were these financial irregularities allowed to continue for a year? Meanwhile every quarter, the board was receiving reports that frankly were not accurate,” he told Inweekly. “The place was falling apart, student safety was jeopardized, financial irregularities were taking place and all the while we were left in the dark on purpose.”

Bergosh said that when he told Thomas that he was taking the whistleblower’s complaints to the state attorney, Thomas got “mad as a snake.”

He said, “He came out from behind his desk, he wanted to come after me. He was so upset; I could see the veins popping out of his neck. He told me, ‘Don’t do it, you’re making a mistake. We haven’t done anything; this is all Newpoint.’”

Bergosh replied, “You know what? No, I’m going. I’m going on Monday; I’m going to testify. You want to come, you go ahead, but I’m going.’ He did not want me talking about it, didn’t want me doing anything.”

Bergosh is concerned that Thomas and the district administration have misled the state attorney’s office as to their lack of oversight of the Newpoint charter schools.

“When you deconstruct a massive train wreck, you’ve got to go back and look at all the things that caused it,” said Bergosh. “I think the feds need to come in, they need to bust this wide open and get to the bottom of everything.”

Inweekly tried to contact Superintendent Thomas about Bergosh’s comments and was told the superintendent was on vacation and would not be able to return the paper’s call until July 5.