CUSD maintains its distance from the nonprofit organization that formerly shared its name and whose former director faces charges of embezzlement

By Shawn Raymundo

For about the past year, the Capistrano Unified School District has been working to distance itself from a nonprofit group whose former director has been accused of embezzling funds that were raised to benefit local students and schools.

Up until last year, the nonprofit, which was established in 1992, shared its name with the district, operating as the Capistrano Unified School District Foundation. However, other than the names, the entities are totally separate, officials from both camps have stressed.

“It should be made clear that we were never an official arm of the district,” says Foundation President Larney Fowler.

Cutting Ties

Last October, the CUSD Board of Trustees adopted a resolution directing the CUSD Foundation to “cease and desist from raising funds as the CUSD or Capistrano Unified School District Foundation, or in any way that suggests to unwitting donors that the CUSD Foundation is endorsed by, or in any form associated with, the Capistrano Unified School District.”

That resolution also committed to educating community stakeholders such as PTAs, booster clubs and school-connected organizations about alternatives to the foundation.

CUSD spokesperson Ryan Burris said those education efforts were mostly to provide clarity to those other groups that “while the Foundation was issued a cease-and-desist and that we were no longer working with it, the booster clubs that support students and schools were fine, and we’re grateful for their support and the work they do for the kids.”

As far as the Foundation is concerned, it’s fine with the split, Fowler said.

“They wanted to distance themselves, and we were OK with that,” said Fowler, a local attorney.

Money Matters

The organization, which raises money to “enhance the educational experience of students attending public schools within” the district, now goes by the name CARE Foundation—Contributing Academic Resources to Education.

According to CARE, it has raised more than $2 million since its inception. And, on its website, CARE emphasizes that it is “not affiliated with or associated with the District.”

Fowler reiterated that statement, explaining that the money the Foundation raises does not go directly to CUSD.

“We never give money to the district; we have a number of fundraisers throughout the year and we raise money,” he said. “Our mission is to help enhance the education experience for students who attend the district, but we don’t give money to the district at all.”

The money raised, Larney further explained, has gone to fund such things as cross-country field trips for students and local educational programs.

The district’s decision to distance itself from the Foundation came amid concerns raised over the group’s management of funds, which had stemmed from allegations that its former executive director, Michelle Colleen Hart, had been siphoning money from the nonprofit.

Hart, who ran the organization from mid-2014 to 2017, has denied that accusation.

After the district was made aware of these allegations in April 2018, CUSD requested that the foundation turn over all funds in its possession that were raised for the benefit of district schools; turn over all financial accounting; and present all pending and future donation requests to the district’s deputy superintendent.

The Foundation denied to comply with those requests, stating that it would be illegal to transfer or turn over funds or approval authority to a public school district, The Capistrano Dispatch previously reported.

That refusal to meet the district’s demands was the basis for CUSD severing ties, Burris said.

“They never provided the district the opportunity to independently audit their bank account, so we issued the cease-and-desist (order),” Burris said. “They’re working independently from us, and we do not work for or support them.”

When the Foundation didn’t turn over such information, Burris added, the district asked the booster clubs and other district-affiliated groups who were holding money in the Foundation’s account to directly ask for those funds independently.

“Based on their requests,” Burris said, “it does sound like they were” able to recover those monies.

Larney, who has been the president of CARE for about the past five years, acknowledged the CUSD board’s feelings on the matter, stating that “the district and our foundation were going in different directions.”

“I think the district was worried that people were confusing us with the district,” he said, also adding: “I think they were concerned with the Michelle Hart thing.”

Legal Troubles

Late last month, the Orange County District Attorney’s office and Orange County Sheriff’s Department announced that Hart had been formally charged and is accused of embezzling more than $42,000 from the Foundation.

She currently faces six felony counts of misappropriation or embezzlement of monies by a public officer for allegedly “writing checks to herself and making unauthorized purchases on the CUSDF bank card.”

The Foundation, a year ago this month, filed a lawsuit against Hart, alleging that she “misappropriated funds in excess of $50,000 … for her personal gain, during her entire tenure as Executive Director,” court documents state.

According to the lawsuit, the Foundation alleges that in December 2017, Hart “admitted” she had misappropriated the money before resigning as director. It goes on to state that she “made dozens of fraudulent charges under the guise of her position as an Executive Director.”

“Additionally, Hart represented that there were less funds donated by donors and boosters than there actually (were) in order to cover up her misappropriations,” the lawsuit states.

Those same court documents explain that when Hart was first hired in May 2014, she was promised $1,500 a month plus a 20% commission on all money raised for the Foundation in exchange for 20 hours a week of work. In May 2015, Hart’s monthly compensation was raised to $2,000 while her commission was decreased to 12%.

By 2017, her compensation had risen to $5,000 a month with no commission.

In response to the Foundation’s lawsuit, Hart acknowledges that she diverted some of the nonprofit’s funds and notified the group’s directors; however, she disputes the $50,000 amount she’s accused of embezzling.

“Hart informed members of the board of directors that from the time period of November 2015-December 2017, Hart diverted some of the plaintiff’s funds for her personal use,” a November court filing states. “She fully intended to, and committed to, repay those funds, but admits that she has not yet repaid those funds.”

Hart’s legal response also states that she “accepts the consequences of her actions and is willing to repay the amount that she actually re-directed to her personal use when she has the ability to do so. She can begin making some repayments immediately.”

Hart, a resident of Fresno County, was arrested by the Fresno Police Department and is being held on $42,088.91 bail—the amount of money she is accused of embezzling, the DA’s office said in a press release.

“In order to post bail, she is required to prove that the funds she is using were not feloniously obtained,” the release stated.

According to the DA, CARE brought in a Certified Public Accountant to “review the foundation’s financial records in order to determine the scope of the loss” and OCSD’s “Economic Crimes Detail investigated the case and turned it over to the District Attorney’s Major Fraud Unit for review.”

Kimberly Edds, the public information officer for the DA’s office, said Hart is scheduled to be arraigned on Sept. 20.

Making Adjustments

In light of the misappropriation accusations, CARE has implemented additional oversight measures and bookkeeping procedures, says Stephen Rosen, the nonprofit’s attorney.

“They’ve employed an outside accountant, and their board has stricter processes for double-checking everything,” among other things, he said, adding that multiple signatures are required on checks. “Yeah, they’ve tightened up their bookkeeping and have a third party confirming everything.”

 

 

SR_1Shawn Raymundo
Shawn Raymundo is the city editor for The Capistrano Dispatch. He graduated from Arizona State University with a bachelor’s degree in Global Studies. Before joining Picket Fence Media, he worked as the government accountability reporter for the Pacific Daily News in the U.S. territory of Guam. Follow him on Twitter @ShawnzyTsunami and follow The Dispatch @CapoDispatch.

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