Former Head of St. Louis-Area Charter School Pleads Guilty to $2.4 Million Fraud
For Immediate Release
U.S. Attorney's Office, Eastern District of Missouri
St. Louis, MO – Michael Malone, 44, of St. Louis, MO, pled guilty to three counts of wire fraud connected to a scheme to defraud and obtain education funds from the State of Missouri relative to the operation of the St. Louis College Prep Charter School from 2011 through 2018. Malone appeared today before U.S. District Judge Audrey Fleissig, who accepted his plea and set sentencing for November 30, 2020.
According to the plea agreement and statements made in Court, The St. Louis College Prep Charter School (“SLCP”) was a Missouri Charter School located in St. Louis, Missouri. From April, 2011 through June, 2015 it operated out of leased premises at 2900 South Grand Avenue, at which time it purchased a building at 1224 Grattan Street, where it operated until the school’s closing in May, 2019. During its final school year of 2018-2019, SLCP served students in grades six through twelve. As a Missouri Charter School, SLCP was tuition free and funded by Missouri and federal education funds. SLCP received its state funding through Missouri’s Department of Elementary and Secondary Education (“DESE”) based upon SLCP’s reported student attendance. Per-student funding is based on average daily attendance, or how often students are reported to be in the school, rather than enrollment. Malone founded SLCP and served as the Executive Director of SLCP from the school’s inception during 2011 until his resignation on November 1, 2018. Malone was actively involved in the day-to-day management and administration of SLCP, maintained his office in the primary school building and was responsible for reporting the SLCP student attendance numbers to DESE in order for DESE to calculate SLCP’s state funding.
As part of his scheme, Malone falsely inflated SLCP students’ average daily attendance in his reports to DESE. For four of the seven school years between 2011-2012 and 2017-2018, Malone reported students’ average daily attendance in excess of SLCP’s actual enrollment. For example, during the 2013-2014 school year, Malone reported average daily attendance of 220, when actual enrollment at SLCP was only 191 students. During the 2016-2017 school year, Malone reported average daily attendance of 326, when actual enrollment at SLCP was only 290 students. These falsely inflated average daily attendance numbers reported by Malone to DESE resulted in increased state funding to SLCP.
SCLP operated on a year-long school schedule and an extended school day with no summer school and no remedial classes. However, as part of his scheme, Malone inflated student attendance numbers by falsely claiming regular school days and hours as summer school or remedial hours, increasing the state funding received from DESE. Malone also falsely inflated actual student daily attendance. For example, during the 2016-2017 school year, Malone inflated the daily attendance records of 81 out of 333 students, or 24% of the actual SLCP student body. During the 2017-2018 school year, Malone inflated the daily attendance records of 188 out of 319 students, or 59% of the actual SLCP student body. Inflated hours totaled approximately 10,044 hours for the 2016-2017 school year and approximately 13,255 hours for the 2017-2018 school year.
Malone used the fraudulently obtained increase in state funding, approximately $2,400,000, to maintain SLCP’s ongoing operations during a period when costs to operate the school were increasing significantly. Malone also used the increased state funding to give SLCP a competitive advantage over St. Louis Public Schools and other St. Louis Charter Schools when recruiting students. As Missouri state funding follows the student, each St. Louis resident student successfully recruited to SLCP meant an increase in funding for SLCP and a decrease in funding for St. Louis Public Schools. The additional funds provided to SLCP were used to pay for resources which were not equally accessible to St. Louis Public Schools and other St. Louis Charter Schools.
United States Attorney Jeff Jensen stated, “What the former headmaster did through his deception, repeatedly over many years, was take advantage of the Missouri taxpayers, while obtaining an unfair advantage over the St. Louis Public Schools and other area charter schools. This was not a mistake. Evidence proved Michael Malone’s actions were intentional and, unfortunately he got away with it for years.”
"Michael Malone failed more than just students and staff at St. Louis College Prep Charter School," said Special Agent in Charge Richard Quinn of the FBI St. Louis Division. "By siphoning $2,400,000 from a finite pool of education dollars, he robbed students at other public and charter schools of additional resources they should have received."
Each charge of wire fraud carries a maximum possible penalty of twenty years imprisonment, a fine of $250,000 or both imprisonment and a fine. In determining the actual sentence, a Judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.
This case was investigated by the Federal Bureau of Investigation, with the cooperation and assistance of the Missouri Department of Elementary and Secondary Education and the Missouri State Auditor’s Office. Assistant United States Attorney Hal Goldsmith is handling the case for the United States Attorney’s Office.
Updated August 26, 2020