Big Money in Kids

Ora Carrier has been teaching children at the Nikka Tiffany School in South L.A. for nearly 25 years, and it's never been easy. She has to keep prices at her private school affordable to middle- and working-class families, leaving her with just enough money to keep the doors open, let alone to buy new books and computers. So she was thrilled the day she got a call from something called the Cato School of Reason.

"They said they wanted to help the private schools in the community," recalled Carrier. Cato promised funding based on Carrier's enrollment in exchange for work samples from students and some basic testing. She understood Cato to be a government program of some sort.

"I felt that they wanted to know what the private schools are doing - if they are teaching the children," said Carrier. "I didn't have a problem with that. My children can do math, and they can read and write. I didn't mind anyone coming in."

As for the funding: "I thought, 'At last we're getting help.' Even if it's just enough money to supply the classrooms, fix up the playground, put paint on the building."

In fact, there was more money than that, but Carrier wouldn't see it. The real payoff went to Cato itself.

Without knowing it, Carrier had signed her student roster over to Cato, a maverick charter school based in Victorville that was then contacting private schools across Los Angeles County in an effort to build enrollment and, in turn, bank state education funds. All told, in the past two years Cato garnered millions of state dollars through "satellite" operations such as the Nikka Tiffany School. State officials have characterized Cato's alleged enrollment practices as unethical and possibly illegal.

The Cato school was profiled in these pages two weeks ago, including its origins as a home-school support service, the problems it encountered with its original sponsors at the Snowline school district in San Bernardino County, and the increasing concern expressed by state officials, who concluded that Cato was capitalizing on loopholes in the state education code governing charter schools.

This week's article looks in detail at how Cato and founder Thomas A. Cosgrove, a 67-year-old businessman, expanded the operation to encompass some 40 Cato satellite locations, many of them private and church schools, affiliations that continued until as recently as last June. In some cases, the private school operators served as willing dupes who thought they'd tapped into a new stream of government funding. School owners interviewed by the Weekly said they never saw all the cash they were promised, but only a few realized they'd been drawn into a legally dubious scheme.

Cato management would not comment for this story, but Cato's activities were clearly spelled out in documentation obtained by the Weekly and in the accounts of numerous Cato insiders who spoke on or off the record. In previous interviews, Tom Cosgrove noted the lack of guidelines governing charter schools, adding that until rules are established, "We are going to make them up as we go along." The state has since passed legislation specifically banning Cato's practice of enrolling private-school students.

Key to Cato's rapid expansion from a small, high-desert charter school to a million-dollar enrollment clearing-house was Cosgrove's ability to line up a team of high-profile community figures, including retired Congressman Mervyn Dymally; Melanie Andrews, an elected board member of Compton College; and Brother Modesto Leon, the widely admired East Los Angeles-based activist and educator. Help also reportedly came from Mark Dymally, Mervyn's son and an elected board member of the Metropolitan Water District, though the younger Dymally insists that he had no connection to Cato.

Mervyn Dymally and Andrews were paid for their services to Cato, although both began to have difficulties with the school. Through it all, Cato CEO Cosgrove was obsessed with pushing up enrollment numbers - until last December, when his practices came to the attention of state officials. Even then, Cosgrove only backed down partway.

At its estimated peak, Cato's enrollment numbers rose as high as 3,500 - with each student worth $20 per day in state education funds. The enrollment at Nikka Tiffany alone, a small school with about 48 students, generated an estimated $173,000.

And what did Cato provide to Nikka Tiffany students? Some photocopied handouts, a few textbooks and one round of schoolwide testing that lasted for parts of two days. Carrier was grateful for the handouts, which she found helpful, but she, in fact, was doing more legwork for Cato than the other way around.

Cato required that Carrier collect work samples from her students, about one page per student per day, which Cato kept on file to show to auditors as proof that its students were busily employed. But the Nikka Tiffany students, by and large, weren't doing Cato work. "It didn't change anything," Carrier said of Cato's contribution.  

The same goes for the operator of another South Los Angeles school, who spoke with the Weekly on the condition of anonymity because, she said, Cato administrators still owe her money and she doesn't want to anger them. Cato also broke promises of computers and new textbooks. "Getting computers was one of the first things that lit up my eyes when I was approached," she said. "When you hear computers and books, your eyes light up and your heart jumps because you want it so bad."

About 200 of that school's students were signed over to Cato for most of the school year, probably resulting in more than $600,000 of state revenue. All told, Cato took in $3.9 million in public-education funds in the 1996-97 school year and more than $7 million last year.

Tom Cosgrove made his interests clear when he first met with Dave and John Flores, two brothers who were well-connected in the Latino enclaves of L.A. and Orange counties. "He wanted to expand beyond his desert jurisdiction and go over the hill into Los Angeles," said John Flores in an interview.

At the time, in December 1996, Cosgrove was just beginning to venture aggressively into L.A. County. After talking it over with the Flores brothers, Cosgrove hired John to recruit for Cato among his contacts. John Flores was a veteran community activist who'd served as director of L.A. Youth Gang Services, and later as executive director of the Orange County Community Development Council. Dave Flores, a former teacher and school administrator, was asked to set up computerized curriculum for the satellite programs. The Flores brothers put together a persuasive pitch, a 50-50 split of state money between Cato and the satellite.

The state money was virtually there for the taking because California had few rules governing attendance at charter schools. Unlike traditional schools, charters have had no minimum-day requirement or any regulations on who qualifies as a teacher. The idea was to make charter schools, which emerged as the backup plan among supporters of school vouchers, into lean machines for education reform by sparing them from cumbersome regulations. But this freedom left an open field for Cato's unorthodox and profitable practices.

In making their case to prospective satellite operations, the Flores brothers noted that every 50 students would generate about $20,000 in state funds per month. Cato would get $10,000. The satellite also would get $10,000, but would bear the brunt of expenses, including about $2,000 a month for curriculum, $2,000 a month for a Cato "facilitator" and $100 a month per computer to lease five computers. That still left $5,500 in cash for the satellite.

John Flores said his targets were mainly social-service agencies that did not charge tuition to their students. He and his brother never signed up church schools or other private schools that charged tuition.

Flores delivered key clients for Cato, including Abrazar, an Orange County nonprofit that used Cato funds to offer classes to adults without high school diplomas. Another major satellite was Soledad Enrichment Action, run by Brother Modesto Leon. At the time, Leon had lost state funding for his own well-regarded youth programs and was anxious to keep his classes going at locations across the L.A basin. Leon eventually was granted his own charter school to enroll youths on probation, but his Cato affiliation allowed him to open his classes to all comers.

Leon retained his Cato affiliation until this summer, but was dissatisfied with it, according to the Soledad school's administration. For one thing, Cato was not providing a usable curriculum. For another, added Flores, promised computers took months to arrive.

Cosgrove fired the Flores brothers after they worked for him several months; Cato administrators regarded them as too expensive, and also faulted Dave Flores for selling schools his own curriculum. John Flores said his brother had little choice, given what Cato was offering as an alternative.

"Eventually, what Cato became is 'Turn in the roll sheets,'" said Flores. "Theoretical discussions about education fell by the wayside. We were just something to pump up their enrollment so they could enrich themselves."

That theme was echoed by Ruben Aguilar, a former Cato facilitator who worked under the auspices of Brother Leon's program. Aguilar said he was paid a flat fee of $1,800 a month to teach with no vacation or health benefits. He averaged about 30 students in his class. From an education standpoint, Cato required only that he teach students one hour a day. Aguilar said he insisted on a full school day anyway and had to get by with little or no curriculum assistance or materials from Cato.

As in other places, Cato required Aguilar to gather work samples. However, "they didn't collect them. They don't know what I did. I gave my students assessment tests, and they didn't collect the tests. The only time I ever heard them ask me for work samples was when I left. Someone called and said, 'Ruben, we're going to have an audit, so do you have work samples?'"  

On attendance, though, Cato was a stickler. On one occasion, said Aguilar, he was one day late turning in roll sheets, and Cato docked him an entire month's pay. Of course, Cato never checked that the students on the roll sheets were genuine, only that Aguilar turned them in, so Cato could collect its state funds.

The Flores brothers gave Cosgrove entree into Latino L.A. His allies in black L.A. were at least as effective. They included Mervyn Dymally and Compton College trustee Melanie Andrews. Dymally was paid $5,000 a month plus expenses. Andrews earned at least $10,000 total for her work as a Cato facilitator.

Sources told the Weekly that Dymally's recruitment efforts culminated in a dinner he hosted at an Inglewood-area hotel in October 1997. The gathering of 30 included key Cato administrators, Andrews, coordinators from Dymally-recruited schools and representatives from at least three prospective satellites. Cosgrove reportedly groused about the cost, but in the end, he picked up the bill.

Most of the satellites in South Los Angeles posed more troublesome legal issues than did the Flores sites. Most charged their students tuition, for example, even though public school funds were going to Cato for these very students. Others - as many as 13 - were religious schools, and presented tricky questions of church-and-state separation. The schools' enrollments ranged from well over a hundred students to the 18 primary-grade students at the Heavenly Vision Christian Day School Academy in South Los Angeles.

Heavenly Vision administrator Sandy Lee is grateful to former Congressman Dymally for introducing her to Cato. "He was and is a friend to the school," said Lee. "All the church members know him. He sometimes comes and speaks to the kids and the church."

Lee said that the school's first facilitator was Dymally's son Mark, a water-board official. After the first month, she added, the role of Cato liaison was taken over by a Mervyn Dymally aide. Mark Dymally denied any connection to Cato. "I never had a professional relationship with Cato," he said emphatically. "I never received a dime from Cato." He'd seen Cosgrove a few times, he added, because he shares an office suite with his father, "but I have no relationship in any shape, form or fashion with Cato."

Mervyn Dymally did not respond to an interview request for this story.

Heavenly Vision received one computer from Cato and some software, but nothing else. Still, Lee is thankful that her school got to keep the computer, because her students still use it. And the school's share of state funds allowed Lee to offer students field trips and piano and karate lessons.

Cato made no curriculum requirements of Lee's school, which uses a Christian-theology-based curriculum called A Beka Book. In biology, for example, A Beka reviews the theory of evolution, but primarily as a vehicle to discredit it. The biblical creation story is presented as the proper explanation of how life came to be, along with scriptural support for this position. A Beka is widely used by Christian schools, but is not permitted in public schools, nor may public school funds be used to finance it.

The church-state issue and other concerns created uneasiness at Cato headquarters. "At one point there was talk of cutting Dymally loose," said one Cato insider. "There was talk that he was involved in shady dealings. We suspected that the enrollment figures he was reporting involved phantom students - fake names with fake addresses." At the very least, it appeared that students were enrolled in Cato without their knowledge. As previously reported in the Weekly, Dymally and top Cato administrators had decided that teachers or administrators could be considered "daily guardians" of students, and that parental consent was not necessary.

Some of the more scrupulous Cato managers decided to test their suspicions about Dymally by sending out post cards to the listed addresses of Cato students, ostensibly to survey interest in a Cato-sponsored field trip. A number of cards came back as undeliverable, but Cato did not confirm any phantom students. The bigger issue turned out to be parents of enrolled students who said they'd never heard of Cato.

Dymally had nothing to do with the church school that probably fared best in its dealings with Cato. It was Barstow Light and Life, whose administrator, Karen Legree, belonged for a while to the Cato Council, the charter school's quasi-governing board, which was largely controlled by Cosgrove. In October 1997, Cato had only 40 computers available for use by all the students at its satellite campuses. Of these, 17 went to the Barstow Christian school.  

At the time, Cato had but 100 computers for all its students, including the home schoolers - a stark discrepancy from Cato's marketing claim of a computer for every student.

At Barstow Light and Life, according to sources, church elders agonized over affiliating with Cato, but eventually decided it was okay because the church-teaching portion of the day could be segregated from the "public school" portion of the day. Light and Life, like many other church schools, uses the A Beka curriculum, said Legree.

"Parents deserve the right to choose what schools their kids go to," added Legree. "Because of that it's really, really important that if they choose to put a child in a private school for religious purposes or whatever, they should also be able to get the extra amenities," such as computers, available in public schools. She added, "That's what Cato was all about. It was just a creative way of getting the best of both worlds and remaining legal."

By the church's interpretation, Cato was offering classes for one period a day. The state however, was paying Cato its standard fee for a full day of enrollment for each of the 200 Light and Life students signed up.

Cato's enrollment boom went bust when state officials got wind of some of its practices from a parent's complaint regarding K. Anthony's, a private school and Cato satellite in Inglewood. Within months, Cosgrove canceled his contracts with numerous satellites, including the K. Anthony's school. But he maintained ties to several long enough to claim another semester's worth of state funding. He was certainly not pressed to sever questionable arrangements by the sponsoring school district, Apple Valley Unified, which evinced little apparent interest in the matter. The school district, after all, had its own contract with Cosgrove to receive a 10 percent cut of all funds that Cato generated outside of Apple Valley.

At least two of the tuition-charging private schools remained on Cato's roster through April. Cosgrove also retained some of the Flores satellites, which neither taught religion nor charged tuition.

Brother Leon's school pulled out of Cato on its own this summer. Although Mervyn Dymally would not comment to the Weekly, one satellite administrator reported that Dymally called several times recently over concern that her school had not received promised funding. Meanwhile, Compton College trustee Andrews had to shut down her start-up Cato branch because Cosgrove canceled her contract. She said she has considered legal action against Cato, but added that her attorney advised her to make no comment. She hopes to start a new charter school, one with state-certified and unionized teachers who "would have more control over what goes on in the classroom." Andrews said that not all charter schools should be tarred by the shortcomings of Cato.

As for Cato, Cosgrove has expanded his home-schooling operations to Northern California, and reportedly is also exploring other business opportunities with the nest egg he built up through the satellites. One such venture is a recent contract to do computer training for Southwest Gas in Victorville.

This new direction was not likely an attack of conscience, according to numerous ex-Cato employees. In the words of one, "I told Tom he could not do what he was doing. So did other people. He disagreed." This same former staffer added, "Tom got rid of everyone who didn't agree with him."

Kevin Uhrich contributed to this story.

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