Financial red flags at charter school group
Times review finds questionable spending, potential conflicts of interest at Celerity schools network
By her own account, Vielka McFarlane was an immigrant success story. She had escaped a childhood of poverty in Panama, made her way to Los Angeles and founded a nonprofit network of publicly funded charter schools called the Celerity Educational Group.
In 2013, she earned $471,842, about 35% more than Michelle King, the superintendent of the Los Angeles Unified School District, makes today.
McFarlane was prospering, and it showed. She wore Armani suits, ate at expensive restaurants and used a black car service.
Financial records obtained by The Times show that, as Celerity’s chief executive, she paid for many of these expenses with a credit card belonging to her charter schools, which receive the bulk of their funding from the state.
It could not be determined whether McFarlane, 54,
ever reimbursed the charter schools for her credit card purchases. Neither she nor a lawyer hired by Celerity responded to requests for comment about the transactions.
At a time when charter school advocates are determined to increase the number of such schools in L.A., the story of McFarlane and the Celerity schools offers a case study of the growing difficulty of regulating them. The task of spotting and stamping out risky financial practices in charters largely falls to the school district’s charter schools division, which employs about a dozen people dedicated to monitoring the schools’ fiscal health.
But as the number of L.A. charter schools has grown to more than 220, enrolling about 111,000 students, oversight has become a challenge for district officials, who are at once competitors and regulators.
In 2012, L.A. Unified’s charter schools division made a routine request for financial records from the Celerity Educational Group.
When the school network’s credit card statements arrived that fall, many of the transactions had been blacked out. One page was nearly all black.
Concerned school district staff grew even more alarmed when they received the full records, which showed that McFarlane had paid for lavish meals and out-of-state travel on the nonprofit’s credit card.
In one month in 2013, she had spent $914 at the Arroyo Chop House in Pasadena, $425 at The Lobster, a seafood restaurant in Santa Monica, and $355 at Paiche, a now-closed Peruvian restaurant in Marina del Rey.
From the arrival of the credit card statements until 2015, when it refused to allow Celerity to open two new schools, L.A. Unified took a gentle approach to the charter group’s unorthodox practices. It sent notices urging the organization to institute tighter financial controls, but continued to renew the schools’ charters when they came before the school board.
L.A. Unified officials referred Celerity’s credit card transactions to the district’s inspector general, who eventually opened an investigation into the group’s finances. Then, in late January, federal agents from the Department of Homeland Security, the FBI and other agencies raided Celerity’s offices, as well as the headquarters of a related nonprofit, Celerity Global Development, and McFarlane’s home. The focus of the federal investigation is unclear, and the district’s inquiry is ongoing.
When The Times sent Celerity a list of questions about its spending, the group said it was having difficulty providing answers because many of its computers and records had been seized in the federal raid.
Asked if anyone had demanded that McFarlane pay her schools back, a district spokeswoman declined to comment.
While the district investigated, Celerity went national, expanding into Ohio, Florida and Louisiana, where it operates four schools in addition to the seven it runs in Southern California. McFarlane launched Celerity Global Development, the parent company of the schools in her growing empire, and began offering herself as a consultant to other charter school leaders.
In 2015, McFarlane became the CEO of Celerity Global, an organization that took in millions of dollars in management fees from Celerity’s schools. But Global wasn’t just supporting the schools; it had the power to control Celerity Educational and could appoint and remove the school network’s board members.
It also served as a shield. In documents laying out their findings, L.A. Unified officials complained that McFarlane and her staff repeatedly rebuffed the district’s requests for information and acted in ways “designed to reduce, or eliminate, transparency.” In response, Celerity argued that it had always responded to the district’s “reasonable” inquiries.
By the time district and county education officials began to worry that Celerity was hiding key information, the organization’s multiple layers of bureaucracy had made McFarlane’s activities opaque.
Records obtained by The Times offer some insight into why the Celerity network has drawn federal attention. They show years of questionable spending and potential conflicts of interest over a period of time when former teachers said the schools lacked basic supplies and often leaned on students to fundraise.
McFarlane’s use of the group’s credit card was extensive.
In 2013, she shopped at Nordstrom and patronized an L.A. hair salon. She charged Celerity more than $2,400 for two separate stays at Solé on the Ocean, a hotel in Sunny Isles Beach, Fla., just north of Miami Beach.
That fall, she spent nearly $800 on Blacklane, an Uber competitor that relies on a network of licensed chauffeurs with high-end cars.
Several former Celerity teachers interviewed for this story said they saw McFarlane arrive at their schools in a chauffeured limousine. For Lisa Cordero, who taught at Celerity Dyad Charter School in South L.A. for four years, the limo became a troubling symbol.
“I should have known something was wrong during that first year when Vielka said in one of our meetings, ‘Education is a business,’ ” Cordero said. “And all the teachers were like…. No.”
As the Celerity Educational Group expanded, the enrollment-based funding it received grew steadily. So did McFarlane’s salary, according to the group’s tax filings. But she may have had other sources of income.
As the CEO of Celerity Educational Group — and now of Celerity Global — McFarlane steered hundreds of thousands of public dollars to several companies providing services to her schools. Those companies are registered to her, state records show, and list their addresses as either Celerity Educational’s or Global’s offices.
Celerity Educational Group’s check register for the 2015-16 school year shows payments totaling nearly $1 million to an information technology company called Attenture, a general contracting company called Celerity Contracting Services, and Celerity Development, a limited-liability corporation that buys properties and rents them to McFarlane’s charter schools.
The organization has also paid thousands of dollars to Orion International Academy, a private high school in Chino Hills that McFarlane founded in 2013, and where she is still the CEO.
The flow of money from the charter schools to Celerity Development is documented going back to 2011, when Celerity Educational Group signed a 10-year lease with the company, which at the time had only one owner — McFarlane. That made her, in effect, both landlord and tenant of the two sites in South L.A. on which she expanded Celerity Dyad Charter School.
Over the next few years, she revised the terms of the lease, increasing the rent her school paid her company.
Whether McFarlane profited personally from these arrangements is unclear. In 2014, when she disclosed her ties to Attenture and Celerity Contracting Services on required state forms, she described these two CEO positions as “voluntary/unpaid.” The Celerity network maintains that McFarlane has no financial interest in her companies, but did not answer questions about them.
At least two of her family members found employment in her tangle of companies and nonprofits. As recently as last fall, her brother, Jaime McFarlane, in a campaign donation, listed Attenture as his employer. Her son, Rolando McFarlane, is employed as a “creative media assistant” for Celerity Global Development, according to the group’s organizational chart. Neither responded to requests for comment.
Under California law, Celerity’s schools, like most charters, are exempt from many of the regulations that govern traditional public schools. However, anyone who wishes to open a charter school in L.A. Unified must agree to abide by state laws written to prevent public officials from using taxpayer money to help themselves, their families or their businesses. One of those laws bans public officials from having a financial stake in “any contract made by them in their official capacity.”
Failure to comply with these laws “could give rise to revocation of the charter,” leading to a school’s closure, said John Yeh, a Silicon Valley-based attorney who often advises school districts on charter school law. “It could also be prosecuted as a felony,” he said. No one at Celerity, including McFarlane, has been charged with a crime stemming from the schools’ operations.
McFarlane should have been familiar with these requirements, as well as the obligation to report ties to any company that did business with her schools. From 1991 to 2005, she worked for the school district, climbing the ranks from elementary school teacher to principal to administrator. One of her last jobs was in the district’s charter schools office.
The Times examined the financial disclosure forms that Celerity’s leaders and board members filled out over the last five years, and McFarlane did not report ownership of her companies between 2011 and 2013. While she disclosed her ownership of Attenture and Celerity Contracting Services in 2014, she has yet to do so for Celerity Development or Orion International Academy.
“That’s a red flag,” said Bob Stern, a government ethics expert. “Why wouldn’t you be disclosing companies that were doing business with your agency?”
It would have fallen to Celerity Educational Group’s governing board to approve the schools’ largest expenditures. But it’s unclear how much the board, which includes two lawyers, a payroll administrator, a TV network consultant and a video producer who runs a company called LuvHub Productions, knew about the relationships between McFarlane’s schools and her businesses.
Current board members declined to be interviewed and referred questions to Celerity’s lawyer. Three people who served on the organization’s board in the past said they did not know of the business ties.
However, the board knew something of McFarlane’s unusual spending. Meeting minutes from October 2007 noted: “Ms Mcfarlane [sic] wanted to announce to the board of her purchase of two Armani suits that need [sic] be reimbursed, they are for public appearances.”
One of McFarlane’s companies, Celerity Contracting Services, didn’t just work for the schools; it was a parttime handyman service for Celerity’s higher-ups.
Enrique Barraza, who was a Celerity Contracting foreman, said the company painted and updated houses owned by Grace Canada, the current CEO of Celerity Educational Group, and Miguel Portillo, Celerity’s director of operations. A 2013 permit application shows the company remodeled a bathroom in McFarlane’s Mar Vista home, though Celerity maintains that McFarlane and board member Julie Stern, who also had work done on her home, paid for the services. Neither Canada nor Portillo responded to requests for comment.
Although McFarlane’s contracting business and Celerity Educational were ostensibly separate, Barraza and Lori Wynn, who ran the contracting company, said the nonprofit paid their salaries and issued them credit cards. The charter school group’s credit card statements reflect thousands of dollars in purchases from Home Depot and other home improvement stores.
“I thought it was weird,” Wynn said of the way the finances seemed intermingled. “I think they were all benefiting,” she said of Celerity’s leaders.
During a recent visit to Celerity Educational Group’s office building, a reporter was told that the contracting business had been shut down.
By late 2015, L.A. Unified officials decided they had seen enough.
Having concluded that Celerity’s financial issues had become too serious to tolerate, they recommended that the school board refuse the group’s request to open two new schools, and the board agreed. Celerity’s leaders appealed to the Los Angeles County Office of Education, which could have intervened, but chose not to.
“This is effective ongoing oversight,” Jose ColeGutierrez, the director of L.A. Unified’s charter schools division, said in a recent interview.
Not that it stopped Celerity’s Southern California expansion.
State law allows charter schools that have been denied at the local level to appeal to the state. Last November, over the objections of L.A. Unified and the county, the State Board of Education voted to let Celerity keep growing.
More public money will flow Celerity’s way this fall when it opens two new L.A. charter schools.