Pa lawsuit charges Agora Cyber with fraud

The Pennsylvania Department of Education yesterday filed suit against Agora Cyber Charter School in Devon, alleging fraud and breach of fiduciary responsibility by its board of trustees.

The civil complaint maintains that cyber charter's board entered into improper contracts with the Cynwyd Group LLC., a management company that was co-created by Agora's founder Dorothy June Brown "for the purpose of making money from managing and operating the school."

According to documents filed in Commonwealth Court, the state Department of Education has concluded that Agora "is operating in such a grossly unlawful and improper manner" that if the department continued making payments of taxpayer funds, it "would be "facilitating and enabling Agora in the perpetration of ongoing and pervasive unlawful and improper conduct."

Brown declined comment and Board Chairman Howard Lebofsky could not be reached.

The state payment which Agora was due to receive today has been placed into an escrow account to ensure the 4,400 students enrolled in Agora from across Pennsylvania will be able to continue their education.

The department sent a letter yesterday to Lebofsky informing him that the state would not make the electronic transfer of funds today.

Based on current enrollment, Agora officials have projected that the charter's revenues will total about $41 million in taxpayer funds this school year. The management contract calls for Brown's company to be paid 7 percent of gross revenues. The fee could be as much as $2.8 million this school year.

The education department also has contacted all 500 school districts in the state directing them to send tuition payments for Agora students from their districts to the escrow fund instead of to the school, the suit said.

The suit asks the court to declare that the Agora board, which is dominated by associates of Brown, violated terms of its operating charter and state law by contracting with her management company.

Brown's Cynwyd Group not only has a management contract with Agora but owns the school's administrative offices on Chestnut Street in Devon. The school pays $25,000 per month in rent.

The suit contends that Agora's board of trustees "participated in a scheme to defraud" the department and had "defrauded Agora students by entering into a lease that was far above fair market value" and paying Cynwyd Group a management fee when "little was done by Cynwyd. . ."

The complaint, which was signed by Education Secretary Gerald D. Zahorchak, also asks the court to replace Agora's board.

"Agora's students will not be impacted by our decision in any detrimental way," Zahorchak said in a statement today. "Moving forward, these students will continue to have the same curriculum and day to day education experience to which they have become accustomed." The school's academic program is administered under contract by K-12 Pennsylvania, LLC, a for profit education company.

By state law, the education department has oversight responsibility for the 11 cyber charters that provide online instruction to students in their homes.

The suit is an outgrowth of an investigation the department launched in response to complaints from several Agora parents seeking information about the school's finances and the role that Brown and Cynwyd Group played in Agora's operations.

A state team, including the department's top lawyer and two auditors, spent a day in mid-March at the cyber school's administrative headquarters reviewing documents and interviewing staff, including Brown.

State officials followed up with a visit two weeks later to Brown's business offices in Bala Cynwyd, and continued seeking information related to Agora's operations, sources with knowledge of the investigation said.

Brown, who initially was Agora's chief executive officer, is Cynwyd Group's senior consultant to the cyber school and an ex-officio member of the charter board.

Federal criminal investigators and the Philadelphia School District's inspector general also are examining Agora's finances, the sources said.

In January, Brown and Cynwyd Group took the unusual step of suing six Agora parents, including those who complained to the state, for slander, libel and civil conspiracy. The Agora Parent Association also named in that suit, which is pending in Montgomery County.

Brown founded three traditional charter schools in Philadelphia and was the CEO of two of them until last summer: Laboratory Charter School in Northern Liberties and Overbrook; Ad Prima in Overbrook; and Planet Abacus in Tacony.