06-005074 John Winn, As Commissioner Of Education vs. Muskateer`s Academy, Inc. Status: Closed Recommended Order on Monday, April 2, 2007.

Summary: Respondent committed fraud in seeking to obtain funds from the McKay Scholarship Program, thereby warranting Petitioner`s immediate suspension of payments to Respondent. Petitioner should revoke Respondent`s participation in the program for noncompliance.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN WINN, AS COMMISSIONER OF )

EDUCATION, )

)

Petitioner, )

) Case No. 06 - 5074

vs. )

)

MUSKATEER'S ACADEMY, INC., )

)

Respondent. )

)

RECOMMENDED OR DER

This case came before Administrative Law Judge John G.

Van Laningham for final hearing by video teleconference on

January 9, 2007, at sites in Tallahassee and Miami, Florida.

Thereafter, on January 18 and February 1, 2007, the parties

examined six additional witnesses via videotaped depositions,

and they elicited further testimony, via deposition, from three

witnesses who had testified previously at hearing. All nine

depositions, including the six videotapes, were received in

evidence in lieu o f reconvening the final hearing.

APPEARANCES

For Petitioner: Jason M. Hand, Esquire

Department of Education

325 West Gaines Street, Suite 1244

Tallahassee, Florida 32399 - 0400

James A. Peters, Esquire

Daniel Biggins, Esquire

Offi ce of the Attorney General

The Capitol , Plaza 01

Tallahassee, Florida 32399 - 1050

For Respondent: Marie G. Vital, Esquire

The Whitaker Building

1065 Northeast 125th Street, Suite 317

Miami, Florida 33161

STATEMENT OF THE ISSUES

The issues in this case are (a) whether Respondent

committed fraud in seeking to obtain funds from the McKay

Scholarship Program, thereby warranting Petitioner's summary

suspension of payments to Respondent; and (b) whether Petitioner

should revoke Respondent's participation in the McKay

Scholarship program for failing to comply with applicable laws.

PRELIMINARY STATEMENT

On November 1, 2006, Petitioner John L. Winn, as

Commissioner of Education, issued an Administrative Complaint

against Respondent Muskateer's Academy, Inc., through which the

Commissioner sought to revoke Respondent's participation, as a

private school, in the McKay Scholarship Program. In addition,

h aving found probable cause to believe that Respondent had made

fraudulen t misrepresentations in an effort to obtain payment of

scholarship funds, the Commissioner simultaneously ordered that

all payments to Respondent be immediately suspended. Respondent

timely requested a formal administrative hearing to contest the

Commissi oner's allegations, which it denied .

O n December 13 , 2006, the matter was referred to the

Division of Administrative Hearings (" DOAH") for further

proceedings . Once assigned, the undersigned scheduled the final

hearing for January 9, 2007.

At the final hearing, which took place as scheduled ,

Petitioner presented the testimony of Chad Aldis, Seth

Stoughton, Oscar Miranda, and Altagracia Moreta. Respondent

called Erick Cermeno, Michael Nelson, Demara Young, and

Jacqueline Cermeno. Thereafter, on January 18 and February 1,

2007, the parties examined six additional witnesses via

videotaped depositions, namely: Amneris Mesa, Lidet Fernandez,

O. F., and N. P. (Petitioner's witnesses); and C. M. and

Madeline Pena (Respondent's witnesses). Respondent also re -

called, via deposition, Erick Cermeno, Jacqueline Cermeno, and

Michael Nelson. These deposition s , nine in total, were received

in evidence according to the parties' stipulation.

Petitioner introduced 18 Petitioner's Exhibits, numbered 1

through 18, and ea ch was received in evidence. Respondent's

Exhibits E, H, J (as supplemented post hearing, without

objection), and K were offered and admitted as well.

The evidentiary record was complete on February 27, 2007 .

Each party timely filed a Proposed Recommend ed Order before the

established deadline, which was March 9 , 2007.

Unless otherwise indicated, citations to the Florida

Statutes refer to the 2006 Florida Statutes.

FINDINGS OF FACT

1. Respondent Muskateer's Academy, Inc. ("MAI") is a

Florida corporation that, at all times relevant to this case,

operated a private school known as Muskateer's Academy

("Muskateer's"). MAI was closely held by Erick and Jacqueline

Cermeno , a married couple. Together, they ran the school,

holding (and sometimes swapping) var ious titles of importance,

such as "principal" and "superintendent," which signified their

supervisory roles.

2. Located in Hialeah, Florida, Muskateer's served mainly

at - risk students who, for one reason or another, were unable or

unlikely to succeed in the public school system. On paper, the

school's tuition was quite steep. The undersigned infers,

however, that few parents, if any, actually paid the " sticker

price " for tuition and other expenses that Respondent reported

to the Florida Department of Ed ucation ("Department") in its

student fee schedules, which charges totaled $24,000 per year,

per child. Rather, the undersigned infers that, for most

students at least, Respondent agreed to accept as payment in

full whatever amount was available annually for a particular

student under the John M. McKay Scholarships for Students With

Disabilities Program ("McKay Scholarship Program").

3. Respondent operated two separate high schools at

Muskateer's. One was a "regular," four - year high school that

followed the traditional model, where instructors taught various

academic subjects to classes of students, who attended classes

for the purpose of learning academic subjects from their

teachers. In this high school, tests were given periodically,

as a means of mea suring the students' mastery of the material.

4. The other program was an "accelerated" high school

where each student worked individually, at his own pace.

Teachers played a relatively small part in this program, doing

little but overseeing the "testing room" in which the students

took tests —— their primary scholastic activity. Students

received course credit for passing tests. 1

5. At the relevant times, there were three or four

teachers at Muskateer's. To be a teacher there, a person did

not need a b achelor's degree. Instead, MAI was willing to hire

individuals having some type of educational background,

preferably including at least 40 college credits, more or less.

One of the teachers at Muskateer's was Amneris Mesa, whose

brother, O. F., attended the school for some period of time. As

will be seen, O. F. is one of the key figures in the instant

dispute.

6. In August 2006, the Department's Office of Independent

Education and Parental Choice ("Choice Office") received a

complaint about Muskateer 's, the gravamen of which was that MAI

was continuing to receive funds under the McKay Scholarship

Program for former students who had stopped attending the

school. The Choice Office, which administers the McKay

Scholarship Program, referred the complaint to the Department's

Office of Inspector General ("OIG") for investigation.

7. The OIG's investigation led to the discovery of

evidence sufficient to persuade the Commissioner of Education

("Commissioner") that MAI had engaged in fraudulent activity

with regard to the McKay Scholarship Program. Consequently, on

November 1, 2006, the Commissioner issued an Administrative

Complaint against MAI, which charged MAI with fraud and other

violations of the laws governing the McKay Scholarship Program.

At the sam e time, the Commissioner immediately suspended all

payments to MAI under the McKay Scholarship Program. Being thus

cut off from its primary source of revenue, MAI closed

Muskateer's on November 18, 2006. As of the final hearing, the

school had not reopen ed.

8. The Commissioner's present case against MAI hinges on

allegations that, to induce the payment of funds under the McKay

Scholarship Program, the company falsely represented to the

Department that three students —— O. F., N. P., and C. M. —— had

"reen rolled" at Muskateer's for the 2006 - 07 school year, when in

fact two of them (O. F. and N. P.) previously had graduated, and

the third (C. M.) had dropped out midway through the preceding

school year. MAI disputes these allegations, and hence the

focus of the hearing largely was on whether the three

individuals in question had attended Muskateer's during the

2006 - 07 school year. Before addressing the contested factual

issues, however, a brief examination of the McKay Scholarship

Program is in order, to pr ovide context for the findings of fact

that will follow.

9. The McKay Scholarship Program affords a disabled

student the option of attending a different public school from

the one to which he is assigned, or, if he is eligible, the

opportunity to receive a scholarship to defray the cost of

attending a private school of choice. Once awarded, a McKay

scholarship remains in force until the student returns to a

public school, graduates, or turns 22, whichever first occurs;

provided, however, that he does not drop out, which would render

the student ineligible for the scholarship, at least during the

period of non - enrollment.

10. To participate in the McKay Scholarship Program, a

private school must meet certain conditions as well. Inasmuch

as the Commissio ner has alleged that MAI failed to comply with

some conditions of continued eligibility, the relevant ones will

be discussed in greater detail below. For the moment, however,

it is sufficient to note that McKay scholarship funding is

potentially available to most private schools operating lawfully

in the state, for the program is designed to be inclusive in

this regard.

11. A private school that wants to participate in the

McKay Scholarship Program must notify the Department of its

in terest and submit inf ormation demonstrating compliance with

the eligibility requirements. This information —— and other data

necessary to secure the disbursement of scholarship funds —— must

be transmitted to the Department electronically, through forms

available online to regist ered users, at a secure website

maintained b y the Department. To access this site , a private

school must first obtain a unique code and establish a

confidential password, both of which must be entered correctly

in order to logon to t he Department's secure web page .

12. If the parent of an eligible student chooses the

private school option and secures a place for his child at the

private school of choice, then the parent must notify the

Department of his decision before the child begins attending the

p rivate school. After receiving such notice, the Department

verifies the student's enrollment in the private school, obtains

from the private school a schedule of the tuition and fees, and

receives from the student's school district a "matrix of

services" reflecting the student's special educational needs.

13. The maximum amount of the McKay scholarship for a

particular student is the lesser of (a) the "calculated amount"

(which is roughly equal to the estimated cost of educating the

student in the publi c school to which he is assigned) or (b) the

actual amount of the private school's tuition and fees. 2 The

amount of the student's scholarship is deducted from his public

school district's total funding entitlement. 3

14. McKay scholarship payments are mad e in four equal

amounts during the school year to which the scholarship applies.

The payment dates are September 1, November 1, February 1, and

April 1. Payments are made by warrant payable to the student's

parent. The Department mails each warrant to t he private school

of the parent's choice. The parent is required restrictively to

endorse the warrant, authorizing the funds to be deposited only

in the private school's account. 4

15. To remain eligible for the McKay scholarship, the

student must have re gular and direct contact with his teacher(s)

at the private school's physical location. Thus, ahead of each

payment (after the initial payment), the private school must

verify, through the Department's secure, password - protected

website, that the student continues to be enrolled in, and to

attend, the private school.

16. It is in connection with this ongoing duty to verify

continued enrollment and attendance at the private school that

MAI is alleged to have engaged in fraudulent activity, namely,

report ing to the Department that O. F., N. P., and C. M. were

still enrolled in, and attending, Muskateer's when, in fact,

they were not. The undersigned will now turn to these

allegations, which lie at the heart of this matter.

17. But first: It must be ack nowledged that the evidence

is in conflict concerning the historical facts relevant to the

allegations of fraudulent activity. Given the evidential

conflicts, the undersigned supposes that reasonable people might

disagree about what happened here. Ultima tely, however, it

falls to the undersigned, rather than a group of hypothetical

"reasonable people," to resolve the evidential conflicts and

settle the disputed issues of material fact. Thus, to the

extent that any finding below (or herein) is inconsisten t with

the testimony of one witness or another, or with some

documentary evidence, the finding reflects a rejection of all

such inconsistent testimony and evidence (none of which was

overlooked, disregarded, or ignored) in favor of proof that the

undersign ed deemed, in the exercise of his prerogatives as the

fact - finder, to be more believable and hence entitled to greater

weight.

O. F.

18. In January 2006, halfway through the 2005 - 06 school

year, O. F. was enrolled as a student of Muskateer's. He began

attending the accelerated high school on January 26, 2006. At

the same time, his sister, Ms. Mesa, started working for MAI as

a teacher in the regular high school.

19. About five months later, O. F. graduated from

Muskateer's. O. F. participated in a graduation ceremony on

June 3, 2006, and, according to the transcript maintained in his

student file, O. F. was awarded a diploma or certificate on that

date.

20. The transcript notwithstanding, it is undisputed that

O. F. did not actually receive his diploma until several months

after his graduation date. MAI contends that it withheld O.

F.'s diploma because he had not finished all the tests necessary

for graduation. The undersigned finds, however, that the

evidence is insufficient to support a findi ng that O. F. had not

finished his degree requirements as of June 3, 2006; indeed, the

greater weight of the persuasive evidence is to the contrary.

Accordingly, MAI's assertion that O. F. did not graduate from

high school at the end of the 2005 - 06 school year is rejected.

21. On May 26, 2006, MAI reported to the Department,

through the Department's secure, password - protected website ,

that O. F. had reenrolled in Muskateer's for the 2006 - 07 school

year, and that he would resume attending the school on Ju ly 1,

2006. On the same date and in the same manner, MAI reported

that O. F.'s tuition and fees for the upcoming school year would

total $24,000. These representations were made for the purpose

of obtaining funds from the McKay Scholarship Program.

22. The foregoing representations regarding O. F.'s

reenrollment in Muskateer's for the 2006 - 07 school year were

false. Moreover, the greater weight of the evidence persuades

the undersigned that, more likely than not, the individuals

responsible for making these representations —— namely Mr. And

Mrs. Cermeno —— actually knew that the representations were false,

or they recklessly disregarded the truth or falsity of the

matters asserted. 5

23. Despite having graduated, O. F. returned to

Muskateer's on three or f our occasions in September and October

2006, at which times he took a few tests that he had previously

taken and passed. This happened because the Cermeno s refused to

give O. F. his diploma unless he retook these tests —— a condition

that was repeated both to O. F.'s mother and his sister (the

teacher). 6 The undersigned infers that, more likely than not,

the Cermeno s used the threat of withholding O. F.'s diploma as a

means of coercing his "attendance" at Muskateer's during the

2006 - 07 school year, to creat e plausible deniability in the

event the charge were brought (as it was) that MAI had

fraudulently sought to obtain McKay scholarship funds for O. F.

At any rate, post - graduation "attendance" such as O. F.'s —— to

retake exams for no apparent legitimate rea son —— is not the kind

of regular attendance that would support the reasonable

inference that the student had enrolled for the 2006 - 07 school

year. 7

N. P.

24. N. P. enrolled in Muskateer's on May 3, 2004, and

began attending classes in the accelerated hig h school on August

16, 2004. He graduated (at least in the ceremonial sense) at

the end of the 2004 - 05 school year but never received a diploma.

25. N. P. testified that he never returned to Muskateer's

as a student after he (ceremonially) graduated. In other words,

N. P. claims that he was not a student of Muskateer's during

either the 2005 - 06 school year or the 2006 - 07 school year. N.

P.'s testimony in this regard is corroborated by the testimony

of his aunt (and legal guardian ) , Altagracia Moreta.

26. Additionally, N. P.'s testimony is corroborated by the

absence of well - kept, reliable documentation —— such as enrollment

registers and attendance records —— attesting to his ongoing

attendance at Muskateer's after the 2004 - 05 school year. The

unders igned considers the lack of such documentation to be a

telling fact.

27. Consequently, although the re is conflicting evidence,

the undersigned finds that, more likely than not, N. P. did not

attend Muskateer's during the 2005 - 06 and 2006 - 07 school years,

as he testified.

28. On May 4, 2005, MAI reported to the Department,

through the Department's secure, password - protected website ,

that N. P. had reenrolled in Muskateer's for the 2005 - 06 school

year, and that he would resume attending the school on A ugust 8,

2005. On the same date and in the same manner, MAI reported

that N. P.'s tuition and fees for the 2005 - 06 school year would

total $24,000. These representations were made for the purpose

of obtaining funds from the McKay Scholarship Program.

29. On May 26, 2006, MAI reported to the Department,

through the Department's secure, password - protected website ,

that N. P. had reenrolled in Muskateer's for the 2006 - 07 school

year, and that he would resume attending the school on July 1,

2006. On the sam e date and in the same manner, MAI reported

that N. P.'s tuition and fees for the 2006 - 07 school year would

total $24,000. These representations were made for the purpose

of obtaining funds from the McKay Scholarship Program.

30. The foregoing representa tions regarding N. P.'s

reenrollment in Muskateer's for the 2005 - 06 and 2006 - 07 school

year were false. Moreover, the greater weight of the evidence

persuades the undersigned that, more likely than not, the

individuals responsible for making these represe ntations —— namely

Mr. And Mrs. Cermeno —— actually knew that these representations

were false, or they recklessly disregarded the truth or falsity

of the matters asserted.

C. M.

31. In July 2004, C. M. registered to attend Muskateer's.

He began attending t he accelerated high school on August 16,

2004.

32. C. M. testified at hearing (via deposition) that he

continued to attend Muskateer's while this proceeding was

pending, having been in class there as recently as "yesterday"

(January 17, 2007). C. M. d id not know what courses he was

currently taking or how many other students currently were

attending Muskateer's. (Recall that Muskateer's closed its

doors on November 18, 2006, and, as of the final hearing, had

not reop ened). 8

33. Whatever credibilit y C. M. still possessed after

giving testimony such as that just described was shredded when

Petitioner impeached him with a prior inconsistent (actually,

contradictory ) statement. On August 22, 2006, C. M. told the

OIG's investigator that he had stopped attending Muskateer's in

December 2005 and never returned. The investigator made an

audio recording of C. M.'s statement, which was received in

evidence, but C. M. was not under oath at the time he gave the

statement.

34. The undersigned finds that C. M . is not a believable

witness, and his testimony, being unreliable and unpersuasive,

is given no weight. 9 The documents in C. M.'s disorderly (and

seemingly incomplete) student file are likewise insufficient to

establish, to the required degree of persuas iveness (namely,

that the fact is more likely true than not), the dates on which

C. M. attended Muskateer's as an enrolled student.

35. The bottom line is that the evidence is insufficient

to permit the undersigned to make a finding as to when (or

whet her) C. M. stopped attending Muskateer's (prior to its

closure on November 18, 2006). 10

36. Lacking sufficient proof regarding the dates during

which C. M. attended Muskateer's as a duly enrolled student, it

is impossible to determine whether MAI engaged in any fraudulent

activity with regard to C. M.

Determinations of Ultimate Fact

37. The greater weight of the evidence establishes that,

to induce the state to disburse McKay scholarship funds for the

benefit of O. F., MAI engaged in fraudulent activity, to wit:

MAI intentionally reported to the Department that O. F. had

reenrolled in Muskateer's for the 2006 - 07 school year, while

either (a) knowing that this representation of material fact was

false or (b) recklessly disregarding the truth or falsity of

this material representation, which was, in fact, false.

38. The greater weight of the evidence establishes that,

to induce the state to disburse McKay scholarship funds for the

benefit of N. P., MAI engaged in fraudulent activity, to wit:

MAI intentiona lly reported to the Department, on separate

occasions, that N. P. had reenrolled in Muskateer's for the

2005 - 06 and 2006 - 07 school years, while either (a) knowing that

these representations of material fact were false or (b)

recklessly disregarding the tru th or falsity of these material

representations, which were, in fact, false.

39. The greater weight of the evidence is insufficient to

establish that MAI engaged in fraudulent activity in connection

with its efforts to obtain McKay scholarship funds for t he

benefit of C. M.

40. The greater weight of the evidence establishes that,

by failing to keep and maintain complete and orderly records of

enrollment and attendance, MAI failed to meet its obligation

under Section 1002.39(8)(a), Florida Statutes, to com ply with

all of the requirements set forth in Section 1002.421, which

mandates that private schools participating in the McKay

Scholarship Program must, among other things, conform to all the

requirements outlined in Section 1002.42, Florida Statutes,

incl uding Section 1002.42(4), which directs that private schools

must prepare and keep attendance records in accordance with the

provisions of Secti on 1003.23(2), Florida Statutes.

CONCLUSIONS OF LAW

41 . DOAH has personal and subject matter jurisdiction in

th is proceeding pursuant to Sections 1002.39(7), 120.569, and

120.57(1), Florida Statutes.

4 2. The burden of establishing the grounds for suspending

or revoking a private school's participation in the McKay

Scholarship Program falls on the Commissioner, who must prove

his allegations by a preponderance of evidence. See Florida

Department of Transportation v. J.W.C. Co., Inc. , 396 So. 2d

778, 788 (Fla. 1st DCA 1981)(burden of proof is usually upon

party asserting the affirmative of the issue); cf. Florida

De partment of Health and Rehabilitative Services v. Career

Service Commission , 289 So. 2d 412, 415 (Fla. 4th DCA

1974)(agency must carry burden of proving grounds for dismissal

of employee); cf. Southpointe Pharmacy v. Department of Health

and Rehabilitative Services , 596 So. 2d 106, 109 (Fla. 1st DCA

1992)(party seeking to establish Medicaid overpayment has burden

of proof); see also § 120.57(1)(j), Fla. Stat.

43. Pursuant to Section 1002.39(7)(c), Florida Statutes,

the Commissioner is authorized to

i mmediately suspend payment of scholarship

funds if it is determined that there is

probable cause to believe that there is:

1. An imminent threat to the health,

safety, or welfare of the students; or

2. Fraudulent activity on the part of the

private s chool.

(Emphasis added.) The Commissioner's order immediately

suspending payments "may be appealed" by timely filing a request

for hearing pursuant to Sections 120.569 and 120.57, Florida

Statutes. § 1002.39(7)(c), Fla. Stat.

44. That an aggrieved pa rty can "appeal" the

Commissioner's order should not be misconstrued to mean that, in

a proceeding such as this, the administrative law judge either

sits in review of the Commissioner's probable cause

determination or otherwise substitutes his judgment for the

Commissioner's on the question of whether probable cause exists.

Clearly, the probable cause determination —— which is

investigative or prosecutorial, rather than adjudicative, in

nature —— is for the Commissioner alone to make, and he may make

his decis ion without necessarily, or even usually, first

allowing the private school under suspicion to attack the

evidence of wrongdoing via adversarial mechanisms such as cross -

examination.

45. Properly understood, the Commissioner's executive

decision on probab le cause is a necessary condition of

immediately suspending payment of scholarship funds to a private

school believed to be engaging in fraudulent activity (or to

pose an imminent threat to students). However, probable cause

is not a sufficient basis for entering a final order suspending

payment to such school if the school requests a "substantial

interests" hearing. If a formal administrative proceeding is

initiated, as here, then the final order must be based, not on

probable cause, but on findings of f act supported by the greater

weight of the competent substantial evidence adduced at

hearing. 11 In sum, then, it is not the Commissioner's burden in

this adversarial, adjudicative proceeding to prove merely that

probable cause exists for believing MAI has engaged in

fraudulent activity. Rather, the Commissioner's burden is to

prove —— over and against MAI's defenses —— that, more likely than

not, MAI engaged in fraudulent activity. 12

46. The essential elements of a fraud claim are: (1) a

false statement conce rning a material fact; (2) made (i) with

knowledge that the representation is false and (ii) with the

intention of inducing another's reliance thereon; and (3)

consequent injury to the other party acting in reliance on the

false representation. See , e.g. , Cohen v. Kravit Estate Buyers,

Inc. , 843 So. 2d 989, 991 (Fla. 4th DCA 2003).

47. " [ F ] raudulent intent usually must be proved by

circumstantial evidence and such circumstances may, by their

number and joint consideration, be sufficient to constitute

pr oof." Nally v. Olsson , 134 So. 2d 265, 267 (Fla. 2d DCA

1961). Therefore, as proof of fraud, "one may show 'a series of

distinct acts, each of which may be a badge of fraud and when

taken together as a whole, constitute fraud.'" Department of

Revenue v. Rudd , 545 So. 2d 369, 372 (Fla. 1st DCA 1989),

quoting Allen v. Tatham , 56 So. 2d 337, 339 (Fla. 1952).

Further, "[s]cienter, or guilty knowledge, [which] is an element

of intentional misconduct [such as fraud], . . . can be

established by showing actual knowledge, or that the defendant

was reckless or careless as to the truth of the matter

asserted." Ocean Bank of Miami v. INV - UNI Inv. Corp. , 599 So.

2d 694, 697 (Fla. 3d DCA 1992).

48. The undersigned has found, as recited above in the

factual findin gs, that the Commissioner carried his burden of

proof regarding the allegations of fraudulent activity.

Therefore, the Commissioner is legally authorized to immediately

(and indefinitely) suspend payment of McKay scholarship funds to

MAI.

49. It is the undersigned's opinion that a finding of

fraudulent activity constitutes a sufficient basis for revoking

a private school's participation in the McKay Scholarship

Program —— or alternatively, at a minimum, makes such revocation

superfluous, inasmuch as the im mediate and indefinite suspension

of payments is functionally the equivalent of revocation of

participation. Nevertheless, because the Commissioner

separately has alleged and proved grounds for revoking MAI's

participation in the McKay Scholarship Program , the undersigned

has made the relevant findings and will briefly discuss the

applicable law.

50. Pursuant to Section 1002.39(7)(a), Florida Statutes,

the Commissioner is required to "deny, suspend, or revoke a

private school's participation in the schol arship program if it

is determined that the private school has failed to comply with

the provisions of this section."

51. Section 1002.39(8)(a) requires, as a condition of

participating in the McKay Scholarship Program, that a private

school "[c]omply wi th all requirements for private schools

participating in state school choice scholarship programs

pursuant to s. 1002.421."

52. Section 1002.421(1), Florida Statutes, requires, among

other things, that all private school participating in the McKay

Schola rship Program "must comply with all requirements . . .

outlined in s. 1002.42."

53. Section 1002.42(4), Florida Statutes, mandates that

all private schools' "officials, teachers, and other employees

. . . shall keep and prepare [attendance] records in accordance

with the provisions of s. 1003.23(2)."

54. Section 1003.23(2), Florida Statutes, provides as

follows:

All officials, teachers, and other employees

in public, parochial, religious,

denominational, and private K - 12 schools,

including private tu tors, shall keep all

records and shall prepare and submit

promptly all reports that may be required by

law and by rules of the State Board of

Education and district school boards. Such

records shall include a register of

enrollment and attendance and all persons

described above shall make these reports

therefrom as may be required by the State

Board of Education. The enrollment register

shall show the absence or attendance of each

student enrolled for each school day of the

year in a manner prescribed by the State

Board of Education. The register shall be

open for the inspection by the designated

school representative or the district school

superintendent of the district in which the

school is located. Violation of the

provisions of this section shall be a

misdemeanor of the second degree, punishable

as provided by law. This section shall not

apply to home education programs provided in

s. 1002.41.

(Emphasis added.)

55. As found above, MAI failed systematically to maintain

records showing the attendan ce or absence of each student

enrolled for each school day of the year, as Section 1003.23(2)

requires. Indeed, if MAI had met its statutory duty to prepare

and maintain such records with respect to O. F., N. P., and C.

M., then the instant dispute might not have arisen (assuming, as

MAI has maintained, that these students actually were enrolled

in, and attending, Muskateer's at all times for which

scholarship funds were sought). As it happened, the absence of

such records constituted a "badge of fraud" t hat helped the

Commissioner prove his case for immediate suspension of

payments.

56. The absence of such records also established the

failure of MAI to comply with Section 1003.23(2), Florida

Statutes, which (working back through the chain of statutes

identified in the preceding paragraphs) constitutes

noncompliance with Section 1002.39 —— which warrants revocation of

MAI's participation in the McKay Scholarship Program.

RECO MMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Commissioner enter a final order

(a) suspending payment of McKay Scholarship funds to MAI in

connection with the 2006 - 07 school year (b) revoking MAI's

participation in the McKay Scholarship Program.

DONE AND ENTERED this 2nd da y of April , 2007, in

Tallahassee, Leon County, Florida.

S

___________________________________

JOHN G. VAN LANINGHAM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

( 850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2nd day of April , 2007.

ENDNOTES

1 / The evidence is insufficient for the undersigned to ascertain

how the students learned the material on which they were tested,

or the number of tests that needed to be passed to receive

credit for completing a course.

2 / It is interesting that there is no "fair market value" cap on

the scholarship amount. As a result, for schools such as

Muskateer's that have few, if any, "paying" ( i.e. non -

scholarship) students, and which do not attempt to hold parents

financially responsible for the difference between the McKay

scholarship amount and the published tuition and fees, there is

effectively no limit on the amount that can be claimed for such

expenses. Market forces do not operate to keep the tuition for

such schools competitive because a third party (the state),

rather than the consum ers (parents), picks up the tabs. The

state, of course, pays no more (approximately) than it would

have paid had the McKay scholarship recipients remained in

public schools. But without market mechanisms to regulate the

transactions, the possibility exis ts that the fair market value

of the educational services being delivered ( i.e. the amount a

bona fide purchaser would be willing to pay out of his own

pocket) might, in some cases, fall below the amount being paid

by the state.

3 / School districts are r equired to report all students who are

attending private school under the McKay Scholarship Program.

See § 1002.39(10)(c)1., Fla. Stat. The undersigned is not sure

whether these reports identify students by name, but if so he

would like to have seen the relevant reports from the Miami - Dade

County School District.

4 / The undersigned would like to have seen all of the warrants

that were issued for the benefit of O. F., N. P., and C. M. and

especially to have taken evidence as to who was endorsing the

warr ants. Ms. Cermeno testified that she routinely placed

copies of all endorsed warrants in the respective students'

folders, but her testimony on this point is not substantiated by

the folders of O. F., N. P., and C. M., which are in evidence.

O. F.'s fold er contains one barely legible copy of what perhaps

is an endorsed warrant dated March 30, 2006 —— covering a period

during which, it is undisputed, O. F. was attending Muskateer's.

This is the only copy of a warrant in the record.

5 / There was testimony to the effect that MAI never asked its

students' parents to sign enrollment agreements prior to each

school year, which might explain why no such agreement appears

in O. F.'s file or the files of either N. P. or C. M. MAI's

practice, according to some tes timony, was to assume that each

existing student would return for the next year, unless his or

her parent expressly notified MAI to the contrary. On the

assumption that each student not explicitly "withdrawn" would

continue to attend Muskateer's, MAI repo rted its "reenrollments"

to the Department for purposes of obtaining McKay scholarship

funds. Whether making such an assumption in regard to the run

of students was reasonable (or prudent) might be debatable, but

clearly it was not a reasonable assumption to make and act upon

with regard to any student, such as O. F., who had graduated.

6 / The outrageousness of the demand that O. F. retake tests he

had previously passed is underscored by its seeming

arbitrariness. There is no persuasive evidence sheddin g light

on the degree requirements for a student in O. F.'s situation,

and the hodgepodge of materials in O. F.'s haphazardly assembled

file offers no insight as to which such requirements O. F.

legitimately could be said, based on objective measures, to h ave

lacked at any given point in time. The upshot is that the

Cermeno s appear to have been in the position of deciding, on

their own authority, and at their discretion, whether or not a

student had fulfilled the degree requirements.

7 / Indeed, going a s tep farther, even if O. F. truly had needed

to retake the tests in question in order to satisfy the

applicable degree requirements, his having done so in the fall

of 2006 still would not support a reasonable inference that he

had enrolled for the 2006 - 07 s chool year. This is because, as

everyone involved agrees, O. F. received a "diploma" (it was

actually a fake) at the baccalaureate service on June 3, 2006,

when he "graduated" with his class —— at least in the ceremonial

sense. Ordinarily, one would infer from this fact (ceremonial

graduation) that the student had "graduated" in the sense of

having earned a degree. MAI argues, however, that it graciously

allowed O. F. to "walk" ( i.e. participate in the graduation

ceremony as if he were a graduate), as a co urtesy to him and his

family, despite his having failed to complete all the degree

requirements. Assuming for argument's sake that this is true,

the reasonable inference therefrom would be that O. F. needed

merely to tie up some loose ends ( e.g. turn in a paper, take a

makeup test, complete an assignment) in connection with courses

substantially completed —— not to register for new courses and

thus to reenroll for another school year. If reenrollment were

going to be necessary, no reasonable school administ rator would

allow the student to ceremonially graduate, for doing so would

undermine the integrity of the school's graduation ceremony, not

to mention tend to deceive or humiliate the faux "graduate."

8 / In addition, on September 26, 2006, MAI reported t o the

Department, using the secure website, that C. M. had gotten a

job and would not return to Muskateer's as a student. The

undersigned is unable to reconcile this formal notice of

withdrawal —— which, incidentally, was given after MAI had been

made aware of the allegations that would lead to this

proceeding —— with C. M.'s testimony concerning his continued

attendance.

9 / C. M.'s father also testified at hearing, essentially

averring that he had regularly driven C. M. to school —— even

after the school had shut down. Ultimately, the testimony of C.

M.'s father is about as credible of that of his son, which is to

say, insufficiently persuasive to support any finding of fact.

10 / The undersigned cannot base a finding on C. M.'s August 22,

2006, statement bec ause it is hearsay (a) that neither

supplements nor explains other nonhearsay evidence in the

record, and (b) which was not introduced under a recognized

exception to the hearsay rule. See § 120.57(1)(c), Fla. Stat.

C. M.'s prior statement was admissible , of course, for the

limited purpose of impeaching his credibility, see § 90.614,

Fla. Stat., which it effectively accomplished.

11 / The undersigned assumes without deciding (for a legal

conclusion is not required to resolve the instant dispute) that

if t he Commissioner were unsuccessful in his attempt to prove

fraudulent activity, then any back - payments to which the

exonerated school's students might be entitled should be

immediately disbursed to the school. In this regard, it is

somewhat worrisome that the statute authorizing the Commissioner

summarily to stop making scholarship payments to a private

school is silent concerning the punitive effects that such

suspension might have on the students for whose benefit the

withheld payments would have been mad e. The undersigned wonders

whether, before summarily suspending payments, the Commissioner

considers the deleterious effects this action could have on

scholarship students and their parents, which latter (unlike the

parents of the students who attended Mu skateer's) might be

contractually obligated to pay the private school's tuition and

fees regardless of the availability of McKay scholarship funds.

Parents whose financial liability subsists notwithstanding the

loss of scholarship funds might be forced to leave their

children at the private school —— and hope that back - payments

eventually will be made.

12 / Only a preponderance or greater weight of the evidence is

necessary to prove fraud. See Wieczoreck v. H & H Builders,

Inc. , 475 So. 2d 227, 228 (Fla. 19 85).

COPIES FURNISHED :

Jason M. Hand, Esquire

Department of Education

325 West Gaines Street, Suite 1244

Tallahassee, Florida 32399 - 0400

James A. Peters, Esquire

Daniel Biggins, Esquire

Office of the Attorney General

The Capitol , Plaza 01

Tallahasse e, Florida 32399 - 1050

Marie G. Vital, Esquire

The Whitaker Building

1065 Northeast 125th Street, Suite 317

Miami, Florida 33161

Honorable Jeanine Blomberg

Commissioner of Education

Turlington Building, Suite 1514

325 West Gaines Street

Tallahassee, Flo rida 32399 - 0400

Deborah K. Kearney, General Counsel

Department of Education

Turlington Building, Suite 1244

325 West Gaines Street

Tallahassee, Florida 32399 - 0400

Lynn Abbott, Agency Clerk

Department of Education

Turlington Building, Suite 1514

325 Wes t Gaines Street

Tallahassee, Florida 32399 - 0400

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be file d with the agency that

will issue the Final Order in this case.