Friday, July 11, 2014

Sometimes it really is just because "that's where they keep the money"

Joseph and I have been having a long running debate about the emphasis of many of my education posts. I tend to spend quite a bit of time discussing culture, both specific to the reform movement and in relation to the type of corporate culture associated with management consultants and MBA programs.

I tend to see this culture as a big and interesting part of the story. Joseph is more inclined to see it as a secondary factor and something of a distraction. He argues that when there unquestionably bad actors and egregious wrong-doing, that should be our focus.

This story by Jennifer Dixon (from the Detroit Free Press's exceptional series on corruption in the Michigan education system) would be a point for Joseph.
The Summit payments to the Witucki-Cancilliari companies added up. In 2008-09, for example, the schools paid Helicon and other companies nearly $1.8 million for management fees, janitorial and tutoring.

Over time, the revenue streams just kept multiplying.

When Summit North issued $26.6 million in bonds to refinance existing bonds, pay off leases and finance an ice rink, Helicon collected nearly $400,000 for “financial services,” while a construction company owned by Dino Cancilliari and his brother built the school ice rink for $3.2 million.

In 2008, Central Michigan raised questions about conflicts after the school’s outside auditors revealed Summit North had done several deals with companies tied to Dino Cancilliari and Witucki. Under pressure from CMU [the Summit schools’ authorizer, Central Michigan University], the schools replaced Helicon, its lawyers and auditor-accountant. Witucki died in 2009.

The schools’ boards allowed the Cancilliaris to remain at the schools, with Dino Cancilliari earning $200,000 a year as facilities director and Alison Cancilliari earning $250,000 as program director. But even as she was paid to run the schools, Alison Cancilliari worked off-site — at the offices of a textbook company the Cancilliaris founded.

In 2011, Summit hired Canyon Insulation of Corona, Calif., to oversee a $4-million construction project; the company was owned by Alison Cancilliari’s brother, Kenneth Sirls. And then an anonymous tipster complained to CMU about Sirls, saying Canyon didn’t build houses, let alone schools.

In response, CMU demanded hundreds of pages of records from the schools. The schools’ finance director, Brian Beaudrie, came forward with worksheets, invoices and other records. His brother, it turned out later, was the anonymous tipster, who also went to the FBI, which does not confirm or deny investigations. CMU said it also contacted the FBI. Beaudrie alleged that:

■ Alison Cancilliari and a Dino Cancilliari company received a cut of Helicon’s management fees from 2002-07 worth hundreds of thousands of dollars, if not more.

■ Helicon billed Summit hundreds of thousands of dollars for “benchmark tracking,” but did no work.

■ Summit reimbursed Helicon $20,000 to pay off a fired employee who had threatened to expose the company for financial improprieties. Alison Cancilliari said she couldn’t find any record of the payment.

■ Summit paid a school employee for two years while she worked at the Cancilliaris’ textbook company. Cancilliari said the woman worked there only part-time.


The new board at Summit has a much different opinion. It has countersued Alison Cancilliari, alleging she had an agreement with Helicon and Witucki to receive kickbacks totaling $3 million.

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