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Former Charter School Executive Director Pleads Guilty in Fraud Scheme

Wed, 08/26/2020 - 13:50

Former St. Louis College Preparatory (SLCP) charter school executive director Michael Malone pled guilty today in federal court to three counts of wire fraud related to a multi-million dollar scheme involving state education funds. Malone intentionally over-reported student attendance information so that SLCP received more state and federal funding than it was due. Sentencing information for Malone’s charges is forthcoming. Each charge of wire fraud carries a maximum possible penalty of twenty years imprisonment, a fine of $250,000 or both.

The Missouri Department of Elementary and Secondary Education (DESE) became aware of the issue in November 2018. At that time, SLCP’s board chair and charter school sponsor notified DESE of Malone’s resignation, which came after he was confronted with concerns about inflated student attendance data. At this time, a SLCP staff member also expressed concern about this illegal activity to a DESE staff member.

Upon notification that an investigation was being conducted by the SLCP board and the charter school sponsor, DESE requested an audit by the State Auditor’s Office. DESE also assisted federal authorities in their investigation.

In early 2019, DESE immediately corrected the overpayment from the 2018-19 school year. Once the overpayment amount was established for prior years through an additional external audit, it was found that recovering any prior year overpayments at that time would have forced SLCP to close its doors mid-year to students.

SLCP closed in May 2019. DESE had planned to recover prior year overpaid funds by recovering any unobligated assets upon SLCP’s closure; however, due to the school’s overextended financial status upon closure, there were no unobligated assets to recover. In October 2019, the State Auditor’s Office issued a report stating that SLCP had $3.5 million in outstanding liabilities, which included $1.4 million in overpaid funds from DESE.

“We take very seriously the inappropriate and unlawful use of state education funds,” said Commissioner of Education Margie Vandeven. “We thank those involved in bringing Mr. Malone to justice, especially the SLCP board and sponsor who were forthright in bringing this to our attention. This abuse of power is a clear example of why strong oversight, governance and accountability measures must be in place to ensure that every education dollar is used to benefit the students and schools for which it is intended.”

The full release by the United States Department of Justice can be found here.