Federal agents raid Los Angeles charter school network

Federal agents raided the offices of a network of Los Angeles charter schools Wednesday as part of an ongoing investigation into allegations of fraud and fiscal mismanagement.

The charter organization, Celerity Educational Group, opened its first L.A. school more than a decade ago, but it has recently drawn the scrutiny of the inspector general of the Los Angeles Unified School District and the U.S. attorney’s office in Los Angeles. It currently manages seven schools in Southern California, and has ties to four more in Louisiana, all of which are publicly funded but privately operated and exempt from many of the regulations that govern traditional schools.

Officials from the Department of Homeland Security confirmed their involvement in the raid on the charter organization’s headquarters, as did a spokeswoman for the FBI’s field office in L.A.

The inspector general for the U.S. Department of Education is also involved, according to well-placed law enforcement sources who asked to remain anonymous because they were not authorized to discuss the investigation.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, declined to discuss the nature of the investigation. He said search warrants had been filed under seal and would not be made public.

L.A. Unified officials confirmed Wednesday that they’d been alerted that the U.S. attorney’s office in Los Angeles was going to oversee the serving of a search warrant on Celerity’s offices.

“I don’t know what information the U.S. attorney is relying on, but the district’s inspector general has conducted a thorough and ongoing investigation into this matter, and I expect that some of that work led to this,” L.A. Unified general counsel David Holmquist said.

Holmquist added that it is his understanding that the focus of the investigation is not Celerity’s schools, but the Celerity organization that manages them, as well as businesses that have relationships with the charter group.

An employee of the charter organization, who asked to remain anonymous out of fear of retaliation, described the scene that unfolded early Wednesday morning as like “something out of a movie.”

Federal agents swarmed the organization’s offices, collecting laptops and copying data from computers, the employee said.

Celerity founder Vielka McFarlane could not be reached for comment.

"Celerity has been informed of this investigation and looks forward to cooperatively addressing any concerns raised by the investigating agencies," said Stefan Friedman, a Celerity spokesman.

The first signs that Celerity and its Los Angeles schools might be in trouble came in 2015. The organization had petitioned L.A. Unified to allow it to open two new charter schools, an application process it had gone through successfully several times before.

But this time, L.A. Unified’s school board said no.

School district officials raised new concerns over the charter school organization’s finances and its complex governance structure. In their final report, in which they advised board members to reject the group’s charter petition, they accused Celerity’s leaders of unorthodox fiscal practices, such as borrowing money from one school in order to pay another schools’ bills, spending money on expenses unrelated to the school and commingling the organization’s finances with those of separate legal entities.

Celerity’s leaders denied any wrongdoing. Ultimately, the state Board of Education voted to allow the new schools to open.

While all of this played out in the foreground, L.A. Unified’s inspector general opened an investigation into Celerity and McFarlane.

The charter school organization’s battle with L.A. Unified continued. In October of last year, Celerity asked the school board to renew two of its schools’ charters — Celerity Dyad in South Los Angeles and Celerity Troika in Eagle Rock — for another five-year term.

Renewals typically sail through LAUSD’s review process, but Celerity’s did not. Although district officials said the schools’ academic performance had met their standards, they reiterated their concerns about the organization’s fiscal management and potential conflicts of interest.

They also raised specific concerns about Celerity Global Development, a newer entity run by McFarlane that has significant financial and operational influence over Celerity Educational Group. 

Celerity Global Development was set up to have the power to elect and remove Celerity Educational Group board members, merge the educational group with other entities or dissolve it entirely. The group has transferred more than $2 million to Celerity Global, according to documents cited by L.A. Unified. The district alleged a similar pattern with a third entity, Celerity Development.

At various times, McFarlane has held positions in, and conducted financial transactions between, the three Celerity operations, as president, chief executive or both, according to school district officials.

In the end, the board voted 6 to 0 not to renew the two Celerity schools. Board member Ref Rodriguez, who represents the area where the schools are located, abstained. Like other board members, Rodriguez, who co-founded a charter school group before joining the board, was privy to confidential information unearthed in the investigation.

Rodriguez could not be reached for comment Wednesday.

Celerity’s leaders have appealed to the state, which has yet to decide whether to keep the schools open.

The seizing of records does not necessarily foreshadow a quick resolution. In December 2014, the FBI seized school district records related to its $1.3-billion iPad project. No charges have been filed in connection withthat investigation. 

anna.phillips@latimes.com

howard.blume@latimes.com

matt.hamilton@latimes.com

MORE FROM EDUCATION

Parents need more help choosing schools in Los Angeles, report says

Touting a federal grant for local students, L.A. mayor again vows to protect immigrant families

Copyright © 2017, Los Angeles Times
64°