Officials of Dropout Program Indicted : Education: Institute for Successful Living allegedly bilked L.A. school district out of more than $700,000 by inflating enrollment figures.

A federal grand jury Thursday returned an indictment against operators of an independent study program targeting dropouts that allegedly bilked the Los Angeles Unified School District out of more than $700,000 by claiming far more students than were actually enrolled.

The 20-count indictment--on charges of conspiracy, federal program fraud and mail fraud--was issued against Arnese Clemon, former director of the Institute for Successful Living Inc., and Dewey Hughes, a consultant who helped hire teachers and manage the program.

The institute, which operated from 1989 to 1991, had a contract with the school district to provide flexible tutoring and home study assignments for students who had been expelled, had dropped out or were at risk of dropping out.

The district paid the program a set amount per student. Program officials claimed to the district that their enrollment more than doubled, from 163 students to 330 students, over two years.

Clemon and Hughes are accused of a complicated ruse under which they allegedly solicited students to sign up for classes, then arranged for teachers to sign those names to work completion reports, even though the students had never done the work. Those reports were allegedly forwarded to the district for funding.

Additionally, they are charged with advertising teaching openings, interviewing teachers and copying their credentials, then never hiring them but using those credentials to support their claims of growing student enrollment. Under the independent study regulations, programs must have one teacher for every 30 students.

“What they were doing was grossly inflating the number of students who were doing work at the school and . . . by doing that obviously enriching themselves quite a bit,” said Mark D. Flanagan, the assistant U.S. attorney assigned to the case. “They scammed the school district out of a lot of money, but the real victims are the students who really wanted to do work.”

A tip to the state attorney general’s office launched the two-year investigation leading to Thursday’s indictments. The inquiry was conducted jointly by a variety of agencies, including the FBI and the state attorney general’s office, which issued the initial search warrant in April, 1992.

Clemon had previously described the investigation as the result of a vendetta against her and the program, but neither she nor Hughes could be reached for comment on Thursday. They are scheduled be arraigned Dec. 19. If convicted, they face maximum penalties of 185 years in prison and a $5-million fine.

Investigators declined to comment on where the money had gone, but state Deputy Atty. Gen. Robert M. Snider said he would not rule out the possibility that some of it could be recouped.

Court records filed to support the 1992 search warrant allege that Clemon might have skimmed more than $70,000 from the institute for her brother, U.W. Clemon, who was previously a member of the institute’s board of directors.

U.W. Clemon, a U.S. district judge in Birmingham, Ala., said Thursday that the money was paid to him for rental of the institute’s headquarters. He said he had not been contacted by investigators and had not heard from his sister recently. “I don’t know anything about it,” he said.

Snider and Flanagan said the investigation is continuing and could lead to further indictments.

Concerns over the investigation of the institute helped lead the Los Angeles school district to begin its own independent study program.

“When you do hindsight on this, I would say that it shows that if you’re going to have these kinds of operations, you’ve got to have the ability to monitor them,” said Supt. Sid Thompson, who as deputy superintendent was responsible for independent study program when the investigation began.

“The difficulty in a big bureaucracy like this is you have trouble monitoring yourself, not to mention anyone else,” he said.

The school district did its own audit of the program in 1991, which questioned more than $300,000 in charges. But follow-up interviews with Clemons found justification for all but $11,000 of that money, according to Thompson.

At that time, Thompson attributed the problems to poor record-keeping. “We found nothing back then that (showed) there was any deliberate attempt to subvert funds from the district,” he said in a 1992 interview.

But on Thursday, Thompson pointed out that the audit results caused the district to stop funding the institute. He described the indictment contents as “disturbing.”

“We’re the victim in this thing and that’s never fun,” he said.

However, a former Los Angeles Unified administrator in charge of the outside independent study programs said the indictments should have included Thompson and then-administrative consultant Barry Mostovoy for failing to act more quickly to shut down the institute.

“All you have to do is look at the audits in ‘89-’90 and ‘90-’91 and you know that the district’s own auditors pointed out problems,” said Donald Martin, who has claimed he was demoted to a counselor for blowing the whistle on the institute. Martin sued the district, but his lawsuit was dismissed earlier this week.

“The program wasn’t (discontinued) and the question is, why?” he said Thursday.

The president of the district’s teachers union, Helen Bernstein, said she also was disappointed that Los Angeles Unified had not been held accountable in Thursday’s indictments.

Bernstein and several others interviewed compared the institute situation to that of Edutrain, a Downtown charter school for dropouts that is embroiled in controversy for overestimating enrollment. However, no allegations of intentional wrongdoing have been made against Edutrain.