A married couple who run financially struggling charter schools in the Phoenix area have agreed to repay the state $180,000 after using those funds on tickets to professional sporting events and other personal expenses.
Arizona Attorney General Mark Brnovich’s office announced Thursday the civil settlement with Kristofer and Rita Sippel, owners of San Tan Montessori School Inc., which operates two charter-school campuses.
Brnovich’s office launched a criminal investigation in 2016, probing allegations that the Sippels’ nonprofit company, which runs San Tan Charter School in Gilbert, was misusing public funds. The investigation, which originated with a whistleblower familiar with the school’s finances, found more than $300,000 in questionable spending from state funds dedicated to the education of children. The woman, who was not identified, quit.
Records of those expenditures, obtained by The Arizona Republic through a public records request, show the purchases of tickets to Arizona Cardinals, Phoenix Suns and Arizona Coyotes games, payment of the couple’s home mortgage and utilities, the purchase of a $2.3 million life insurance policy for the Sippels, as well as gas, vehicle insurance and car payments. The inquiry found the K-12 charter school did not own the vehicles.
The Sippels in fiscal 2018 received at least $373,406 for running the San Tan campuses located less than 2 miles apart in southeast Gilbert and a related Montessori school, financial records obtained by The Republic show. The K-12 programs had roughly 800 students, according to the most recent state Department of Education records.
In the deal, the Sippels, who admitted no wrongdoing, agreed to repay only $180,000 of more than $300,000 in alleged misspending of public funds.
The AG’s Office initially contemplated filing 12 felony counts against the Sippels. But Ryan Anderson, a spokesman for Brnovich, said prosecutors were unable to pursue criminal charges because of Arizona’s charter school laws.
“The root of this problem comes down to the state statute’s definition of public monies and specifically with charters: The moment it (state funding) hits a charter’s bank account, it’s not viewed as public money,” Anderson said.
Anderson added that some questionable spending was dropped from the settlement because of “gaps in charter” laws and because San Tan commingled public and private funds, making it challenging to prove what was an expenditure of tax dollars.
However, Anderson said there were “clear examples of unlawful disbursements of public money.”
The Sippels could not be reached for comment.
Their attorney, Jim Belanger, said the Attorney General’s forensic financial investigation of San Tan was “flawed;” the money spent was private funds, and the couple settled to avoid additional costs.
Belanger, who specializes in white-collar criminal defense, said allegations against the Sippels involve a fraction of the millions of dollars they received to run their charter schools.
The school issued a statement saying the Attorney General’s Office “identified a handful of payments properly attributable to the preschool that were erroneously paid out of charter school operator accounts. San Tan Montessori School made each of the allegedly improper payments in reliance on then-employed counsel that such payments were legally appropriate. As a result, the owners have agreed to enter into a civil consent judgment and pay a fine.”
The school stated it fired its bookkeeper, accountant and lawyer and “corrective measures and procedures representing best practices in the charter school industry were implemented several years ago when San Tan Montessori School engaged legal and financial professionals who are more experienced working in the charter school industry.”
The Sippels are the board president and vice president of the nonprofit company, which had a nearly $1.8 million deficit as of June 30, 2018, following two consecutive years of operational losses, records show. Belanger said the Sippels do not vote on their compensation.
Records show the school for two consecutive years has not met at least two of the six financial sustainability measures set by the Arizona State Board for Charter Schools. The board cannot intervene because of a charter school’s financial problems.
Arizona’s 500-plus charter schools, in the main, privately operated but publicly funded, receiving more in state per-pupil funding than school districts. The Arizona Republichas found that the state’s lax charter school laws have allowed several operators to personally enrich themselves with millions of dollars from public funds.
Brnovich has harshly criticized the spending and self-dealing of some charter school operators and called on lawmakers to fix those laws. He specifically asked the Legislature to give his office subpoena power on civil cases and he wanted lawmakers to require charter schools to segregate public and private funds.
House Speaker Rusty Bowers, R-Mesa, earlier this year killed a modest charter school reform bill largely written by a lobbyist from the industry-backed Arizona Charter Schools Association. That bill would have given the Attorney General’s Office subpoena power on civil cases.
Anderson said the legislation would have given additional protections for taxpayers when it comes to charters and public money.
“I don’t know that the bill would have addressed this specific situation, but it was a step in the right direction,” Anderson said.
Settlement: Thousands spent on Cardinals, Suns tickets
The settlement lays out opposed views of how public funds are to be used at charter schools.
Charter school advocates and operators have argued that even though charter schools are nearly 100 percent funded with state and federal tax dollars, they are private contractors who are not subject to the same scrutiny as school districts.
Bronvich’s office alleged the Sippels engaged in unlawful disbursements of public funds by sending tens of thousands of dollars on noneducational expenses, such as professional sports tickets.
The Sippels, however, contended in the settlement that the purchases were lawful and for appropriate school functions or were from available from nonpublic funding sources.
The two sides agreed, in part, to settle to avoid additional legal costs.
The court settlement alleges the Sippels used school funds to:
- Purchase approximately $105,000 of Arizona Cardinals tickets from 2008 to 2015.
- Bought about $15,000 in Phoenix Suns tickets. The dates of the purchases were not disclosed.
- Reimbursed themselves about $1,500 for Arizona Coyotes tickets. The dates of the purchases were not disclosed.
- Pay about $20,000 for personal health-care services, which were not disclosed.
The Sippels will make restitution payments over three years to the Attorney General’s Office, with the first installment due Dec. 31. The money will go to the state general fund.
The school, as part of the settlement, must also retain an independent auditor to conduct financial audits of the school’s purchasing practices. And the Sippels as well as other board members and executives must take training related to fiscal responsibility in ensuring that charter school monies are utilized only for educational purposes.
Fewer students, higher pay
Kristofer Sippel formed San Tan Charter School in 2008, incorporating applicable Montessori concepts for kindergarten to sixth grade, according to the school’s website.
The school added a middle school in 2014 and a high school two years later.
The school’s website says it has more than 1,000 students and two campuses.
San Tan Charter School has a fraction of the kids of neighboring Queen Creek and Gilbert school districts. Yet Sippel’s base salary of $200,169 is higher than the superintendents of those districts, and he pays his teachers less.
His total compensation in fiscal 2018 was $227,979, records show.
San Tan has a “C” letter grade rating from the state Department of Education.
Queen Creek pays its superintendent $148,753 annually to manage a district with 7,939 students at six elementary schools, two middle schools and one high school. Another Queen Creek elementary school and high school are slated to open in July.
Queen Creek pays its teachers an average salary of $50,898, nearly 17 percent more than the $43,368 average at San Tan, records show.
Gilbert has more than 35,000 students and 40 schools. Its superintendent is paid $189,000 or $11,169 less than Sippel to oversee 29 times more students. Gilbert’s average teacher pay is $48,731, or 12 percent more than San Tan’s.
Rita Sippel is the board vice president, chief customer officer and the Montessori director. She was paid $75,883 last year.