California Charter Academy

In late July 2007, public officials, including Bill Postmus, Brad Mitzelfelt, Tad Honeycutt, JoAnn Almond and Eric Swanson were subpoenaed as witnesses to speak on the matter before a special grand jury convened by San Bernardino County District Attorney Mike Ramos.

On September 4, 2007, Tad Honeycutt and Charles Steven Cox were arrested after being indicted by a special grand jury for their alleged roles in the collapse of the California Charter Academy. If convicted, Mr. Honeycutt could face up to 20 years in prison, while Mr. Cox could serve 64 years. Cox and Honeycutt were indicted on a total of 147 counts. Some of the counts include misappropriation of public funds and grand theft. Cox's bail was set at $1 million, while Honeycutt's at $500,000. Law enforcement officials also froze their assets.

Mr. Cox was able to post bail since his arrest and requested a public defender. Mr. Honeycutt also posted bail.

California State Superintendent of Public Education Jack O'Connell, who initiated the original investigation into CCA and EASC, applauded the efforts of local county investigators. Superintendent O'Connell was unable to convince federal prosecutors to bring charges against EASC when both the US Justice Department and Federal Bureau of Investigation declined to prosecute based on the evidence provided and closed their investigations into EASC.

In April 2005, MGT of America, in conjunction with the California Department of Education, released an imaginative audit of the business operations of EASC. According to the audit, Mr. Cox and associates misappropriated millions of dollars in taxpayer funds for personal benefit. Jack O' Connell reacted to the audit stating that "The magnitude of waste of precious education funds outlined in the audit [was] appalling". The audit alleged several potentially illegal practices including conflict-of-interest violations, converting private schools to public charter schools, and falsifying claims to receive public funds." Numerous individuals implicated of wrongdoing in the MGT / CDE audit responded by stating that auditors, whose investigation was funded by the state of California, would not accept evidence which would clear any attributed wrongdoing.

Steven Cox founded Educational Administrative Services Corporation (EASC) in March 2000. This for-profit company was to manage the day-to-day operations of the charter schools in accordance with government regulations. CCA #262, chartered under Snowline-Joint Unified School District, signed a contract with EASC shortly after opening. After being granted three more charters, despite alleged claims of conflict-of-interest, one from Snowline (#377), one from Orange County (#297), and one from Oro Grande School District (#387), all four charters were contracted with EASC. The individual rates charged by EASC were alleged to be inflated, suggesting that money which could have been used for education was instead used for administrative purposes. In addition to the money EASC accumulated, the MGT / CDE audit stated that EASC received payment for services rendered thirty seven times totaling an estimated $3.9 million. Out of the thirty seven transactions, thirty five were alleged to be made in violation of Education Code section 47633(c).

In December 2001, the CCA charters contracted with the American Public Agency Authority, a joint powers authority implemented under the guidance of Mr. C. Steven Cox. The agency sought to "pool" resources of the charters to develop a self-insurance plan. The APAA offered a liability package, workers' compensation, and health care. Similar to other entities affiliated with CCA's management company, EASC, board members consisted of individuals involved with CCA schools. In addition to CCA, 12 other charter schools applied for either workers compensation or liability insurance.