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Lawsuit says Kansas City charter school owes millions

Friday, August 2, 2013 | 12:10 p.m. CDT

KANSAS CITY — A bank has filed a lawsuit against a failed Kansas City charter school and its former board members, accusing them of running up more than $10 million in debt and ignoring warnings that doing so could force the school to close.

The lawsuit was filed this week against Derrick Thomas Academy and its seven former board members by Wells Fargo Bank, which is the trustee for several bondholders.

The charter school owes bondholders $10.6 million borrowed since January 2007 to buy, renovate and equip the school building and to pay a $2.5 million debt to EdisonLearning, which managed the school, according to the lawsuit.

It is the second lawsuit filed this year against the school. EdisonLearning is suing it for more than $2 million that it says it is owed, partly to pay final teacher salaries. The teachers still have not been paid, The Kansas City Star reported.

Jackson County Court is holding the money while lenders fight over how it should be distributed.

"What the new lawsuit alleges is that DTA's former board of directors was negligent in managing the school's finances and through their actions led to the failing of DTA and its ability to repay bonds," said Robin Martinez, the Kansas City lawyer representing the school and its transition board. He does not represent the former board members named in the lawsuit.

The school closed in June after its sponsor, the University of Missouri-Kansas City, refused to renew its charter, citing poor management and low test scores. It had served about 950 pre-kindergarteners through ninth-grade students.

The lawsuit alleges that the former board members "negligently" decided to incur substantial debt and then disclose the school's financial troubles to principals while also approving hiring more staff and increasing salaries. The lawsuit also claims previous board members ended an agreement with EdisonLearning without settling its debt, contrary to advice from its legal counsel.

"What this lawsuit is, is bondholders looking into every available pocket," Martinez said. "The reality is that Derrick Thomas Academy has no money."


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