Cashing in on Kids

Imagine Schools Corporate Profile

Overview Imagine Schools operates approximately 70 schools in 12 states and the District of Columbia. It includes a non-profit (Imagine Schools Non-Profit), a for-profit management company (Imagine Schools), and a real estate development company (Schoolhouse Finance). Imagine was founded in 2004 after Dennis and Eileen Bakke purchased the Chancellor Beacon Academies, a struggling for-profit management organization. Dennis Bakke previously co-founded AES, an international energy company. Real Estate Deals Imagine’s schools are often involved  in real estate deals that enable the company to expand while burdening individual schools – and therefore taxpayers – with high rental costs. The company profits from facilities in two ways. First, Imagine controls some of the buildings through the company’s real estate arm, and charges individual schools to use the facilities. Second, Imagine sells the facilities to investment companies that then lease the schools back to Imagine. While individual schools do not benefit from these arrangements, the deals allow Imagine to expand by opening new schools. In some places, Imagine-run schools dedicate nearly half their operating expenses to rent. The high rent rates not only divert resources from the classroom, the costs push some Imagine schools into debt, and sometimes that debt is owed to Imagine’s for-profit arm. Further Criticism In addition to complaints about high rent fees, Imagine has been criticized for exerting too much control over governing boards, poor services provided, low academic achievement, and mismanagement. “We felt hostage to Imagine,” one charter school board member told the Atlanta Journal-Constitution. A Florida principal complained, “This school is ours. For the last five years, they've taken our money and have not been able to deliver.” An anonymous former employee in a New York school told the New York Times: “It was rather baffling, but as a management company, they weren’t providing any management services,” said one person who has worked with the school and spoke anonymously for fear of retaliation. “With the exception of payroll processing and some accounting support, it wasn’t really clear what they were doing for the school.” Pittsburgh Schools Superintendent Mark Roosevelt described just how bad Imagine’s reputation is when Imagine was trying to open a school in the district: "A lot of my friends in education around the country are very supportive of the charter movement. But I have not had a single person once say to me, 'Wow! Imagine Schools.' It's always been, 'Watch out for Imagine Schools.'" In 2012, the Missouri Department of Education closed six Imagine-run schools in St. Louis for failing to maintain fiscal control, for being poor stewards of public resources, and for spending and too little on instruction and too much on administrative and facilities costs. The state and business community shouldered the $250,000 required to coordinate student transfers in the wake of the closures. More Controversy In 2009 Fort Wayne Journal Gazette posted an internal memo sent by Imagine CEO Dennis Bakke. The memo explained Bakke’s view that Imagine, and not the local charter school boards, controlled the schools. Greg Richmond, CEO of the National Association of Charter School Authorizers, sharply criticized the contents of the memo, saying the schools belong to the public, not Imagine. Before the state of Missouri shuttered schools in the state, the name of Imagine’s regional director, Sam Howard, appeared on bank statements of a company under investigation for kickbacks and bank fraud. After Ball State University declined to renew the charters for two Imagine-run schools in the state, Imagine took advantage of Indiana’s new voucher program and will keep the schools open as private schools in the fall. The company also paid $570,000 to settle a discrimination lawsuit brought by two women who were denied employment because they were pregnant. Imagine settled a separate suit for $33,500 in 2011. In yet another incident, Imagine settled with an employee “who accused the company of firing her for reporting an alleged kickback paid to a co-worker.” Previously, the Nevada Department of Education questioned how Imagine used $50,000 in federal funds. Further reading EDUCATION INC. -- Part II: It's 'Our school, not theirs' EDUCATION INC. – Part I: Private company skirts public boards in running tax-funded charter schools EDUCATION INC. – Part III: Local board secretly starts two school corporations in Texas Full text of Imagine Schools memo Public Good vs. Private Profit: Imagine Schools, Inc. in Ohio For School Company, Issues of Money and Control