The Chicago Sun-Times reported that the SEC has charged the United Neighborhood Organization, which runs several charter schools in Chicago, with defrauding bond investors by “making materially misleading statements” about several charter-school construction contracts involving a UNO insider.
The charges were filed in federal district court in Chicago, and the Sun-Times wrote a big article about it—more than 750 words, which is big for that paper. And yet, there was no mention of how the charter school monster defrauded or even cheated kids, the taxpayers of Illinois, or its community.
Anyway, the Securities and Exchange Commission will be more closely overseeing the charter schools for a period of one year, based on a settlement agreed to in the case. The SEC mentioned that the case isn’t closed, because it involved insider dealings, but none of the other details have come out yet.
“We’re not done,” the Sun-Times quoted Peter KM Chan, the SEC’s assistant regional director for the municipal securities and public pensions unit in Chicago, as saying. “With regard to other parties that may have contributed to UNO’s securities violations, the investigation continues. So charges against others, including individuals, are possible.”
The SEC pointed the finger of blame at Juan Rangel, who leads the Hispanic community group and its charter network. He also served as co-chairman of Rahm Emanuel’s 2011 mayoral campaign. He lost his $250,000-a-year job as head of UNO once the insider dealing scandal hit, and the scandal cost the group millions of dollars in state funding. A 2009 law signed by Gov Pat Quinn would have given UNO about $98 million to build new charter schools, but the funds were cut off once anyone became suspicious of Mr Rangel.
The SEC also said UNO had raised $37.5 million by selling off state-backed bonds and paying two brothers of one of UNO’s top executives $8.5 million out of grant funds. The state grant to UNO, which might have been the largest grant in the country for charter schools, made it mandatory to report to the state any possible conflicts of interest or even any appearance of a conflict of interest, which UNO executives didn’t do.
As a result of this failure on the part of UNO, the state could have demanded the organization repay the money, but as you might expect, they don’t have the cash anymore. “UNO would not have had the cash to repay the grants and therefore would have had to liquidate the very revenue-producing assets (i.e., its charter schools) essential for repayment of the bonds,” the SEC complaint read.
