2 charter schools struck by thefts [The Arizona Daily Star, Tucson]

Jan. 01--When charter school director Bette Jeppson sat down with an accountant last March, she expected to get a few tips on how the school could improve its bookkeeping and finances.

What she got instead was a litany of illegal transactions by the school's business manager that drained resources to the point the school was forced to cut back in educational spending, making it one of two Southern Arizona charter schools to come under investigation by the Arizona attorney general for financial improprieties.

For example, Jeppson didn't expect to learn business manager Keri Gall had given herself a 29 percent raise and was making 40 percent more than she herself was.

Or that the manager had used the school's credit cards to buy a $1,000 boxer, designer clothes, manicures, groceries and items used to remodel her home.

Jeppson was even more stunned to learn the manager hadn't been depositing money into teachers' IRAs and even forced one to pay her own health insurance.

For five years, Jeppson and her board members believed they couldn't afford to give their teachers raises, buy materials or go on field trips because of state budget cutbacks.

Jeppson truly thought The Carden School of Tucson could no longer afford the teacher who taught French to their younger students.

She and her board believed they had no choice but to ask parents for donations. They thought they had to increase class sizes and charge full-day kindergartners tuition.

Instead, Jeppson found out that morning Gall had been writing checks to herself and fixing the books, plus misusing the credit cards.

"When you work with people, you just trust them, otherwise how do you work?" Jeppson said Dec. 16, a few weeks after Gall was sentenced to six months in jail and five years' probation.

Originally charged with one count of fraud and four counts of theft, Gall pleaded guilty to one count of theft. She was also ordered to pay $150,280 in restitution at no less than $500 a month.

Authorities can prove Gall stole $128,000 between Jan. 1, 2007 and March 23, 2011; the K-8 school couldn't afford to dig back to her 2003 starting date.

That dollar amount doesn't count the $30,000 the school paid its accountant and two lawyers during the investigation or what it may have to pay the IRS in penalties.

Gall is not the only charter school employee to end up before a judge in recent months.

In October, William Eddings Jr., the former principal of a charter school operated by the Pima Prevention Partnership, was placed on three years' probation and ordered to pay nearly $23,000 in restitution for attempted theft.

An Arizona Department of Education audit and subsequent investigation revealed that between June 16, 2006, and March 15, 2008, Eddings submitted inflated attendance records, awarded diplomas to 11 students who didn't meet the state's graduation requirements and signed invoices for services not provided to the school.

The Department of Education overpaid the school $180,000 because of unreported absences and Eddings received $5,000 in bonuses based on the falsified numbers. He received another $12,000 for the fake invoices, said Assistant Arizona Attorney General Michael Jette.

Eddings fixed the books to make it look as though he was paying a Casa Grande mechanic and his sister to either teach or tutor students, when he was pocketing the money himself, Jette said.

Eddings was indicted in April on two counts of fraud and one count of theft; he pleaded guilty to attempted theft.

Other charter schools have lodged complaints with the Attorney General's Office in recent months as well, Jette said.

The fact that charter schools have been victimized in recent months isn't so much about charter schools as it is about small businesses, Jette said.

Small businesses rarely have the resources to hire separate people to open the bills, pay vendors, cut checks to employees and keep the books, Jette said.

That being the case, there often aren't checks and balances in place to catch embezzlers, Jette said.

The Carden School of Tucson, for example, only has nine teachers, 130 students and a handful of administrators and other staff members.

In recent years, the number of small-business owners reporting irregularities has been on the rise because they are going over their books more thoroughly trying to find ways to pinch pennies, Jette said.

Every penny counts nowadays, Jette said.

When asking for leniency, Gall's attorney questioned just how catastrophic the impact was on The Carden School, since the $128,000 was spread over five years.

Jette was offended.

Gall took away the ability of school officials to say where their money should go, Jette said.

"When you're a small business, you cannot run in the red. Twenty-eight thousand dollars (per year) may not seem like a lot to him, but it may mean books for the kids, a substitute teacher here or there or an after-school program," Jette said. "These companies are not GE, they're not a company with a profit margin of 15 percent. This is a school with zero profit margin."

"These were institutions teaching our kids and we don't want them (Gall and Eddings) taking state resources and creating profits for themselves," Jette said. "We want all of the money to go to teaching our kids."

Gall's sentencing has helped the 31-year-old school begin the healing process, Jeppson said.

The board fired Gall in March after her thievery was discovered, but because she wasn't indicted until July, teachers were kept in the dark as to the reasons why.

Until word of Gall's treachery came out, there was a lot of anger over her firing, said Assistant Director Ann Bennon.

They'd been to dinner with her, shared Jeppson's home-cooked Wednesday lunches with her and thought she'd been a staunch ally in their quest for raises and supplies.

Until Gall was indicted, Jeppson and Bennon simply had to ask their teachers for their trust.

Luckily, the teachers continued to show the loyalty they had shown since the school began suffering hard economic times, Bennon said.

"If this had happened elsewhere, I can't imagine they would have stayed," Bennon said.

In recent months, the teachers have received raises, checks and balances have been put in place and arrangements made for regular audits.

"The Carden School has taken its hits, taken its blows and we're still going," Bennon said.

Contact reporter Kim Smith at 573-4241 or [email protected]

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