May 7, 2013

VIA PERSONAL DELIVERY Sheila Jordan, Superintendent Alameda County Office of Education 313 W. Winton Avenue Hayward, CA 94544 Alameda County Board of Education c/o Teresa Kapellas, Executive Director, Administrative Services Alameda County Office of Education 313 W. Winton Avenue, Room 372 Hayward, CA 94544

Re:

American Indian Model Schools: Appeal of Oakland Unified School Districts Revocation of Charters Public Hearing Date: May 14, 2013

I.

INTRODUCTION A. OUSD Board Decision to Revoke On March 20, 2013, the Oakland Unified School District (OUSD or District) Board voted to

revoke the charters of the American Indian Model Schools (AIMS). The OUSD Board reached this decision after making two key sets of factual findings. First, the District found that AIMS Board and Founder had violated the law and AIMS charters, committed fiscal mismanagement, and failed to follow Generally Accepted Accounting Principles (GAAP). (Record for Appeal, Exh. O, OUSD 7216-7218; Exh. G, OUSD 6251-6268.)1 Second, the District found that AIMS had failed to adopt sufficient

remedies in response to the Districts Notice of Violation or make good faith efforts to take the remedial steps identified by the District in the Notice of Violation. (Record for Appeal, Exh. O, OUSD 7219 7223.)

Exhibit 1 to this Brief is an Index to the Record of Appeal submitted by OUSD.

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Chief among the Districts reasons for the revocation was the fact that AIMS had violated conflict of interest laws through contracts with its Founder, Ben Chavis (the Founder). As a result of these interested-party transactions, the Founder personally profited in a sum exceeding $3.8 million. (Record for Appeal, Exh. O, OUSD 7217-7218.) Despite the fact that the Founder wrote checks from AIMS bank accounts to companies that he owned (Record for Appeal, Exh. E, OUSD 1964, 1966; Exh. G, OUSD 6285-6292), the AIMS Board refused to recognize or acknowledge that these payments and contracts were improper and violated the law. (Record for Appeal, Exh. P, OUSD 7397 7398; Exh. E, Binder 3 Chart No. 3.) Moreover, the AIMS Board refused to institute any meaningful institutional reform to prevent recurrence of these types of violations. (Record for Appeal, Exh. O, OUSD 72187222.) In short, the AIMS Board offered no meaningful reassurance that it had either the capacity or the willingness to prevent future violations of law or financial improprieties. B. Post-Revocation Events at AIMS: Employee Terminations, Turnovers, and Instability Post-revocation events at AIMS demonstrate that AIMS still has not made progress in remedying the violations that led to the revocation. At the AIMS Board meeting on April 12, 2013, the AIMS Board terminated Interim Director Sylvester Hodges and Site Administrator Jennifer Avelinoboth of whom had advocated for reforms identified by the District. (Record for Appeal, Exh. S, OUSD 7414.) Toni Cook, AIMS Board President, who had also advocated for these reforms, resigned in protest. (Record for Appeal, Exh. T, OUSD 7419-7420.) This pattern of retaliation against those who speak out is not new. In the past 12 months alone, seven leaders have left AIMS or been removed/terminated after advocating for reform and/or sharing dissenting views:
2

Kaytena Beckford, Site Administrator Michael Rodriguez, Board Member2 Chris Stember, Board Member

At July 17, 2012 meeting, the AIMS Board voted to remove members Stember and Rodriguez, who had advocated for a third-party investigation into the findings in the FCMAT Report. (Record for Appeal, Exh. O, OUSD 7360-7361.)

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Jason Chu, Site Administrator Jennifer Avelino, Site Administrator Sylvester Hodges, Interim Director Toni Cook, Board Member and Board President

In addition, a number of established charter school consultants, such as charter school attorneys Paul Minney and Jennifer McQuarrie, and Charter Schools Development Center Executive Director and Founder Eric Premack, were retained by AIMS for a brief period lasting no longer than a month. The continued instability and turnover in leadership at AIMS validate the Districts decision to revoke the charters.3 This brief is intended to provide a high-level summary of the substantial evidence on which the revocation is based, as well as a roadmap of the revocation proceedings before the OUSD Board. The substantial evidence supporting revocation is complex and extensive and is not discussed in full detail in this brief. Rather, this brief will summarize the primary grounds for revocation and will incorporate by reference the underlying Notice of Violation (Record for Appeal, Exh. D), Notice of Intent to Revoke (Record for Appeal, Exh. G.), and the OUSD Board Resolution revoking the charters (Record for Appeal, Exh. O).4

Jennifer McQuarrie was retained by the AIMS Board on June 19, 2012. Ms. McQuarrie subsequently advised the District Charter Office that she voluntarily terminated the day after AIMS Board Directors Rodriguez and Stember were removed from the Board. Paul Minney was retained by AIMS from September 7, 2012 to October 8, 2012. The records provided to the District indicate that Mr. Minney conducted a governance workshop for the AIMS Board at its 8/31/12 meeting and that the contract to retain him was approved at the September 7, 2012 AIMS Board meeting. Mr. Minney also attended a meeting on September 20, 2012 with the Districts Charter Office and legal counsel for the District, John Yeh, to discuss the NOV. On October 8, 2012, in response to an e-mail inquiry from legal counsel for the District, Mr. Minney advised the District that he no longer represented AIMS. 4 Note that the OUSD Board Resolution is attached as Exhibit 2 to this brief. The Notice of Violation and Notice of Intent to Revoke are exhibits to the Resolution and are therefore included in Exhibit 2 as well.

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II.

FACTUAL AND PROCEDURAL BACKGROUND A. AIMS Charters AIMS currently holds three charters granted by OUSD: 1. American Indian Public High School, Renewal Term July 1, 2011 July 1, 2016 (California Department of Education Charter No. 01-61259-0111856); 2. American Indian Public Charter School, Grades 6-8, Renewal Term July 1, 2011 July 1, 2016 (California Department of Education Charter No. 01-61259-6113807); 3. American Indian Public Charter School II, Grades K-8, Renewal Term July 1, 2012 June 30, 2017 (California Department of Education Charter No. 01-61259-0114363). B. June 12, 2012, the Fiscal Crisis Management Assistance Team (FCMAT) Issued an Extraordinary Audit of the American Indian Model Charter Schools In June 2012, FCMAT issued an Extraordinary Audit of the American Indian Model Charter

Schools, detailing findings of conflict of interest violations, fiscal mismanagement, and improper use of public funds. The County Superintendent referred the FCMAT report to the Alameda County District Attorney, and as a result of the FCMAT findings, effective July 1, 2012, the California Department of Education terminated After School Education and Safety Program (ASES) funding to AIMS and the California Finance Authority found AIMS in default of the Charter School Facilities Grant Agreements. C. September, 2012 Notice of Violation In September, 2012, the District issued a Notice of Violation to AIMS under Education Code Section 47607(d). (Record for Appeal, Exh. D, OUSD 65-124.) The Notice of Violation, which had been approved by the OUSD Board on September 27, 2012, was based on numerous violations, including but not limited to the following: 1. Allowing the Founder to personally profit in the sum of approximately $3.8 million in public funds through contracts between AIMS and companies owned by him and/or his spouse in violation of conflict of interest laws; and 2. Failing to maintain financial or operational control over AIMS operations, which resulted in the following: inappropriate use of AIMS credit cards; forgery of an attendance record; non-compliance with teacher credentialing requirements; and violation of the After School Education and Safety (ASES) Program grant terms;

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3. Failing to follow Generally Accepted Accounting Principles (GAAP), including failing to maintain documentation of fiscal transactions and failing to disclose losses, such as those from an improper real estate escrow transaction; 4. Failing to make an adequate record of the AIMS Board's actions, including failing to maintain board minutes for all meetings and failing to conform board agendas and minutes to the requirements of the Brown Act; 5. Failing to follow its own rules of governance, including rules regarding selection of new board members. The Notice of Violation stated that [i]n its written response, AIMS will be expected t o address the violations addressed herein and identify remedial steps in the areas raised in the Notice of Violation, including but not limited to the following: 1. Management of the AIMS organization to ensure compliance with applicable legal requirements, including enrollment and teacher credentials; 2. Changes to [the] structure and operation of [the] AIMS governing board to ensure greater fiscal and operational control; 3. Identification of responsible agent for AIMS fiscal operations; 4. Institution of conflict of interest enforcement procedures; 5. Appropriate separation of Founder and spouse from all aspects of AIMS operations. (Record for Appeal, Exh. D, OUSD 118-119.) The District provided AIMS 60 days to remedy the violations and to provide a written response. D. Remedy Period and AIMS Response AIMS submitted its written response (November Response) on November 26, 2012. (Record for Appeal, Exh. E.) AIMS response included the following primary contentions (among others): The contracts at issue did not violate any laws because the AIMS Board knew that the Founder had a financial interest in the contracts at the time that they approved them (Record for Appeal, Exh. E, Binder 3 Chart); The AIMS Board maintained control over the charter schools fiscal affairs because the credit card expenses were appropriate and related to school business and the organization properly documented its transactions (id.).

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E. January 24, 2013 Notice of Intent to Revoke The District conducted an extensive review of AIMS November Response and found substantial evidence that the charter school ha[d] failed to refute [the violations] to the chartering authority's satisfaction, or remedy a violation identified in the Notice of Violation. (Record for Appeal, Exh. G, OUSD 6242; Cal. Admin. Code Tit. 5, 11968.5.2(d).) included the following: 1. AIMS did not acknowledge that its Founder, Ben Chavis, committed conflict of interest violations, nor did AIMS take steps to address those conflicts of interests. 2. AIMS failed to institute acceptable institutional reforms to safeguard against future violations. 3. AIMS failed to institute acceptable changes in its financial and operational procedures to ensure that future fiscal mismanagement does not occur. 4. AIMS failed to engage sufficient institutional expertise, such as a charter management organization, to implement the necessary institutional and organizational overhaul of its operations. 5. AIMS failed to address in an acceptable manner any means or process for defining the role of the Founder or achieving the necessary separation of him from the organization. (Record for Appeal, Exh. G, OUSD 6242.) At its January 23, 2013 meeting, the OUSD Board approved the issuance of a Notice of Intent to Revoke, which was served on AIMS the following day. (Record for Appeal, Exh. G, OUSD 6241 6292.) F. February 27, 2013 Public Hearing and AIMS Supplemental Response As required by Education Code section 47607(e), the District held a public hearing on whether evidence exist[ed] to revoke the charter and heard comments from many individuals, including thenInterim Director Sylvester Hodges and then-Board President Toni Cook. (Record for Appeal, Exh. K.) AIMS also submitted a supplemental response (February Supplemental Response) to the Notice of Violation on February 27, 2013, consisting of a list of 48 steps that the charter school claimed constituted remedies to the violations identified in the Notice of Violation and accompanying exhibits. The primary grounds for this conclusion

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(Record for Appeal, Exh. L.) Although the 60-day remedy period ended on November 28, 2012, the District allowed AIMS to submit its February Supplemental Response and evaluated the 48 measures identified by AIMS as part of its assessment of whether substantial evidence existed to revoke the charters. G. March 20, 2013 Revocation Decision Upon considering AIMS November Response and the February Supplemental Response, OUSD Superintendent Anthony Smith recommended to the OUSD Board that it revoke the AIMS charter because of substantial evidence that AIMS violated the law and its charter, committed fiscal mismanagement, failed to follow generally accepted accounting principles, and failed to remedy the violations listed in the Notice of Violation. (Record for Appeal, Exh. M.) The OUSD Board voted to revoke the charters at its March 20, 2013 meeting. The factual findings supporting the OUSD Boards revocation are contained in its Resolution No. 1213-0124 Revoking the Charter of the American Indian Model Schools (Resolution). (Record for Appeal, Exh. O.) The OUSD Board made the revocation effective June 30, 2013, to allow current students to complete the school year.5

III.

SUMMARY OF SUBSTANTIAL EVIDENCE SUPPORTING REVOCATION This section provides an executive summary of the evidence supporting the OUSD Boards

decision to revoke the AIMS charters. The evidence supporting revocation is discussed in more detail in the Notice of Violation (Record for Appeal, Exh. D), Notice of Intent to Revoke (Record for Appeal,

The District worked hard to ensure that if the AIMS charters were revoked the AIMS students would have a multitude of school placement options. To that end, OUSD provided several opportunities for AIMS families to find alternative school placements for their children. Beginning in February, OUSD held three school enrollment fairs. The fairs allowed AIMS parents to explore OUSD schools as well as the many charter schools located within the OUSD border. Many charter schools attended these enrollment opportunities at the request of OUSD and have since enrolled many AIMS students. OUSD reached out to AIMS parents through a variety of ways. Notices were placed in local Chinese language newspapers, fliers were created in several languages and sent directly to the students homes, AIMS schools were given fliers to pass out to their students, and meetings were held with community leaders.

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Exh. G.), and the Resolution to Revoke (Record for Appeal, Exh. O), all of which are incorporated herein by reference. A. Scope of County Board's Review Under Education Code Section 47607(f)(2), the County Board's review of the revocation decision is limited to determining whether the revocation was based on substantial evidence. The County Board can only reverse the revocation if the county board of education determines that the findings made by the chartering authority. . .are not supported by substantial evidence. (Ed. Code Section 47607(f)(2).) B. Substantial Evidence Standard Evidence is substantial if any reasonable trier of fact could have considered it reasonable, credible, and of solid value. Substantial evidence is relevant evidence that a reasonable mind might accept as adequate to support a conclusion.

Kearl v. Board of Medical Quality Assurance, 189

Cal.App.3d 1040 (1986); Estate of Teed, 112 Cal.App.2d 638, 644, 247 P.2d 54 (1952); Polanski v.

Super, Ct 180 Cal.App.4th 507, 537 (2009). A conclusion may be supported by substantial evidence
even if reasonable people could disagree as to the conclusion.

Kearl v. Board of Medical Quality

Assurance, 189 Cal.App.3d 1040 (1986); Estate of Teed, 112 Cal.App.2d 638, 644, 247 P.2d 54 (1952); Polanski v. Super, Ct 180 Cal.App.4th 507, 537 (2009).
C. Substantial Evidence Supports OUSDs Findings That AIMS Committed Violations of Law and Charter, Engaged in Fiscal Mismanagement, and Failed to Follow Generally Accepted Accounting Principles 1. Violations of Law and the AIMS Charters AIMS violated conflict of interest laws, including the Political Reform Act (Government Code Sections 87100 et seq.) and Government Code Sections 1090 et seq., by entering into contracts with its Founder and his spouse, all of which resulted in direct payments from AIMS to the Founders

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companies and/or his wifes companies.

The Founder wrote and signed checks from AIMS bank

accounts to his own companies. (Record for Appeal, Exh. E, 1964, 1966; Exh. G, OUSD 6285-6292.) The contracts between AIMS and its Founder included the following: Leases at all three school sites between AIMS and companies in which the Founder had an ownership interest. Construction contracts between AIMS and companies in which the Founder held an ownership interest (i.e., ADS, Lumbee). A contract to pay OASES, a company in which the Founder had an ownership interest, a 15 percent oversight fee to administer the After School Education and Safety Program (ASES) Grant. Contracts for fiscal and administrative services between AIMS and A & A Business Solutions LLC and AAFS, companies in which the Founders spouse had a financial interest. (Under community property laws, the Founder therefore had a financial interest in the property too.)

The contracts between AIMS and its Founder violated the Political Reform Act. The Political Reform Act prohibits public officialsincluding officers and employeesfrom entering into any contract in which they hold a financial interest. The regulations implementing the Political Reform Act contain an eight-step test to determine whether a conflict of interest exists. As shown below, all eight steps apply to the Founders contracts with AIMS. The contracts, therefore, violated the Political Reform Act.

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Step 1:

Criteria Is a public official involved?

2:

3:

Is the public official making, participating in making, or influencing or attempting to influence a governmental decision? Does the public official have an economic interest involved in the decision? Are the public officials economic interests directly or indirectly involved in the decision? What materiality standard applies? Are public officials economic interests materially affected by the decision? Are they important enough to trigger a conflict as defined by the Political Reform Act? Does the Public Generally exception apply?

4: 5: 6:

Application Yes: The Founder was director of AIMS schools, and a board member briefly.6 Yes: The Founder wrote checks from AIMS bank accounts to his own companies.7 Yes: AIMS funds were paid directly to the Founders companies. Yes: The Founder directly benefited from contracts. Yes: The Founders financial interest was material. Yes. The Founder was directly paid through the contracts. No. The Founder and his spouse were the sole parties receiving payment from AIMS under these contracts. No. No steps were taken to recuse or abstain. In fact, the Founder wrote checks to himself.

7:

8:

Is the public officials participation legally required?

The AIMS charters expressly state that the Board will comply with the Political Reform Act. Because the contracts violated the Political Reform Act, the contracts violated AIMS charters as well. Government Code Section 1090 prohibits public officialsincluding officers and employees from entering into any contract in which they hold a financial interest. Government Code Section 1090 applies even where a public official or employee does not participate in the execution of the questioned contract. (People v. Sobel, 40 Cal.App.3d 1046, 1052 (1974).) Under Government Code Section 1090, the AIMS Board was prohibited from entering any of the contracts with the Founders companies.

See Government Code Section 82048 (including employees under the Political Reform Act); Wilson v. State Board of Education (1999) 75 Cal.App.4th 1125 (charter school officials are public officials); FPPC Advice Letter 98-234 (charter school

officials subject to Political Reform Act).) 7 Record for Appeal, Exh. E, 1964, 1966; Exh. G, OUSD 6285-6292.

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Through the contracts described above, the Founder and/or his spouse personally profited in the sum of approximately $3.8 million:

Beneficiary
ADS/Lumbee (Ben Chavis, Owner) American Delivery Systems (Ben Chavis, Owner) AAFS (Marsha Amador, Owner) Lumbee Holdings (Ben Chavis, Owner) American Delivery Systems (Ben Chavis, Owner) SAIL OASES Lumbee Holdings (Ben Chavis, Owner) Ben Chavis Ben Chavis

Nature of Services
Lease, Construction Construction Financial Services Rent and Storage Rent and Storage Summer Mathematics Program ASES Grant Administration Unrecovered Escrow Deposit Wages Unsupported Credit Card Charges, including AZ charter formation Financial Services

Dates
2007-2008 7/1/09-12/31/11 7/1/09-12/31/11 7/1/09-Present 7/1/09-Present 7/1/09-12/31/11 7/1/10-12/31/11 1/1/09 9/30/09 7/1/09 12/31/11 7/1/09 12/31/11

Amount
$ 348,500 $ 38,000

$ 325,833 $1,338,065 $1,109,495 $ 458,000 $ 105,000 $ 30,000 $ 130,265 $ 25,748

Marsha Amador TOTAL

7/1/09 12/31/11

$ 30,000 $3,939,336

AIMS violated other provisions of law as well, including but not limited to the prohibition against charging tuition set forth in Education Code Section 47605(d)(1) by assessing a financial penalty on students for absences from the SAIL program. 2. AIMS Committed Fiscal Mismanagement and Violated GAAP AIMS committed fiscal mismanagement and violated GAAP, including failing to implement policies to prevent credit card misuse; losing a $30,000 escrow deposit in a failed real estate transaction with Lumbee Holdings, the Founders company; and failing to prevent an employees forgery of a teachers attendance report.

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D. Substantial Evidence Supports OUSDs Findings that AIMS Failed to Remedy Violations in the Notice of Violation Substantial evidence supports the findings of the OUSD Board that AIMS Board failed to remedy the violations set forth in the Notice of Violation: 1. AIMS failed to institute acceptable institutional reforms to safeguard against future conflict of interest violations. a. AIMS did not unconditionally acknowledge the conflict of interest violations,8 and its new conflict of interest policy did not sufficiently safeguard against future conflict of interest violations. b. AIMS did not institute an adequate system of checks and balances to prevent future conflicts, and did not implement any permanent or ongoing training regarding conflicts, or implement a sufficient procedure for clearing conflicts in advance of transactions. 2. AIMS Board failed to engage sufficient institutional expertise, such as a charter management organization. a. In the February Supplemental Response, AIMS stated that it requested and received a contract with the Charter School Management Corporation (CSMC) for comprehensive back-office services and charter vision access. According to CSMC, AIMS, however, never entered into a contract with CSMC, and, in fact, CSMC told the District that it would not have entered into an agreement with AIMS unless AIMS had made significant governance changes. b. In contrast, in its November Response, AIMS denied the need for a Charter Management Organization, citing the cost. (Binder 3.) Therefore, not only was AIMS February Supplemental Response misleading, it contradicted the statement in the November Response that AIMS declined to retain a CMO for financial reasons. 3. AIMS Board failed to institute acceptable changes in its financial and operational procedures to ensure that future fiscal mismanagement did not occur. a. In its February Supplemental Response, AIMS stated that it had a contract with Mr. Patrick Martin to ensure productive fiscal management of AIM Schools. (Record for Appeal, Exh. L, OUSD 6316.) The representation by AIMS that Mr. Martin had over 10 years of experience in financial procedures with charter schools (id.) was

The AIMS Board has never acknowledged that the contracts violated conflict of interest laws. At the February 27, 2013 Public Hearing, then-Interim Director, Sylvester Hodges, appeared to make a qualified admission that the contracts constituted a conflict of interest. (Record for Appeal, Exh. K.) However, as is described above, Mr. Hodges was later terminated. (Record for Appeal, Exh. S, 7414). In its appeal document, AIMS once again denies that the contracts were illegal. (Record for Appeal, Exh. P, OUSD 7397 7398.)

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exaggerated as his rsum demonstrated that he had little more than two years of experience in charter school finance. b. Other steps taken by AIMS to institute changes to its financial and operational procedures were also insufficient. AIMS has retained new personnel in the area of fiscal operations but the new staff members had little experience in the public sector. AIMS retained a new auditor, Vavrinek, Trine & Day LLP, but the auditor is responsible for annual financial audits, not everyday financial operations. 4. AIMS Board failed to institute structural or permanent changes to the governing board. a. None of the measures identified by AIMS constituted the significant institutional reform required to remedy the violations leading to revocation. The AIMS Board had undergone significant turnover, and Board members who shared dissenting views have been removed. The AIMS Board was unable to sustain a relationship with any of the attorneys and consultants that it retained. (Record for Appeal, Exh. O, Exh. 7 thereto, OUSD 7359-7361.) b. Moreover, as is set forth below, AIMS submitted misleading information to the District during the revocation proceedings. 5. AIMS Board failed to adequately ensure a proper separation between the Founder and the organization. a. The AIMS Board has not indicated any intent to file lawsuits against the Founder and/or his spouse or to take any other steps to disgorge any of the funds arising from the interested contracts, as was urged in the Districts January 24, 2013 Notice of Intent to Revoke. b. AIMS claimed that it sent a letter dated June 23, 2012 to the Founder addressing the issue of separation. As is noted immediately below, this letter is contradicted by information in AIMS Board meeting minutes, which casts doubt on its authenticity as well as post revocation activities by the Founder, which are discussed below, that demonstrate the Founders continuing day-to-day involvement at AIMS. 6. AIMS Board submitted potentially misleading documentation in response to the Notice of Violation. a. AIMS submitted a letter dated June 23, 2012 from the AIMS School Board President that purported to notify the Founder and his spouse that they must cease interacting with the AIMS community. (Record for Appeal, Exh. O, Exh. 4 thereto, OUSD 7349.) The District could not verify the authenticity of this letter, and the documentation in the record suggests that the letter is not authentic: i. Minutes from the June 24, 2012 Board meetingwhich took place one day after the letter was purportedly sentshow that no letter had yet been sent regarding the separation of the Founder. (Record for Appeal, Exh. O, Exh. 5 thereto, OUSD 7350 - 7353.)

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ii. The letters authenticity is further undermined by the fact that AIMS did not submit the letter in its November 26, 2012 response to the Notice of Violation, even though the date of the letter preceded the November Response by five months. b. AIMS submitted a written statement signed by three former AIMS Board members claiming that the AIMS Board approved the contracts with the Founders company (ADS) with full knowledge of his financial interest. This claim is not supported by AIMS own board agendas and minutes, which show that the contracts were not even considered during those meetings. Moreover, not all of the individuals signing the statement were in attendance at those meetings. (See Record for Appeal, Exh. G, Exh. Rev-A thereto, OUSD 6277 - 6283.) c. AIMS submitted a memorandum dated July 15, 2011 that purported to reprimand former AIMS director Sophath Mey for being out of contact with the school during an out-of-state trip, and to reassign her to the position of Site Administrator. AIMS submitted the letter to demonstrate that it had remedied the misuse of the schools credit card. In fact, Mr. Mey never received the July 15, 2011 memorandum. (See Record for Appeal, Exh. O, Exh. 8 thereto, OUSD 7364 - 7369.) d. AIMS claimed that the Founder sent a November 18, 2010 memorandum to Mey stating that OASES would not charge AIMS the 15 percent administrative fee for administration of the ASES grant. AIMS had submitted this documentation in support of its claim that it did not exceed the threshold for administrative services in spending the ASES grant funds. Mey stated that she never received this memorandum. (See Record for Appeal, Exh. O, Exh. 8 thereto, OUSD 7364 - 7369.) AIMS submission of questionable and misleading documents in response to the Notice of Violation provides substantial evidence that it failed to remedy those violations. E. AIMS Failed to Rebut the Districts Findings and Conclusions On appeal, AIMS submits several arguments denying the violations, and denying that AIMS failed to remedy the violations. (Record for Appeal, Exhs. P and Q.) Although OUSD addressed many

of these arguments in the Notice of Intent to Revoke and Resolution, the District provides an executive summary of OUSD's responses to specific arguments made in the AIMS appeal in Exhibit 3 to this brief.

IV.

DISCUSSION OF STATUTORY FACTORS The County Office has asked the District to address the three factors cited in the revocation

regulations governing the County Boards consideration of AIMS appeal.

Cal. Admin. Code Tit. 5,

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Section 11968.5.4 contains the following standards under which the County Board must assess a charter schools appeal from a district revocation: In determining whether the district chartering authority's factual findings are supported by substantial evidence, the county board of education shall consider whether the district chartering authority provided the charter school's governing body as described in the school's charter a Notice of Violation, a reasonable opportunity to remedy the identified violation(s), a Notice of Intent to Revoke, a public hearing, and Final Decision, pursuant to Articles 2 and 2.5 and Education Code sections 47607(c) through (e), inclusive. If the charter school submits a response to the Notice of Violation pursuant to section 11968.5.2(c), the county board of education shall, in determining whether the district chartering authority's factual findings are supported by substantial evidence, consider whether the charter school complied with the procedures set forth in that section. The county board of education shall also consider whether an alleged procedural deficiency negatively impacted the charter school's ability to refute or remedy the alleged violation or the chartering authority's ability to comply with its procedural obligations or authorizing duties.

The District will discuss these requirements below: A. Provision of Notice of Violation, Reasonable Opportunity to Remedy, Notice of Intent to Revoke, Public Hearing and Final Decision 1. Notice of Violation The OUSD Board approved the Notice of Violation on September 27, 2012. (Record for Appeal, Exh. D.) The Notice of Violation provided AIMS with 60 days to remedy the violations set forth therein, and even identified the specific areas that required remedy: a. Management of the AIMS organization to ensure compliance with applicable legal requirements, including enrollment and teacher credentials; b. Changes to structure and operation of AIMS governing board to ensure greater fiscal and operational control; c. Identification of responsible agent for AIMS fiscal operations; d. Institution of conflict of interest enforcement procedures; e. Appropriate separation of Founder and spouse from all aspects of AIMS operations.

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AIMS did not contend in its response to the Notice of Violation or in subsequent proceedings that the 60-day remedy period was not reasonable. 2. Notice of Intent to Revoke On January 23, 2013, the OUSD Board approved the issuance of the Notice of Intent to Revoke, which was served on AIMS the following day. (Record for Appeal, Exh. G.) The OUSD Board reached this decision after a detailed evaluation of AIMS response to the Notice of Violation and after hearing public comment from the AIMS community, including statements made by the AIMS Board President at the time, Jean Martinez. (Record for Appeal, Exh. G.) 3. Public Hearing The OUSD Board held the statutorily-required public hearing on February 27, 2013, at which then-Interim Director Sylvester Hodges and then-Board President Toni Cook spoke on behalf of AIMS. (Record for Appeal, Exh. K.) On the same day, AIMS submitted a supplemental response to the Notice of Violation, even though the remedy period had ended on November 28, 2012. Exh. L.) (Record for Appeal,

Although not required to do so, the District evaluated and considered AIMS February

Supplemental Response in making the recommendation to revoke the charter to the OUSD Board. 4. Revocation Final Decision Lastly, the findings of the OUSD Board were contained in its March 20, 2013 Resolution No. 1213-0124 Revoking the Charter of the American Indian Model Schools and accompanying documentation. (Record for Appeal, Exh. O.) 5. Additional Due Process The District not only met all legal requirements during the revocation proceedings, it provided AIMS due process beyond what was required by law. included the following: Counsel for the District, John R. Yeh of Burke, Williams & Sorensen, LLP, and the Districts then-Charter School Coordinator, Gail Ann Greely met with then-AIMS Board president Jean Martinez, AIMS Board member Nedir Bey, and AIMS then-attorney Paul The additional steps that the District took

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Minney to hand deliver the Notice of Violation and to discuss the revocation process on September 20, 2012, one week before consideration by the OUSD Board; Identified five specific areas in the Notice of Violation in which the District would require AIMS to take remedial measures; After the OUSD Boards approval of the Notice of Violation on September 27, 2012, Mr. Yeh and Ms. Greely advised Mr. Minney that the District would be willing to meet with AIMS during the remedy period to discuss potential remedies; Invited Sylvester Hodges, AIMS Interim Director at the time, to meet to discuss the Notice of Intent to Revoke; Granted AIMS request, on February 5, 2013, to continue the public hearing to allow AIMS to obtain legal counsel (Record for Appeal, Exh. F); Allowed AIMS to submit its February Supplemental Response to the Notice of Violation after the conclusion of the 60-day remedy period on November 28, 2012 (Record for Appeal, Exh. L); Communicated to AIMS that District staff was willing to meet with AIMS leadership during the revocation proceedings to discuss potential remedies, even after the conclusion of the 60-day remedy period; Conducted a meeting between then-Interim Director Hodges and the OUSD Board President, David Kakishiba; Conducted a meeting between then-Interim Director Hodges and OUSD General Counsel, Jacqueline Minor and OUSD Executive Director for Quality and Charter Schools, David Montes de Oca.

B. Whether the Charter School Complied with Procedural Requirements in Responding to the Notice of Violation While AIMS submitted a great deal of documentation in response to the Notice of Violation13 binders in totalmuch of it was redundant and nonresponsive to the violations identified by the District. Despite the great volume of documents, AIMS failed to adequately recognize, acknowledge, or address the serious institutional issues raised by the District. Specifically, the District found as follows in its Notice of Intent to Revoke: 1. AIMS did not acknowledge that its Founder, Ben Chavis, committed conflict of interest violations, nor did AIMS take steps to address those conflicts of interests. 2. AIMS failed to institute acceptable institutional reforms to safeguard against future violations.

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3. AIMS failed to institute acceptable changes in its financial and operational procedures to ensure that future fiscal mismanagement does not occur. 4. AIMS failed to engage sufficient institutional expertise, such as a charter management organization, to implement the necessary institutional and organizational overhaul of its operations. 5. AIMS failed to address in an acceptable manner any means or process for defining the role of the Founder or achieving the necessary separation of him from the organization. (Record for Appeal, Exh. G, p. 2, OUSD 6242.) A more detailed discussion of the Districts assessment of AIMS remedies is contained in the Notice of Intent to Revoke (Record for Appeal, Exh. G, OUSD 6271-6274) and the Resolution (Record for Appeal, Exh. O, OUSD 7218-7223). In addition, the District found it troubling that AIMS submitted misleading and inaccurate documentation in response to the Notice of Violationespecially given that the District had identified AIMS failure to document its activities as an area of violation in the Notice of Violation. (Record for Appeal, Exh. D, OUSD 97 106; Exh. G., OUSD 6269.) In conclusion, despite the volume of its response, AIMS failed to fully address the violations identified, failed to acknowledge most of the violations, and failed to submit documentation that demonstrated that it had instituted acceptable remedial measures. C. There Were No Procedural Deficiencies that Negatively Impacted AIMS Ability to Refute or Remedy the Violations As has been noted above (Section IV(A)(5)), the District provided AIMS with due process well beyond that required by law. In addition to the statutorily-required Notice of Violation and Notice of Intent to Revoke, the District conducted face-to-face meetings with AIMS leadership and counsel as discussed in Section IV(A)(5). The District also granted AIMS an extension of the public hearing, and provided AIMS the opportunity to provide its February Supplemental Response after the conclusion of the 60-day remedy period. AIMS had every opportunity to address and remedy the violations identified by the District, and failed to do so despite such opportunities.

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AIMS identifies only two alleged procedural omissions or errors in the revocation process: 1) that the District relied solely on the findings of the FCMAT Report; and 2) that Education Code Section 47607 requires the District to consider pupil academic achievement as the most important factor in determining whether to revoke the charter. arguments are addressed here. 1. FCMAT Report The FCMAT report was initiated in response to a whistleblowers report of fiscal misconduct at AIMS by a former AIMS employee. After the reports release in June, 2012 (Record for Appeal, Exh. A), the District conducted its own independent investigation, resulting in the Notice of Violation, which was accompanied by 1010 pages of exhibits. (Record for Appeal, Exh. D.) The Notice of Intent to Revoke (Record for Appeal, Exh. Q, OUSD 7406-7409.) Both

also contained the Districts independent findings of fact and conclusions of law and included supplemental exhibits. (Record for Appeal, Exh. G.) The Resolution contained a summary of

substantial evidence supporting revocation, based on the Districts independent investigation and evaluation of the underlying facts. (Record for Appeal, Exh. O.) Further undermining AIMS argument is the fact that the evidentiary basis of the revocation included evidence of conduct not addressed in the FCMAT report, such as the failure of the AIMS Board to maintain fiscal control over the organization, the institutional instability caused by significant Board turnover and removal of members who advocated for reform measures, AIMS submission of questionable and misleading documentation as part of the revocation process, and AIMS failure to fully acknowledge prior misconduct or take meaningful remedial measures to correct the misconduct. 2. Student Academic Achievement SB 1290, which took effect January 1, 2013, amended Education Code 47607 to add the following provision:

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The authority that granted the charter shall consider increases in pupil academic achievement for all groups served by the charter school as the most important factor in determining whether to revoke a charter. The amendment defines all groups of pupils served by the charter schools as numerically significant pupil subgroups in the following categories: ethnic subgroups, socioeconomically

disadvantaged pupils, English learners, and pupils with disabilities. This portion of the statute does not prohibit a district from revoking a high-performing charter. Rather, it is a procedural requirement that obligates the District to consider academic achievement as the most important factor. The Resolution addressed the Districts consideration of AIMS record of student achievement. First, the District noted the high academic achievement of the schools: WHEREAS, the three AIMS charter schools achieved the following scores on the 2012 Academic Performance Index (API) Test: AIPCS: AIPCS II: AIPHS: 974 API 981 API 928 API

(Index. Exh. O, OUSD 7215-7216.) Then the District weighed this factor against other relevant factors: The District has considered increases in pupil academic achievement for all groups of pupils served by the charter school under Education Code Section 47607(c)(2). Although the performance of AIMS students is an important factor in its decision, the Staff believes that AIMS failure to remedy the conflict of interest violations, its failure to institute sufficient changes to the management of the AIMS organization, its failure to institute structural or permanent changes to the governing board, its failure to take action to recover the public funds intended for AIMS students paid to Dr. Chavis, and its lack of complete candor in response to the Districts revocation proceedings, outweigh all other factors in considering whether to revoke the AIMS charters, including the schools academic performance. (Index. Exh. O, OUSD 7215-7216; 7222-7223.) In revoking the AIMS charters, the District acknowledged that the AIMS charter schools have a track record of high academic performance. (Record for Appeal, Exh. M, OUSD 7206.) But in the end, the OUSD Board determined that the egregiousness of the conflict of interest violations and the

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institutional indifference of the AIMS Board to following conflict of interest laws or adopting appropriate remedies outweighed the schools academic performance.

V.

POST-REVOCATION EVENTS AT AIMS Events subsequent to the March 20, 2013 revocation by the OUSD Board further demonstrate

the dysfunction and institutional resistance to reform that pervades the AIMS Board. Continued Involvement of Founder. In direct contradiction of AIMS contention that it had achieved separation of its Founder from the organization, the Founder, Ben Chavis, was present and actively involved at the AIMS April 12, 2013 Board meeting. For example, the Founder was observed advising the Board on the length of time that each public speaker should be given. Since the revocation, the Founder was seen at one of the AIMS schools berating a staff member in the presence of other children and employees, causing the staff member to break down in tears. When asked by a staff member not to yell or curse in front of the students, the Founder refused. In short, the AIMS Board continues to permit the Founder to be involved in the day-to-day operations and management of the organization. Continued Instability. As discussed above, Ms. Avelino, Site Administrator, and Mr. Hodges, Interim Director, were both terminated after advocating for the adoption of needed reforms. Other staff members were also reportedly fired after advocating for reforms as well. (See Record for Appeal, Exh. S, OUSD 7414; Exh. U, OUSD 74217424.) The significant turnover in AIMS Board members, attorneys, and consultants is symptomatic of an institutional resistance to dissenting views and change.

These post-revocation developments further demonstrate that the Districts decision to revoke the AIMS charters was appropriate.

VI.

CONCLUSION The revocation of the AIMS charters by the OUSD Board followed a six-month proceeding in

which AIMS was provided multiple opportunities to remedy the violations that led to those proceedings. Despite these opportunities, AIMS has failed to recognize or acknowledge violations identified by the District and failed to institute any meaningful institutional reform to prevent their recurrence. For these reasons, the OUSD Board decided to revoke the AIMS charters. decision. The County should uphold that