The Utah attorney general’s office weighed earlier this year whether to prosecute the founder of a mismanaged charter school for possible financial misconduct. But, in the end, investigators determined there was not enough evidence to secure a conviction.
“The attorneys weren’t confident they were going to get anything,” said Richard Piatt, spokesman for the office, on Tuesday.
The decision to not charge Michael Farley, who created the American International School of Utah, was made in February. A law firm hired by the charter had reviewed Farley’s work after his controversial departure, and sent its allegations to the attorney general’s office. In a declination letter released this week, the director of the A.G.'s white collar and commercial enforcement division said it was “unlikely that a criminal conviction could be secured.”
Instead, the office will move forward with a lawsuit filed Friday against the school, as a whole, and the for-profit company that owns it — and it’s still related to the financial troubles there. The suit asserts that AISU improperly agreed to sell all its assets to the company rather than surrendering them to investors or to taxpayers, who are picking up the school’s debts.
The suit seeks the termination of that sales contract and a temporary restraining order, so the company cannot benefit financially as the school shuts down over poor performance.
Tasi Young, who succeeded Farley as director and has since left the post himself, is currently the head of the company. He said the school never owned the property and that the furniture was paid for by investors.
“This latest thing with the lawsuit, it borders on ridiculousness and utter waste of resources," he suggested. “I just don’t know if this is incompetence at the state level or if they have some larger strategy. I don’t think this is legal rocket science.”
Young said the agreement was actually meant to release any claims that the company had on the property; and he doesn’t intend to fight the lawsuit. But he said he’s frustrated that the state is stepping in now — instead of helping when the charter could have used advice and support.
“They denied us resources," he added. "They denied us help.”
Farley, though, was the one largely at the center of the many discussions involving the charter’s poor financial state since its board of directors voted to shutter it this spring under pressure to repay debts. AISU will officially be out of business on Aug. 15.
The institution was first placed on “warning status” late last year for the money it owed — which several administrators at the school have pinned on mistakes made by Farley, who left after three years of running the charter and the company that owns it. (He says he was forced out.)
After years of concern in Utah about the oversight of charter schools, the legal actions involving AISU are a rarity. The potential criminal charge against Farley, for instance, is one of the first times such a case has been considered.
Piatt said he didn’t know the specifics of why there wasn’t enough evidence to move forward with it — whether it was a problem of records not being kept or a matter of not having witnesses. But AISU has had issues since its founding five years ago. And Farley was the only person investigated with connection to the school, Piatt added.
“I never had any concern on legal issues,” Farley responded Tuesday. “But there’s nothing I can say that’s going to tilt the balance.”
He said he’s become the scapegoat for the school’s ongoing problems. And he contemplated filing a wrongful termination suit at one point.
“I don’t accept at all the characterization they’ve made of me,” Farley said. “They, for the last two years, have been repeating this narrative that I think is self-serving and not accurate, and it’s damaged my reputation.”
The school is indebted to the state and federal government for $415,689 for funding that was supposed to be used for special education. AISU, according to a scathing audit published by the Utah State Board of Education, spent that money instead on salaries and health benefits or otherwise didn’t properly document it. The debt, due on June 26, has not been paid.
The school also faces potentially millions of dollars in other unspecified debt, according to Jordan King, its spokesman before the closure.
Close the charter has been messy. Earlier this month, the Utah State Charter School Board voted to remove Young from the school. Members unanimously decided, too, to replace him with state Auditor John Dougall to finish out the process of shutting down the school.
At the same time, every member of AISU’s board of directors — which had already signed the July 11 sales agreement with the company — resigned.
After less than a week, Dougall stepped down from the school position. Now, Royce Van Tassell, the executive director of the Utah Association of Public Charter Schools, is overseeing the closure and trying to recoup some of the money owed.
The lawsuit filed by the attorney general’s office last week has that same aim. The lawyers worry that desks, chairs, computers and other property there will be handed over to AIS LLC instead of to the state or other debtors who are owed.
“They didn’t have the authority to do that [agreement] under statute,” said Assistant Attorney General Alain Balmanno. “We feel fairly strongly that we’re right.”
He suggested the board may have signed it to help the LLC benefit financially from the closure. Balmanno filed the request to terminate that contract last week and for a temporary restraining order Monday.
The new board headed by Van Tassell, Balmanno said, has informally agreed to hold off on turning over the assets. And Van Tassell said he views those assets as maybe the only way to pay off the charter’s debts.
"As far as the current board is concerned, we’re Switzerland,” Van Tassell said. “But that property could reduce those obligations.”
As the process of closing the school continues, the Utah Board of Education will have a chance to weigh in Thursday and the state auditor intends to release the results of an investigation into the finances at the charter in December.