School board bond discussions are typically boring, but not when the person who handles all of Utah’s money drops a bomb.
State Treasurer David Damschen recently addressed the Utah State School Board. He told the members, when referring to a charter school who recently received a $12 million bond to buy its building it was leasing, “just right down the line, a little bit of a pillaging.”
Damschen says the people who guide the charter school allowed the school to overpay by as much as $295,993 for the loan that was granted by an out-of-state entity in Arizona.
Damschen did not name the school he referred to in the meeting, but the Beyond the Books investigation unit discovered the school is Franklin Discovery Academy in Vineyard, Utah.
We reached out to the school’s director Jen Price. After first agreeing to an interview, she later canceled, saying she was doing so on the advice of her attorney.
We then reached out to the school’s attorney of record, Joel Wright. We caught up to him at his office in Utah County.
We asked him about the allegation by the treasurer that the school had been fleeced.He told us the treasurer had “no evidence.”
Click below to watch the full interview between 2News Chris Jones and Joel Wright.
However, the treasurer did have facts that he presented to the school board. Damschen said the people who advised the school may have overcharged them by not guiding the school to seek the bond through the state’s Charter School Finance Authority, established by the Utah legislature in 2015.
Damschen sits on the board with two other members including Scott Jones, assistant superintendent of Utah schools and Phil Dean from the governor’s office.
Damschen says going to another state to get the money forced the school to pay even more. He said:
The conduit issuer in Arizona charged $55,000 to affect the transaction, remember we charge nothing. Why would you do that?
Damschen also says by sidestepping the Utah Charter School Finance Authority, Franklin was not required to hire a fiduciary adviser, a professional who would have guided Franklin through the process. That adviser could have helped the school avoid paying too much.
Damschen, although he did not name the borrower’s council to the school board, said that that attorney was overpaid as well.
The borrower's council was paid $50,000, depending on what comparable you look at. That’s between double and four times the market here in Utah.
Beyond the Books has learned that the borrower’s council for Franklin also happened to be Joel Wright.
In a 2016 meeting of the Utah Charter School Finance Authority, Wright complained about the oversight provided by the board, and that it had affected the fees he could charge for his services saying, “fees have gone down from 40 or $50,000 down to $15,000.
Franklin did not provide anyone to speak to us about the issue but did give us a statement.
It stated in part:
No one affiliated with Franklin Discovery Academy will have any further comments. We decline any interview requests on this topic both now and in the future. We would, however, be more than happy to provide interviews on the amazing things our school is doing, like taking 20 students out on a field trip every single day.
You can read it in its entirety below. Mobile app users, tap here
The school told us that allegations of lax oversight two years ago ruined its chances of finding financing, so it had to seek alternative means of investment.
They said the treasurer’s preferred mode of financing “would have almost certainly taken much longer to get us financing—or quite possibly resulted in no financing at all.”
Franklin says they got good advice from its experts and paid market price for the deal. It also said purchasing its building versus leasing it has saved the school $90,000 a month.
The statement said:
Bottom line, we got more money for our students. This is the only story.
The statement also adds that the school was not required to go through the CSFA for its financing.
Damschen says that is true, but 99 percent of all Utah Charter Schools seek their financing through the Charter School Finance Authority and Franklin, “Absolutely, without questions,” overpaid for its bond.
Members of the school board discussed the possibility of addressing the out-of-state financing plan by asking lawmakers to address the issue in the next legislative session.