Marcus May has helped write some chapters on how to personally benefit from a nonprofit. Mr. May is now facing legal charges from the Feds (there was Federal money involved) but his playbook should serve to at least provide some wisdom to funders and state/federal administrators when they suspect something isn't right. The biggest problem, no one could look to the boards of Mr. May's Charter Schools to be the accountable body. Mr. May picked the boards to ensure they wouldn't get in the way. This of course serves as a good reminder that good boards do indeed "get in the way" to ensure that all is "right" with the nonprofit they oversee. Here's some of the Law360 article that provides details on this case, particularly about the board.
Convicted Charter School Operator Hit With Racketeering Suit
Law360 (June 10, 2019, 8:19 PM EDT) -- A former charter school operator convicted of defrauding Florida schools out of millions of dollars is being sued for racketeering by schools that he and his business associates ripped off by using shell companies to sell them school supplies at grossly inflated prices.
Three public, nonprofit charter school organizations in Florida that receive funding from local, state and federal sources filed a federal lawsuit Friday against Marcus May, his business associates and their shell companies, many of which appear to be named after fictional characters and companies from Ayn Rand’s novel, Atlas Shrugged.
The lawsuit alleges violation of the federal Racketeer Influenced and Corrupt Organizations Act and Florida’s Civil Remedies for Criminal Practices Act.
Galt Solutions LLC, Rearden Capital LLC and D’Anconia Development are among more than a dozen shell companies set up by May, his business associate and longtime friend Steven Kunkemoeller, and their wives, the complaint alleges. Due to the lost revenue, the schools say they were often forced to operate with few supplies or classroom materials.
“Teachers were forced to teach without textbooks,” the schools allege.
Through the shell companies, the Mays and the Kunkemoellers unjustly awarded themselves contracts that resulted in the charter schools' overpaying, sometimes as much as 300 percent, for equipment and supplies, according to the complaint.
“The ill-gotten proceeds were then paid to Kunkemoeller with public funds from the schools’ bank accounts. Upon being paid, Kunkemoeller shared approximately half of the profits with May as kickbacks,” the complaint alleges.
Kunkemoeller’s wife, Susan, and May’s ex-wife, Mary, helped carry out the schemes as well, according to the complaint. The Mays and the Kunkemoellers are accused of carrying out fraudulent invoicing, money laundering, and a real estate acquisition scheme.
In addition to purchasing properties in Ohio and Florida with the proceeds, the complaint also alleges that Mary and Marcus May divorced to protect the assets they acquired as a result of the schemes.
“In an effort to conceal and impede the ability of victims of the May Enterprise Scheme to recover funds from which they were defrauded, Mary May and May agreed to a sham divorce, whereupon Mary May ended up with millions of dollars’ worth of ill-gotten cash and other property,” the complaint alleges.
The proceeds of the fraud should be located, assessed and returned to the schools, the complaint says.
The schemes date to around 2007, the complaint says, when May formed his charter school management company, Newpoint Education Partners, and started managing schools across Florida, helping them develop their charter applications and seek approval from school boards.
May took the lead in forming governing boards to oversee each school’s operations and often filled seats on the board with his friends or colleagues, according to the complaint.
“The financial oversight each board exercised was generally to review financial statements prepared by bookkeepers that were handpicked by May. With May’s intentional limited oversight from these charter school governing boards, defendants were generally free to undertake their fraudulent financial transactions without much scrutiny,” the complaint says.
Newpoint Education Partners managed 14 charter schools across Florida, providing services such as negotiating leases for the school buildings, selecting bookkeepers, opening bank accounts for the schools, and purchasing equipment, education materials, furniture, and supplies, the complaint alleges.
May’s company took control of charter schools’ finances and then abused the fiduciary relationship, according to the suit.
Three public, nonprofit charter school organizations in Florida that receive funding from local, state and federal sources filed a federal lawsuit Friday against Marcus May, his business associates and their shell companies, many of which appear to be named after fictional characters and companies from Ayn Rand’s novel, Atlas Shrugged.
The lawsuit alleges violation of the federal Racketeer Influenced and Corrupt Organizations Act and Florida’s Civil Remedies for Criminal Practices Act.
Galt Solutions LLC, Rearden Capital LLC and D’Anconia Development are among more than a dozen shell companies set up by May, his business associate and longtime friend Steven Kunkemoeller, and their wives, the complaint alleges. Due to the lost revenue, the schools say they were often forced to operate with few supplies or classroom materials.
“Teachers were forced to teach without textbooks,” the schools allege.
Through the shell companies, the Mays and the Kunkemoellers unjustly awarded themselves contracts that resulted in the charter schools' overpaying, sometimes as much as 300 percent, for equipment and supplies, according to the complaint.
“The ill-gotten proceeds were then paid to Kunkemoeller with public funds from the schools’ bank accounts. Upon being paid, Kunkemoeller shared approximately half of the profits with May as kickbacks,” the complaint alleges.
Kunkemoeller’s wife, Susan, and May’s ex-wife, Mary, helped carry out the schemes as well, according to the complaint. The Mays and the Kunkemoellers are accused of carrying out fraudulent invoicing, money laundering, and a real estate acquisition scheme.
In addition to purchasing properties in Ohio and Florida with the proceeds, the complaint also alleges that Mary and Marcus May divorced to protect the assets they acquired as a result of the schemes.
“In an effort to conceal and impede the ability of victims of the May Enterprise Scheme to recover funds from which they were defrauded, Mary May and May agreed to a sham divorce, whereupon Mary May ended up with millions of dollars’ worth of ill-gotten cash and other property,” the complaint alleges.
The proceeds of the fraud should be located, assessed and returned to the schools, the complaint says.
The schemes date to around 2007, the complaint says, when May formed his charter school management company, Newpoint Education Partners, and started managing schools across Florida, helping them develop their charter applications and seek approval from school boards.
May took the lead in forming governing boards to oversee each school’s operations and often filled seats on the board with his friends or colleagues, according to the complaint.
“The financial oversight each board exercised was generally to review financial statements prepared by bookkeepers that were handpicked by May. With May’s intentional limited oversight from these charter school governing boards, defendants were generally free to undertake their fraudulent financial transactions without much scrutiny,” the complaint says.
Newpoint Education Partners managed 14 charter schools across Florida, providing services such as negotiating leases for the school buildings, selecting bookkeepers, opening bank accounts for the schools, and purchasing equipment, education materials, furniture, and supplies, the complaint alleges.
May’s company took control of charter schools’ finances and then abused the fiduciary relationship, according to the suit.