A federal grand jury has indicted two former top officials at a charter school in Northwest Philadelphia on charges of stealing $522,000 in taxpayer funds.
The 27-count indictment charges Hugh C. Clark, 64, and Ina M. Walker, 58, with conspiracy, wire fraud, and theft from a federally funded program, U.S. Attorney Zane David Memeger announced Thursday.
The pair, both from Philadelphia, allegedly used the money slated for New Media charter school to pay expenses at Lotus Academy, a small private school they controlled; to fund personal businesses, including the Black Olive health-food store and the Black Olive restaurant in Mount Airy; and for personal expenses, including meals and credit-card bills, Memeger said.
The indictments, which were unsealed Thursday, came nearly two years after The Inquirer first reported allegations of fiscal mismanagement and conflicts of interest at the school, which has campuses in the Stenton and Germantown neighborhoods.
Joan E. Burnes, an assistant U.S. attorney who is prosecuting the case, said that between March 2005 and December 2009, Walker and Clark allegedly stole more than $500,000 in taxpayer funds that were meant to educate students at the charter school.
Clark was the president of the charter's board and Walker was the school's chief executive officer. Both were involved in founding the school in 2004.
New Media is the fourth Philadelphia charter school in recent years whose administrators or board members have faced federal fraud charges. And the school is among at least 18 area charter schools that have come under federal investigation since 2008, sources have said.
The Philadelphia School Reform Commission forced Walker and Clark to step down and sever all ties to the school as conditions for renewing New Media's operating charter in 2010. The SRC also required all members of the charter board to be replaced. That overhaul was completed in July.
Under state law, the district that awards a school's operating charter is responsible for overseeing it. New Media is one of 74 charter schools operating in the school district.
Under its new leadership, the charter enrolls 455 students in grades five to 12.
Clark, a lawyer, who was arrested Thursday morning, was released on a $25,000 recognizance bond after making an initial appearance before U.S. Magistrate Thomas J. Rueter later in the day.
During the brief proceeding, Clark told Rueter that he would retain his own attorney but had not had an opportunity to do so.
Reached later by phone, Clark said: "I have no comment to make at this time."
Walker, who was not arrested, is scheduled to make her initial appearance Friday.
Thomas A. Bergstrom, Walker's attorney, called it a complicated but defensible case.
"It is an interesting case, to say the least," Bergstrom said. "It doesn't appear that it put any real money in her pocket."
As The Inquirer has reported, New Media's finances were so shaky the school had to borrow money to make payroll. Parents complained that the charter had failed to provide adequate books and computer technology to its middle school students.
The 28-page federal indictment lays out a scheme in which Walker and Clark allegedly siphoned money from the charter to prop up Lotus Academy, the private school in West Oak Lane that Clark helped found in 1974.
Walker had been the top administrator at Lotus, where she earned less than $30,000. When New Media opened in 2004, she became the charter's founding CEO and her salary averaged $100,000, the indictment said.
Walker and Clark also are charged with using charter money to prop up the Black Olive restaurant and health-food store they established in Mount Airy in 2008. In addition, Clark allegedly diverted funds to benefit Tekhen Communications, a Web-design and Internet-access company he owned, and to pay expenses for his law practice.
According to the indictment, the pair concealed the diversion of funds by inflating New Media's expenses and by repeatedly raising the rent on a building the charter's middle school leased from Lotus Academy.
The federal government alleges that Clark - without the notice or approval of New Media's board - entered the charter into a written contract with Lotus in 2008 to purchase a building "for the sole purpose of benefiting Lotus Academy."
In late March 2009, while the charter was being audited by the school district, the indictment says, Clark "caused a false accounting entry to be made in New Media accounting records to disguise a portion of the payments to Lotus Academy." The entry showed a $250,000 payment to Lotus as a "building purchase deposit." The government alleges that Clark and Walker spent the money on the expenses of Lotus Academy and personal businesses they controlled.
Because of the misuse of taxpayer funds by Clark and Walker, the indictment further alleges, New Media failed to pay legitimate charter school expenses.
Between December 2007 through February 2009, the government charged, the charter failed to make required payments for its staff to the state teachers' retirement system, was delinquent on payments for textbooks and several times could not make payroll. In the spring of 2009, coaches for New Media's athletic teams were not paid or received only partial payments.
The school district's inspector general began looking into New Media's finances in late 2008 after the SRC received an anonymous letter purportedly written by teachers who claimed the charter was deducting money from their paychecks but not sending the funds to the state pension system.
New Media, which was founded in 2004 with promises to teach multimedia skills to students, attracted support from the Bill and Melinda Gates Foundation, state lawmakers, and educators.
The school also received about $500,000 over three years in state funds for facility costs through Ogontz Avenue Revitalization Corp., a nonprofit founded by State Rep. Dwight Evans, (D., Phila).
Shirley Archie, a teacher at Germantown High School and wife of SRC Chairman Robert L. Archie Jr., has served on New Media's board. She stepped down in 2009 when Archie joined the SRC.
Donnamarie Parker, who has been CEO of New Media since July 1, said the indictment does not affect the school's current leadership or the school's operations.
She said the new administration and new board are "working diligently to move forward and beyond any activities that occurred in the past."