Former head of Philadelphia charter school admits fraud

A former board president and founder of a Northwest Philadelphia charter school admitted Tuesday that he stole $522,000 in taxpayer funds to prop up a restaurant, a health-food store, and a private school he controlled, and for other business and personal expenses.

Hugh C. Clark, 65, told U.S. District Judge Jan E. DuBois that he wanted to change his plea to guilty and admit his role in a scheme to drain funds from the New Media Technology Charter School.

He also pleaded guilty to defrauding the Wilmington Savings Fund Society of $339,000 as part of a plan to acquire property in Mount Airy to house the Black Olive Restaurant.

The initial federal criminal charges were filed against Walker and Clark last April - nearly two years after The Inquirer reported allegations of fiscal mismanagement and conflicts of interest at New Media.

Clark, a lawyer who had been scheduled to go to trial this week, told the federal court last month that he planned to plead guilty to all 28 counts instead.

The charges include conspiracy, 25 counts of wire fraud, theft from a federally funded program, and bank fraud.

Asked whether he had committed the crimes outlined in two grand jury indictments, Clark told the judge: "Yes, I did."

Clark also said he understood his guilty plea likely would cost him his law license.

Ina M. Walker, New Media's former chief executive and Clark's codefendant, pleaded guilty to the same charges in January.

Walker's agreement had required her to cooperate with government and testify against Clark. Assistant U.S. Attorney Joan E. Burnes said Clark's plea did not compel Clark to cooperate with any further investigation.

DuBois scheduled sentencing for Clark and Walker for July 13.

Burnes said federal guidelines suggest a prison term of 33 to 41 months for each.

Last spring, a federal grand jury charged that Clark and Walker stole $522,000 from New Media to pay expenses at Lotus Academy, a small private school they controlled; to fund personal businesses, including the Black Olive restaurant and a nearby health-food store; and for personal expenses, including meals and credit-card bills.

Clark helped found Lotus, a private school in West Oak Lane, in 1974. He also helped establish New Media in 2004. He presided over the boards of both the charter school and Lotus.

Walker, a former head of Lotus, controlled the checkbooks of both schools.

Last November, a grand jury brought additional charges against Walker and Clark. The grand jury accused them of providing false documents to obtain a $357,500 loan from the Wilmington Savings Fund Society in 2006, then defaulting on $339,000 of the debt.

The loan, obtained in Walker's name, was used to buy a commercial property at 22-24 E. Mount Airy Ave. for the Black Olive, which the indictment called "their failed business venture."

To obtain the loan, Walker and Clark provided fake lease agreements with overstated rental revenue and "false or forged signatures" of renters. Clark also submitted a false 2005 tax return for Walker.

The memorandum accompanying Clark's plea agreement said that to help the financially struggling Lotus, he devised a lease plan to provide a "generous and steady stream of income" from New Media. Between August 2004 and June 2009, New Media paid at least $1 million to Lotus to rent space for its middle school program.

There were no signed leases. Clark, as head of both schools' boards, set the rental rates and raised them.

New Media paid for banquets and retreats in Ocean City, Md., for Lotus' staff. Money also was diverted from the charter school to pay utility bills for the health-food store and to develop and market the Black Olive.

As a result of the "improper and fraudulent payments," the charter school failed to pay legitimate expenses, including payments to the state retirement system for teachers and textbooks.

The Philadelphia School Reform Commission, which oversees charter schools in the city, forced Walker and Clark to step down and sever all ties with New Media as conditions for renewing the school's operating charter in 2010.

New Media, which has campuses in Germantown and Stenton, has 450 students in grades five through 12 and continues to operate under new leadership.

The school is the fourth Philadelphia charter school whose administrators or board members have faced federal fraud charges in the past decade.

New Media is among at least 18 area charter schools that have come under federal investigation since 2008, according to sources with knowledge of the probes.