Charter employs founder's relatives

Joseph H. Proietta is known as a pioneer in the charter school movement in Pennsylvania. His Community Academy of Philadelphia, founded in 1997, was the first in the city to receive a charter.

But in local charter circles, Proietta, the chief executive officer of the Kensington school, also is known for hiring relatives:

Daughter Alberta Proietta O'Brien, as deputy chief executive officer at a salary of $94,860.

Brother John Proietta, as operations manager at $75,000.

Sister Maureen Proietta, as a teacher at $61,364.

Niece Mary Proietta, as a teacher and athletic director at $55,925.

Sister Marie L. Foster, as an administrative assistant at $29,101.

Wife Alberta D. Proietta, as a consultant at $8,160.

Together with Proietta's $163,000 salary, relatives this year will collect $487,610, according to information provided by the school.

Proietta also runs a nonprofit that collects $1.5 million rent from the charter and pays him and some relatives an additional $38,951.

The nonprofit also still owes the charter for staff work to launch two alternative schools that Proietta runs for the Philadelphia School District, according to an Inquirer review of documents.

The school's operation has drawn the attention of the school district's inspector general, and the U.S. Attorney's Office has launched a criminal probe. Agents raided the school in August, carting off boxes of documents and copies of computer hard drives.

There's nothing in Pennsylvania law that prevents Proietta from hiring his relatives, and he insists he has done nothing wrong.

It's unclear what the federal investigation is focusing on, but government jurisdiction includes the possible misspending of public money.

Community Academy and Proietta's nonprofit expect to get $20 million in public funds this academic year.

Despite the school's long history, its academic performance has been lackluster. The charter has met state benchmarks once in the last seven years. The state says the school has a 90 percent graduation rate, but only 29 percent of 11th graders tested last spring were on grade level in reading and 17 percent in math.

Community Academy, like all charters, is funded by taxpayers but is allowed to operate free from district rules on staffing and programs.

But Proietta's salary from the nonprofit could put him at odds with a 2008 law that prohibits charter administrators from collecting salaries from any entity doing business with the school.

Community Academy is one of at least six charters being investigated by federal and district officials. This year, prosecutors brought federal fraud charges against former officials of Philadelphia Academy Charter in the Northeast.

Two former officials of Philadelphia Academy pleaded guilty in July to fraud for taking money that was supposed to be spent on students.

At Community Academy, federal authorities' interest is so intense that at least a dozen federal agents joined in the recent raid.

"We have not been given any concrete information as to the subject matter of the investigation," said Michael M. Mustokoff, the school's attorney. "We're cooperating with the investigation and would like to see it end as quickly as possible."

Proietta said he expects to be exonerated.

"The evidence will show there wasn't anything that was done that was wrong, or that there was ever anything done with malice," he said in an interview. "I didn't get into this to get rich, and I never thought that I would."

But in recent months, he was concerned enough about heightened scrutiny from the district that he changed how his wife is paid.

That inquiry continues, said John F. Downs, the district's inspector general, who declined to provide details.

John J. Pease, an assistant U.S. attorney who is chief of the government-fraud and health-care-fraud unit, recently assumed responsibility for charter investigations. He declined to comment on the raid or Community Academy.

But sources with knowledge of the investigations said the raid reflected heightened interest in charter schools by the U.S. Attorney's Office and a recent decision to add resources to the probe.

The Inquirer examination of school documents, public records, and interviews with current and former Community staff found financial entanglements between Proietta's school and a nonprofit that raise questions about conflicts of interest and the use of taxpayer funds.

The nonprofit - International Education and Community Initiatives, which does business under the name One Bright Ray Inc. - is run by Proietta, his daughter, and the charter's chief operating officer. It collects $1.5 million in annual rent from the charter. It also receives $4.7 million in taxpayer funds to operate two high schools for dropouts and at-risk students for the district and a similar program in Baltimore.

Community Academy, at 1100 E. Erie Ave., enrolls 1,216 students from kindergarten through the 12th grade. The school this year will get $15.7 million in local, state, and federal funds.

Even though Community Academy opened its doors as a charter in 1997, its roots date to 1980.

Proietta, a former Catholic school educator who has a master's degree in education from Temple University, had operated a private, alternative school known as the Community High School under contracts with the district. The school, for most of its history at 2820 N. Fourth St. in Kensington, offered second chances for dropouts and those at risk of leaving school.

Every year, Proietta had to scramble for financial support, so when the state charter law passed, he converted Community to a charter with stable funding.

The School Reform Commission later approved adding middle and elementary grades with a program that remained focused on low-income, at-risk students. Psychologists and counselors are on staff.

In 2003, the school moved to a gleaming, 118,000-square-foot former cheese factory on a stretch of East Erie Avenue where heavy industrial trucks still lumber past. The nonprofit paid $17 million to buy and remodel the building.

Proietta defended the hiring of his relatives and praised their qualifications. He gave a reporter documents showing that his relatives are paid on par with other employees with the same titles.

He also said he does not directly supervise his relatives, including his daughter, O'Brien, who was promoted this year from high school principal to deputy CEO. They report to Anna Duvivier, chief operating officer, or other administrators, he said. "We deliberately did that," he added.

But former staffers said that despite what it says on the staff chart, Proietta is in charge of all 168 employees, including relatives.

Proietta's wife, Alberta, has had a complicated relationship with the charter.

A retired parochial school principal, she became an unpaid consultant to Community in 2001 when the school added elementary grades, a specialty Proietta lacked. She later became principal.

But her $65,000 salary as education coordinator was listed on the nonprofit's 2006-07 tax return and not on the school's payroll. In recent years, as a consultant, she has trained the charter's teachers and updated its curriculum.

For several years, each pay period, the charter wired the money to the nonprofit to cover her check.

That changed in April when Proietta decided to separate the business operations of the nonprofit and the charter.

He said he asked for the changes after reading an internal report about Philadelphia Academy, where investigators found that lax financial controls and conflicts of interest with nonprofits led to district and federal investigations.

In Proietta's operation, documents also show close ties between the charter and the nonprofit.

Proietta presides over the three-member nonprofit's board along with his daughter, the executive vice president, and Duvivier, the charter's chief operating officer, who is also CEO of the nonprofit.

In addition to his charter salary, Proietta collects $14,400 from the nonprofit, Duvivier $21,000. Proietta's daughter is not paid, but his brother received $20,208 for acting as operations manager until a full-time staffer was hired.

"It's not like we're having two full-time jobs," Proietta said of the nonprofit salaries. "It was always a part-time job."

Other money has flowed back and forth between the school and the nonprofit. The charter pays rent to the nonprofit, and the charter has billed the nonprofit for a $440,000 "management fee," records show.

Proietta said the fee was mislabeled in tax documents and audits. The money is owed because charter employees worked to launch an alternative school in 2004, he said.

"There was no mismanagement of funds," Proietta said. "We may have been sloppy in language and referred to services as management fees, but there is no management company or management service."

The fee is not listed in the 2008 audit. And while the nonprofit owes the charter $500,000, there is no information about a repayment plan or interest charge.

The 2009 audit has not been completed, Proietta said. "We are confident that all the money has been repaid."