Former board members for Derrick Thomas Academy are accused in a new lawsuit of running up a mountain of debt and ignoring warnings that the deficit would close the school.
The lawsuit was filed this week in U.S. District Court by Wells Fargo Bank as the trustee for several bondholders against Derrick Thomas Academy Charter School Inc. and its seven former board members.
The lawsuit says the Kansas City school owes bondholders $10.6 million borrowed since January 2007 to buy, renovate and equip the school building and to pay off a $2.5 million debt to EdisonLearning, the company that managed the school.
It is the second lawsuit filed this year against the public charter school. EdisonLearning sued in Jackson County Circuit Court, seeking more than $2 million in per-pupil dollars meant to pay final teacher salaries.
That money is now being held by the court. Teachers haven’t been paid, and lenders are fighting over who should get the money.
“What the new lawsuit alleges is that DTA’s former board of directors was negligent in managing the school’s finances and through their actions led to the failing of DTA and its ability to repay bonds,” said Robin Martinez, the Kansas City lawyer representing Derrick Thomas and its transition board.
He does not represent the former board members named in the lawsuit: Janice Cade, Betty Brown, Stephan Wallace, Pete Muenks, Marvin Donaldson, Jacqueline Spencer and Michael McInerney. None of them could be reached for comment Wednesday or Thursday.
The transition board was put in place in December after the former board resigned the month before. The transition board was charged with keeping the school open until the end of the academic year. In June the school closed for good.
The lawsuit alleges that the former board members “negligently” decided to incur substantial debt, even though they knew or should have known it would mean operating the school at a deficit.
It alleges that the board kept the news about the school’s financial troubles from principals and approved hiring additional staff and bumping up salaries when the school was in financial distress.
Phyllis Chase, director of the Charter School Center at the University of Missouri-Kansas City, which sponsored Derrick Thomas Academy, said that in 2010 UMKC had put the charter school on notice about its finances and poor student test scores. The university warned school leaders then that it risked being put on probation and that failure to fix its problems put the academy in jeopardy of having to close.
The lawsuit also alleges that board members terminated an agreement with EdisonLearning without settling its debt with the management company, opting instead to self-manage. The decision, the lawsuit says, was contrary to advice the school had received from its legal counsel. And, according to the lawsuit, the Derrick Thomas board in 2011 voted to omit its debt to EdisonLearning from its financial audit and approved 1.5 percent salary increases for faculty and staff.
“What this lawsuit is, is bondholders looking into every available pocket,” Martinez said. “The reality is that Derrick Thomas Academy has no money.”