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Magnolia charter network pleads for judge to reopen schools

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Magnolia Public Schools asked an LA Superior Court judge Thursday to reopen two charter schools. The Los Angeles Unified school district closed the schools after an audit found missing and misused funds. 

RELATED: Charter schools: Audit finds missing, misused funds at LA network

Judge Luis Lavin tentatively ruled the schools should be reopened until the next hearing, which Lavin said won't be until 2015. The final ruling is scheduled for release Friday.

“The burden is in favor of the petitioners who have children that need to go to school," Lavin told the courtroom. 

Lavin did not speak to the audit (the district is calling it a "draft forensic review") or its findings and instead focused on whether the L.A. Unified school board followed lawful procedure in closing the schools.

“I was trying to address protections of the public," Lavin said.

In March, two of eight schools operated by Magnolia were up for renewal. The school board took issue with an audit in 2012 which found $43,600 missing from accounts: school records showed double payments made to vendors with duplicate invoices attached. 

The board approved the schools on the condition the next audit showed no fiscal concerns.  

By June, L.A. Unified's Inspector General found Magnolia's managing organization was insolvent and borrowing cash from schools to stay afloat.  The inspector general is now investigating the entire network of schools and considering whether to refer the case for criminal prosecution.

L.A. Unified's Charter School Division issued a letter announcing the schools closures.

“It was a discretionary decision that was made here,” said attorney Lisa Corr, arguing on the behalf of Magnolia.

Judge Levin agreed.

“I’m really struggling with whether that’s a proper legal delegation of its authority," Lavin said, adding the board should have examined the merits of the audit and made the decision in an open board meeting after hearing from the public.

Lavin also took issue with the fact Magnolia wasn't given time to refute the audit's claims to L.A. Unified leadership, but made no mention of the earlier audit in 2012.

L.A. Unified's attorney, Sue Ann Evans, argued the board followed proper procedure and cannot be expected to resume oversight of financially troubled schools.

“We have to ensure that they are fiscally responsible,” Evans said.

The judge said he would review L.A. Unified's arguments, but said he was inclined to stick to his tentative ruling.

The parties agreed on conditions for schools to operate: the schools would submit cash flow statements, balance sheets, bank statements, expense reports to the district regularly.

The schools have to maintain a cash reserve, revenues must exceed expenditures, and another auditor will step in to review Magnolia's books.

Magnolia parents, students and staff arrived in matching neon green T-shirts three hours ahead of Thursday's hearing and were elated by the tentative ruling. 

"I believe if you are going to do a forensic audit, there has to be due process and within that there has to be a public hearing," said Alfredo Rubalcava, spokesman for Magnolia. 

Unless the school board intervenes, the schools will remain open for several months if not the entire next school year.  Parties will set the 2015 trial date in October of this year.

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