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Neither the Ballard Spahr investigators nor the individuals now responsible for running PACS have been able to calculate the total loss incurred by the school. That’s largely because the questionable practices of Gardiner and O’Shea permeated virtually every aspect of the PACS operation, ranging from the management of a mortgage taken out on the property occupied by the high school to lunch money collected from students daily in the cafeteria.
Nonetheless, according to the report, the disposition of hundreds of thousands of dollars, potentially more, remains in question. The unwillingness of Gardiner and O’Shea to cooperate with investigators or to furnish them with critical documents further hindered their efforts to untangle the complex web of financial transactions, the report said.
For now, the school isn’t even sure where to start attempting to recover some of the lost money.
"That’s certainly been a subject of discussion," said Larry Sperling, the school’s former chief academic officer who was elevated to CEO after O’Shea’s suspension and subsequent dismissal. "But (the discussion) has only gone so far as, ‘Let’s see what happens with (possible) indictments.’"
School officials have confirmed that the U.S. Attorney’s Office and the FBI also have been investigating the allegations against Gardiner and O’Shea, neither of whom replied to telephone and e-mail messages left by the Northeast Times last week.
Both federal agencies have declined to confirm or deny the existence of their investigations. Meanwhile, an investigation by the school district’s inspector general also continues. The inspector general has consistently declined media requests to speak about progress on his report.
According to Mark Morford, an attorney for Latsha Davis Yohe & McKenna, the school’s newly appointed legal counsel, the pending investigations may be able to add more pieces to the puzzle because of their powers to subpoena witnesses. But he considers the Ballard Spahr document a great starting point.
"The information in the report could support various legal actions," Morford said.
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The report paints Gardiner as a former public school principal and charter-school pioneer who in the early days of PACS (years 1999 and 2000) would tap into his personal finances on occasion to support the fledgling institution.
But as the school grew and its cash flow improved, Gardiner created a consultant business and multiple non-profit entities that he allegedly used to funnel PACS money toward other projects, both professional and personal.
One example cited in the report was the Philadelphia Academy Charter Development Corporation. Technically a non-profit, it was created in 2003 at the recommendation of the school’s then-counsel — former Pennsylvania House Speaker Bob O’Donnell. At the time, Gardiner was chief academic officer, a position that later evolved into the CEO role.
The development corporation was intended solely to facilitate the acquisition of the high school site and oversee the mortgage. Basically, the mortgage was in the name of the corporation, while PACS paid rent to the corporation to occupy the school.
Though the monthly mortgage payments currently are about $16,500, the report claims, PACS made monthly payments of $66,000 to the corporation. Though Ballard and Spahr investigators estimated that the development corporation’s accounts should have in excess of $1.7 million in them, records in May 2008 showed just over $792,000.
In one instance, the report said, the development corporation appeared to have loaned Gardiner’s consultant business $710,000 for the purchase of a property that eventually became the site of another Gardiner charter school, Northwood Academy, which is unaffiliated with PACS.
Similarly, Gardiner allegedly managed to manipulate development corporation funds to pay thousands of dollars to engineering and architectural design firms linked to his own non-PACS projects, including the design of a school building for a site in New Orleans, and roofing work on the Agora Cyber Charter School building in Devon, Chester County.
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Though he holds only a high school diploma, Kevin O’Shea benefited from large salary increases in quick succession upon being appointed as chief executive officer of PACS.
O’Shea, a former Philadelphia police officer, arrived at PACS in September 2002 as director of operations, earning a $60,000 salary, the report said. Previously he had been taking in $50,000 as a non-certified carpentry teacher at Franklin Towne Charter High School, another Gardiner-founded institution.
"Within four months, O’Shea and Gardiner sent PACS’ management company, Nobel, a memo stating that the board (of trustees) had approved salary increases for O’Shea and Gardiner of $2,000 per month and $3,000 per month, respectively," the report said.
By the 2006-07 academic year, the report stated, O’Shea was taking in almost $116,000 a year in the same position. From June 1, 2007 through September that year, O’Shea received three additional raises that increased his salary to $204,000.
He was installed as CEO on Sept. 20, replacing Gardiner, who had resigned to pursue his consulting business.
O’Shea allegedly profited from PACS in other ways.
He refused to allow cafeteria workers to count lunch receipts and instead took the uncounted cash. He often had his daughter and personal assistant, Tara O’Shea, collect the money, according to the report. Between Sept. 12, 2007 and March 31, 2008, PACS averaged cafeteria receipts of $1,715 per week, the report said. After O’Shea was suspended from the school, the receipts spiked to $3,343 per week from April 17 to June 3.
O’Shea also controlled vending machines in the school. According to the report, he routinely would buy candy for the machines using school funds and had Tara O’Shea stock them. Either he or his daughter would subsequently collect the money from the machines. According to the school’s records, it received no money from the machines between September 2007 and April 24, 2008. In the few weeks after his suspension, PACS took in $6,376 from the machines.
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One of the more outrageous allegations against O’Shea involves his confiscation of cash raised by the school’s National Honor Society for a Toys for Tots charity program.
On one "dress down day" at the school last December, $800 was raised as students paid $2 each for permission to wear casual clothes rather than their school uniforms. At the end of the day, the students were to accompany a faculty adviser to a local toy store to buy gifts for needy children.
But when the adviser approached O’Shea to exchange an abundance of small bills for some larger ones, O’Shea allegedly took half of the $800, leaving the students with just $400 to buy toys.
The report details numerous other instances of alleged misappropriation of school resources by Gardiner and O’Shea including:
• Their use of PACS maintenance workers for improvement work at each of their vacation homes.
• The use of PACS credit cards to buy supplies for improvements to their homes.
• The use of PACS funds to pay for cell phones for family members not employed by the school.
• Claiming reimbursement by the school for thousands of dollars in personal credit-card bills, including meals at restaurants, gas purchases and Flyers hockey tickets.
• Using PACS buses to transport Northwood Academy students on dozens of field trips without reimbursing PACS for the service.
• Gardiner’s sale of his personal minivan to PACS for about $16,000 — a price double the Kelley Blue Book value.
• O’Shea’s sale of two personal copy machines to the school for about $4,000.
Reporter William Kenny can be reached at 215-354-3031 or bkenny@phillynews.com