Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
STATE ex rel. OHIO
ATTORNEY GENERAL,

)
)
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)
)
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Plaintiff,
vs.
WILLIAM LAGER, et al.
Defendants.

Case No. 18 CV 007094

Judge Kimberly Cocroft

MOTION OF SCHOOL DISTRICTS TO INTERVENE

Logan-Hocking Local School District Board of Education and the Dayton Public
Schools Board of Education (the “School Districts”) seek leave to intervene in this
proceeding. A Brief in Support and a proposed Intervenors’ Complaint is attached
hereto.
There is ample cause for intervention. The School Districts’ claims overlap with
the claims being asserted by Attorney General Mike DeWine (the “AG”) herein.
Further, the Districts have considerable reservations about whether the AG will
adequately represent their interests in this proceeding. The AG has been a solid
supporter of charter schools, including ECOT, for many years, at a great cost to all
public schools in Ohio, and especially to the Logan-Hocking Local and Dayton Public
Schools. While examples of the AG’s enthusiastic promotion of charter schools are too
copious to list here, some more glaring illustrations of his patronage are:

 

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

In November of 2014, School Choice Ohio thanked AG DeWine for his part in
making Ohio “one of the nation’s school choice leaders.”1



DeWine accepted the maximum campaign donation allowed under election law
from Defendant William Lager in June of 2015.2



DeWine has a history of not pursuing all potential avenues of recovery against
other charter school operators who have generously donated to the Republican
party
There is no question that the AG is a friend of these institutions. For these

reasons, and many others outlined in the accompanying Brief, the AG is not an
adequate representative of the School Districts’ interests herein.

Respectfully submitted,
COHEN ROSENTHAL & KRAMER LLP
/s/ Ellen M. Kramer
Ellen M. Kramer (0055552)
emk@crklaw.com
James B. Rosenthal (0062872)
jbr@crklaw.com
Joshua R. Cohen (0032368)
jcohen@crklaw.com
3208 Clinton Avenue
Cleveland, OH 44113
216-815-9500 [Telephone & Facsimile]

                                                            
1
 https://scohio.org/home/blog/2014/11/10/ohioans-elect-school-choice-proponents/
2
 https://www.sos.state.oh.us/campaign-finance/#gref
- ii  

 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

BRIEF IN SUPPORT OF MOTION OF SCHOOL DISTRICTS TO INTERVENE
FACTUAL BACKGROUND


ECOT overbilled the public on a massive scale. AG’s Complaint, p. 1



Real harm resulted from [the overbilling], as “every dollar of state funding
ECOT received from overbilling came from” Ohio school districts. Id. at
p. 2.



The overbilling caused the loss of educational opportunities. Children in
Ohio’s schools “suffered real deprivations.” Id.

The numbers lost by the School Districts to ECOT since 2012 are staggering. In
that five-plus year time frame, ECOT received $1,484,453 in monies that otherwise
should have gone to the Logan Hocking Schools and more than $20,000,000 that should
have gone to the Dayton Public Schools. Since 2002 Logan Hocking has lost $2,021,706
to ECOT.3 It is obvious that the School Districts have an interest in the property and
transactions that are the subject of this proceeding.
A. Campaign money is a factor.
Defendant William Lager has not only been a recent proponent of
DeWine, his monetary support of the AG has been substantial. Lager donated the
maximum amount allowed to Mike DeWine in June 2015.4 Later in the same
year Lager donated $3,600 to DeWine’s son, Patrick, in Patrick’s campaign for the
Ohio Supreme Court.5

                                                            
3
 See Logan-Hocking School District August 27, 2018 Resolution, p. 1, attached hereto as Exh. D.
4
 https://www.sos.state.oh.us/campaign-finance/#gref
5
 Id.
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Moreover, DeWine’s current running mate for the Ohio governor race, Jon
Husted, received $36,000 from Lager.6 When Husted and DeWine joined forces,
the money from Lager became part of DeWine’s campaign fund. In addition to
receiving large amounts of money from Lager, Husted also was awarded an
honorary degree from ECOT and delivered ECOT’s graduation address in 2007.7
B. The AG deserted public schools in an earlier charter school
mismanagement case which questioned the actions of a major
Republican donor.
Hope Academy Broadway Campus, et al. v. White Hat Mgmt., LLC, et al., was
filed in the Franklin County Common Pleas Court in 2010 (the “White Hat
Action”),8 by several community schools against several defendants, including
the community schools’ for-profit manager, White Hat Management, LLC, and
the Ohio Department of Education (“ODE”). White Hat was founded and run by
a major Republican contributor.9 The AG represented ODE.
The White Hat Action, hotly contested from the start, wound its way to
the Ohio Supreme Court in late 2013 to address questions related to the payment
of public funds to a private entity operating a community school. Hope Acad.
Broadway Campus v. White Hat Mgmt., L.L.C., 145 Ohio St.3d 29, 2015-Ohio-3716,
46 N.E.3d 665, syll. Despite being a party to a case involving major issues about
                                                            
6
 Id.
7
 http://www.dispatch.com/news/20180902/which-side-is-right-in-political-battle-over-ecotblame
8
 Hope Academy Broadway Campus, et al. v. White Mgmt., LLC, et al., Franklin County Common
Pleas Case No. 10CVC 05 7423
9
https://www.cleveland.com/metro/index.ssf/2013/07/white_hat_managements_ohio_cha.ht
ml
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school funding, the AG filed nothing in the White Hat appeal, not even an amicus
brief.10
After delays relating to this and to another appeal, the community schools
filed their Second Amended Complaint in the White Hat Action in September
2016, asserting claims for declaratory judgment, breach of contract, an
accounting, injunctive relief and breach of fiduciary duty. The AG filed nothing
in response to the Second Amended Complaint. The White Hat Action, set for
trial in May 2019, will go forward without any assistance from the AG.
C. The AG’s vigilance in prosecuting this case pales in comparison to what
he has done in other community school corruption cases.
Unfortunately, ECOT is not the first community school in Ohio to betray
its students; the AG has experience attempting to recover for students after the
collapse of other charter schools in Ohio. In 2014 the AG asserted numerous
claims against another community school, Value Learning and Teaching
Academy (“VLT”), and officials of VLT in the Hamilton County Court of
Common Pleas (the “VLT Action”).11 Neither VLT, nor any of the VLT officers
sued by the AG, donated to Mr. DeWine, at least since 2012 when the Secretary
of State began recording this information.12

                                                            
10
 See docket of Ohio Supreme Court Appeal Case No. 2013-2050.
11
 Due to an appeal, the VLT Action is still pending. See Hamilton County, Ohio Court of
Common Pleas Case No. A140504.
12
 This information was uncovered in a review of public records. Affidavit of Ellen M. Kramer,
attached hereto as Exh. A.
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The AG’s claims in the VLT Action resulted in a decision in the AG’s favor
in March of 2018. Sun Bldg. Ltd., P’ship v. Value Learning & Teaching Acad., 2018
Ohio Misc. LEXIS 2 (March 26, 2018). 13 The breach of fiduciary duty claims in
the VLT Action resulted in a judgment against Valerie and Clyde Lee for all
compensation paid to them during the time they were in breach of their
fiduciary duties. The AG also sought and was awarded treble damages against
Valerie and Clyde Lee and Judy McConnell, the treasurer of VLT for violations of
the Ohio Corrupt Practices Act.
The Lion of Judah Academy was another Ohio community school whose
officers were the subject of a lawsuit by the AG who alleged misconduct (the
“Lion Action”).14 Notably, the Ohio Secretary of State has no record of any
officers of Lion of Judah donating to Mike DeWine.15
In the Lion Action, the AG’s request for treble damages extended to ten of
Lion of Judah’s officers! 16 The AG also sought to recover any money paid
pursuant to illegal contracts and any compensation paid to all fiduciaries of
Lion of Judah. 17

                                                            
13
 The AG’s Complaint in the VLT Action is attached hereto as Exhibit B.
14
 The Lion Action was stayed soon after it was filed due to bankruptcy filings by a number of
its officers.
15
 This information also was uncovered in a review of public records. Exh. B.  
16
 The AG’s Complaint in the Lion Action is attached hereto as Exhibit C.
17
 Id.  
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D. Ohio’s Attorney General after 2018
Mike DeWine is running for Ohio governor, and will not be the AG next
year. David Yost and Steven Dettelbach are running to be the next AG.
Mr. Yost was ECOT’s commencement speaker on three separate
occasions.18 In 2016, while Ohio’s State Auditor, Yost awarded ECOT his
Auditor of State Award.19 Altair Management and Lager each contributed $2,500
to Yost’s transition fund in 2014.20 Lager contributed $11,395 to Yost’s campaign
for State Auditor in 2010.21
LEGAL ARGUMENT
STANDARD ON MOTION TO INTERVENE
Ohio Civil Rule 24, which governs intervention, is to be construed liberally in
favor of intervening. State ex rel. Merrill v. Ohio Dep’t of Natural Res., 130 Ohio St.3d 30,
2011-Ohio-4612, 955 N.E.2d 935, ¶41 (citations omitted); Ass’n of Cleveland Firefighters,
Local 93 I.A.F.F. v. City of Cleveland, 8th Dist. No. 106472, 2018-Ohio-2049, ¶29.
Regardless of the subsection of Rule 24 on which a request for intervention is premised,
the request must be timely. State ex rel. Montgomery v. City of Columbus, 10th Dist. No.
02AP-963, 2003-Ohio-2658, ¶15; Rimmer v. Citifinancial, Inc., 8th Dist. No. 106337, 2018Ohio-2845, ¶24.

                                                            
18
 http://www.dispatch.com/news/20170730/how-ecot-founder-william-lager-cooked-uplucrative-charter-school
19
 https://www.cincinnati.com/story/news/politics/elections/2018/05/19/election-2018-andecot-why-charter-school-scandal-matters/609172002/
20
 https://www.sos.state.oh.us/campaign-finance/#gref
21
 https://www.followthemoney.org/show-me
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As the Motion to Intervene is filed approximately 4 weeks after this case was
commenced, timeliness cannot reasonably be disputed.
I.

Civil Rule 24(A)(2) - Intervention as of right
The Rule provides that anyone may intervene in an action “when the applicant

claims an interest relating to the property or transaction that is the subject of the action
and the applicant is so situated that the disposition of the action may as a practical
matter impair or impede the applicant’s ability to protected that interest, unless the
applicant’s interest is adequately represented by existing parties.” Civ. R. 24(A)(2).
A request to intervene pursuant to Rule 24(A)(2) will be granted if the applicant
shows: 1) that the party has an interest relating to the property or transaction that is the
subject of the action; 2) the party is so situated that disposition of the action may, as a
practical matter, impair or impede the party’s ability to protect its interest; and 3) the
party’s interest is not adequately represented by the existing parties. Ass’n of Cleveland
Firefighters, Local 93 I.A.F.F. v. City of Cleveland, 8th Dist. No. 106472, 2018-Ohio-2049, ¶29
(citing State ex rel. LTV Steel Co. v. Gwin, 64 Ohio St.3d 245, 247, 1992-Ohio-20, 594
N.E.2d 616).
A. The Attorney General’s Complaint demonstrates that the School Districts
meet the first two requirements for intervention pursuant to Rule 24(A)(2).
1. The School Districts have an interest in the property and transactions
that are the subject of this action.
According to the Complaint filed by the Attorney General and which
commenced this action:


ECOT overbilled the public on a massive scale. Complaint, p. 1

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

Real harm resulted from [the overbilling], as “every dollar of state funding
ECOT received from overbilling came from” Ohio school districts. Id. at
p. 2.



The overbilling caused the loss of educational opportunities. Children in
Ohio’s schools “suffered real deprivations.” Id.

The School Districts have lost massive amounts of funding to ECOT since 2012.
It is clear that the School Districts have an interest in the property and transactions that
are the subject of this proceeding.
2. Disposition of this action may impair the School Districts’ ability to
protect their interests.
R.C. § 3314.074 dictates the manner in which the assets of a closed community
school must be distributed. Following distributions to the retirement funds of school
employees and to the school’s private creditors, any remaining funds are for the public
school districts of students enrolled in that community school. R.C. § 3314.074(A). See
also Complaint, p. 23. Thus, the statute authorizes distribution to public school districts
only after school employee retirement funds and private creditors are paid.
School districts have a fiduciary duty to act in the best interests of the students,
parents and taxpayers of their districts. See, e.g., In re Removal of Kuehnle, 12th Dist. No.
CA2004-09-034, 161 Ohio App. 3d 399, 2005-Ohio-2373, 83 N.E.2d 1173, ¶180. Thus, the
intervening School Districts have a duty to ascertain that the claims in this proceeding
are pursued to the fullest extent of the law. The manner in which these claims are
disposed of may impair the School Districts’ ability to protect their constituents.

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The School Districts have a significant interest in the ultimate disposition of this
action.
B. The Attorney General cannot adequately represent the School Districts.
Intervention pursuant to Rule 24(A)(2) is appropriate if the proposed
intervenor’s interest is not adequately represented by existing parties. Although the
burden of proving inadequate representation by an existing party is on the party
seeking intervention, that burden is minimal. State ex rel. Walgate v. Kasich, 2012 Ohio
Misc. LEXIS 5354 (Franklin Cty. Comm. Pleas 2012) (citing Fairview Gen. Hosp. v.
Fletcher, 69 Ohio App.3d 827, 835, 591 N.E.2d 1312 (10th Dist. 1990)); Tomcany v. Range
Constr., 11th Dist. No. 2003-L-071, 2004-Ohio-5314, ¶30 (citations omitted).
A trial court should ask the following in determining whether this minimal
burden is met:
Are the [interests] of a present party in the suit sufficiently similar to that
of the absentee such that the legal arguments of the latter will
undoubtedly be made by the former, (2) is the present party capable and
willing to make such arguments, and (3) if permitted to intervene, would
the intervenor add some necessary element to the proceeding which
would not be covered by the parties in the suit?
Tomcany, 2004-Ohio-5314 at ¶30 (citations omitted).
A government agency charged by law with representing the interests of a
proposed intervenor will usually be deemed adequate to represent the proposed
intervenor’s interest. Montgomery, 2003-Ohio-2658 at ¶26 (citing Mausolf v. Babbit (8th
Cir. 1996), 85 F.3d 1295, 1303) (additional citation omitted). See also Clarke v. Warren Cty.
Bd. Of Comm’rs, 12th Dist. No. CA2000-01-009, 2000 Ohio App. LEXIS 4199 (citations

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omitted). This presumption may be overcome by demonstrating adversity of interest,
collusion or nonfeasance. Montgomery, 2003-Ohio-2658 at ¶25; Clarke, 2000 Ohio App.
LEXIS at *8.
Nonfeasance is the omission of an act which a person ought to do or the failure
to act when a duty exists. Teagardin v. Metal Foils, LLC, 11th Dist. No. 2001-L-235, 2003Ohio-1975, ¶11; Betkoski v. Council of Norton, 2004 Ohio Misc. LEXIS 1893, *7 (Summit
Cty. Comm. Pleas 2004) (citation omitted). An adverse interest is an interest that is
opposed or contrary to that of someone else. Black’s Law Dictionary 10th ed. (2014).
The Attorney General is not an adequate representative of the School
Districts. The AG has already demonstrated that he is unwilling to make all of
the legal arguments needed to capably advocate for the School Districts. Further,
the AG’s past behavior demonstrates both nonfeasance and an adversity of
interest with respect to all public school districts in this state.
Evidence of the AG’s nonfeasance and adverse interests are shown below.
1. Defendant William Lager’s campaign donations to AG DeWine and
his family members compromise the AG.
Defendant William Lager has not only been a recent proponent of
DeWine, his monetary support of the AG, the AG’s son and the AG’s current
running mate has been substantial.
The School Districts are skeptical that DeWine can suddenly forget his
cozy relationship with Lager and ECOT, and ably represent students at Ohio
public schools.

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The fact that DeWine recently donated his contributions to charity should
not change this analysis. The School Districts do not believe that DeWine will
pursue their claims with the utmost dedication and conviction that an attorney
should employ against a very recent and lavish supporter of not only the AG, but
also the AG’s current running mate and son.
2. DeWine has a history of inadequately representing Ohio Public
School Districts.
The School Districts’ wariness of DeWine as their advocate is based on
prior experience.
The White Hat Action is one example. The AG never filed a motion to
withdraw in that case, which would have been public record. Instead he quietly
dropped out by failing to file an amicus brief with the Ohio Supreme Court and,
more recently, by ignoring the Second Amended Complaint. As a result, tThe
White Hat Action, set for trial in May 2019, will go forward without the AG’s
involvement.
3. The AG’s inadequate representation of the School Districts in this
proceeding is glaringly apparent when the current complaint is
compared with those the AG has filed against some other dishonest
charter schools.
Despite his recent success against VLT, the AG’s claims against ECOT are
much less aggressive than those he pursued in VLT. For example,


The breach of fiduciary duty claims in the VLT Action resulted in a
judgment against Valerie and Clyde Lee for all compensation paid
to them during the time they were in breach of their fiduciary

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duties. In contrast, the breach of fiduciary duty claim against Bill
Lager merely seeks to recover profits Lager received from Altair
Learning Management I, Inc. and IQ Innovations, LLC. The AG
does not seek other compensation paid to Lager, or any other
officers of ECOT. The Intervenors’ Complaint, in contrast, includes
these allegations.


The AG sought and was awarded treble damages against Valerie
and Clyde Lee and Judy McConnell, the treasurer of VLT for
violations of the Ohio Corrupt Practices Act. Despite his success in
the VLT Action, the AG only requests “possible” treble damages
against Bill Lager, and not against ECOT’s treasurer or anyone else
associated with ECOT. The Intervenors’ Complaint includes all of
the named defendants on this claim.

As he had in the VLT Action, the AG sought treble damages for Corrupt
Practices Act violations in the Lion Action. In Lion, the AG’s request for treble
damages extended to ten of Lion of Judah’s officers! The AG also sought to
recover any money paid pursuant to illegal contracts - not just profits received
on those contracts - and further sought the recovery of any compensation paid to
all fiduciaries of Lion of Judah.
In the current proceeding involving ECOT, the AG alleges almost identical
claims to those alleged in Lion of Judah. Despite the similarity of the allegations,
the AG only seeks to recover money paid pursuant to illegal contracts; the AG is
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not asking to recover any other compensation paid to Lager or any other
fiduciaries of ECOT. Moreover, in stark contrast to the complaints the AG filed
in VLT and Lion of Judah, the only defendant from which the AG seeks treble
damages is Bill Lager.
The School Districts’ fear that Mike DeWine will not adequately represent
their interests is already being realized. Despite everything that has transpired
with the closure of ECOT and the wide-reaching financial and academic fiasco
resulting from ECOT’s demise, Mike DeWine has chosen to pursue a much
gentler approach with ECOT than he did with other corrupt community schools
involving a much smaller number of students. As the School Districts are only
entitled to distributions after school employees’ retirement funds and ECOT’s
creditors are paid, the recovery of treble damages from as many bad actors as
possible is a crucial issue in this proceeding.
The AG is not and will not adequately represent the School Districts in
this proceeding.
4. The Rules of Professional Conduct preclude the AG from
representing the School Districts.
The Ohio Rules of Professional Conduct (“Prof. Conduct Rules”) preclude
the AG from representing the School Districts in this proceeding.
According to Prof. Conduct Rule 1.7(a)(2), a conflict of interest arises if
there is a “substantial risk that the lawyer’s ability to consider, recommend, or
carry out an appropriate course of action for that client will be materially limited

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by the lawyer’s responsibilities to … a third person or by the lawyer’s own
personal interest.” Prof. Conduct Rule 1.7(b) prohibits a lawyer from
representing a client if a conflict would be created, unless the lawyer will be able
to provide competent and diligent representation to the client and the client
gives informed written consent. Rule 1.11(d) requires attorneys who serve in
public office to comply with Rule 1.7.
The AG and one of his possible successors have has personally aligned
themselves with Ohio charter schools for years. The Prof. Conduct Rules forbid
the AG from representing the School Districts in this proceeding unless the
School Districts give informed written consent, which the School Districts
adamantly decline to give.
5. The fact that DeWine will not be the AG in 2019 does not change this
analysis.
Mike DeWine is running for Ohio governor, and will not be the AG next
year. It is not known if the next Ohio Attorney General will be David Yost or
Steven Dettelbach. If Mr. Yost is elected, the School Districts will continue to
have grave concerns about inadequate representation in this case.
II.

Permissive Intervention – Civil Rule 24(B)
Intervention also may be approved “’when [the] applicant’s claim or

defense and the main action have a question of law or fact in common.’” State ex
rel. Merrill v. Ohio Dep’t of Natural Res., 130 Ohio St.3d 30, 39, 2011-Ohio-4612, 955
N.E.2d 935, ¶43 (quotation omitted). When there is a claim that shares a

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common question of law or fact with the main action and intervention will not
unduly delay or prejudice the adjudication of the rights of the original parties,
the requirements for permissive intervention are met. Id. at ¶45. See also Freedom
Mortg. Corp. v. Milhoan, 7th Dist. No. 13 CO 15, 2014-Ohio-881, ¶59.
The claims proposed by the School Districts overlap with those asserted
by the AG in many respects. Both the School Districts and the AG are seeking to
recover monies improperly paid to ECOT, and officers of ECOT, during ECOT’s
existence.
CONCLUSION


It is undisputed that the School Districts have claims against ECOT and
several, if not all, of its officers.



The School Districts have a duty to protect their students, parents and
taxpayers.



The AG has a long and well-documented history of protecting ECOT.



The AG’s pattern of siding with ECOT is already in evidence by the
insubstantial complaint filed to commence this proceeding.

The School Districts meet all of the requirements for both intervention as of
right, and permissive intervention. Based on the foregoing, the School Districts
motion to intervene in this proceeding must be granted.

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Respectfully submitted,
COHEN ROSENTHAL & KRAMER LLP
/s/ Ellen M. Kramer
Ellen M. Kramer (0055552)
emk@crklaw.com
James B. Rosenthal (0062872)
jbr@crklaw.com
Joshua R. Cohen (0032368)
jcohen@crklaw.com
3208 Clinton Avenue
Cleveland, OH 44113
216-815-9500 [Telephone & Facsimile]

15
 

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CERTIFICATE OF SERVICE
I hereby certify that on the 24th day of September, 2018, a copy of the foregoing was
filed electronically. Notice of this filing will be sent to all parties who have made an
appearance by operation of the Court’s electronic filing system and those parties may access
the filing through the Court’s system. I hereby certify that a copy of the foregoing was sent
by regular U.S. mail to the following:
William Lager
155 W. Main Street, Unit 1206
Columbus, Ohio 43215

William Lager
328 Whitehead Street
Key West, FL 33040

William Lager
204 Noble Cottage Lane
Senecaville, OH 43780-9600

Christopher Meister
134 Heischman Ave.
Senecaville, OH 43780-9600

Ann Barnes
Ann.barnes@yahoo.com
1335 Great Hunter Court
Grove City, OH 43123

Regina Lukich
Unit 206
3175 Tremont Road
Upper Arlington, OH 43221

Michele Smith
6813 Oakfield North Road NW
Bristolville, OH 44402

Rick Teeters
2 Arika at Lionspaw
Dayton Beach, FL 32124

IQ Innovations LLC
c/o William Lager
305 W. Nationwide Blvd.
Columbus, OH 43215

Altair Learning Management I Inc.
c/o Kelly Morgan
Suite 102, 400 S. 5th Street
Columbus, OH 43215

/s/ Ellen M. Kramer
One of the Attorneys for Movants

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
STATE ex rel. OHIO
ATTORNEY GENERAL, et al.,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
vs.
WILLIAM LAGER, et al.
Defendants.

Case No. 18 CV 007094

Judge Kimberly Cocroft

JURY DEMAND
ENDORSED HEREON

INTERVENORS’ COMPLAINT FOR RECOVERY OF PUBLIC FUNDS
"It is pretty well settled under the American system of government that
a public office is a public trust, and that . . . public money . . . under the
control of such officer or officers constitute a trust fund, for which the
official as trustee should be held responsible to the same degree as the
trustee of a private trust fund." Twp. of Crane v. Secoy, 103 Ohio St. 258,
259-260 (1921).
ECOT was a public school and hence a public office. It was entrusted with
immense amounts of public money, most of which came from other public schools.
Those who operated ECOT were subject to the same fiduciary duties as the trustee of a
private trust. The most fundamental of those duties is the duty of loyalty—to avoid any
situation where they would be tempted to profit improperly from their position of trust.
The folks who ran ECOT yielded to that temptation. William Lager, ECOT’s
founder and public face, also founded companies that made millions of dollars doing

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business with that public school. Other ECOT officials stood by, or actively participated,
as ECOT overbilled the public on a massive scale to keep the money flowing.
Real harm resulted from that—every dollar of state funding ECOT received from
overbilling came from school districts in this State. See R.C. 3314.08. The numbers are
staggering. The overbilling totaled more than $79,640,000 just since July of 2017 and had
real impacts on real districts.
As a result of these ECOT charges, the Logan-Hocking Local School District lost
$1,484,453 since 2012, and the City of Dayton Public Schools lost in excess of $20,000,000
in the same time frame (collectively, the Logan-Hocking Local School District and the
City of Dayton Public Schools will be referred to as the “School Districts”). The
overbilling is more than numbers on a ledger sheet—they are concrete educational
opportunities lost. Real kids suffered real deprivations.
This case seeks to hold those responsible for those injuries accountable by
applying well settled legal principles that exist to address the types of abuse underlying
this case. The context may be different, but the principles are the same—those who
abuse positions of trust must be held accountable.
The School Districts, which have authority to bring these claims under O.R.C. §§
3313.17 and 3313.46, plead and allege as follows:
Community Schools Generally
1.

A “community school” is a school created by a contract between a “governing
authority” and a supervisory entity known as a “sponsor.” They are commonly
referred to as charter schools.
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2.

A community school’s governing authority is a multi-member board. It has
roughly the same authority over the community school that a board of education
has over a school district.

3.

Although a community school must be structured as a R. C. Chapter 1702
corporation, it is a public body. A community school is a public school, a public
office, and a political subdivision.

4.

Community schools operate on two types of public monies:
a. State operating funds. Those funds are transferred from the traditional
school districts where the community schools’ students reside.
b. Federal grant funds. The Ohio Department of Education (“ODE”) receives
a finite amount of federal grant funds for distribution to all schools.
Portions are allocated to individual community schools based on the
individual school enrollment and other factors.

5.

A community school receives a set amount of state operating funds for each 920
hours of instruction in which its students participate. Each unit of 920 hours is
known as a “full time equivalency,” or “FTE.” A community school obtains those
funds by submitting monthly enrollment reports to ODE through an electronic
system known at various times as “EMIS,” “CSADM,” and “SOES.” Those funds
are transferred to the community school on a monthly basis.

6.

ODE periodically reviews each community school’s records to determine
whether they document the school’s entitlement to the amount of state operating
funds transferred pursuant to the school’s requests. That process is commonly
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referred to as an “FTE Review.” If ODE determines that the community school
cannot document its entitlement to all the funds it has received, ODE issues a
determination of how much the community school is unable to document,
calculates how much the school was overpaid, and begins collecting the
overpayment. Community schools may appeal such determinations. Such
appeals are commonly referred to as “FTE Appeals.” If an FTE Appeal is
pursued:
a. A hearing officer is appointed to preside over an administrative hearing
on the issues raised by the community school.
b. At that hearing the community school is represented by counsel, may
submit witness testimony and documentary evidence, and may cross
examine ODE’s witnesses. The community school may also file pre- and
post- hearing briefs. A record of proceedings is created.
c. The hearing officer issues a written report and recommendation to the
State Board of Education.
d. The community school may file written objections to the report and
recommendation.
e. The State Board of Education ultimately decides the appeal, determining
the amount of any overpayment. That decision is final.
7.

A community school obtains federal grant funds through an electronic system
known as “CCIP.” That is a multi-step process:

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a. The school identifies the grants it wishes to pursue and submits electronic
applications for those grants. Those applications set out the amounts
sought, describe the proposed uses of the grant funds, and propose
budgets for the use of grant funds. ODE reviews the applications and, if
the grant is approved, establishes the amount of grant funds the school
will be awarded.
b. The school draws down specific amounts of grant funds during the life
of the grant by drafting and submitting project cash requests, commonly
known as “PCRs.” A school usually makes multiple PCRs during the
life of the grant.
c. After the school draws down all grant funds, the school prepares
and submits a final expenditure report, commonly referred to as an
“FER.”
8.

Community schools sometimes contract with private companies to manage all or
part of their operations. Such companies are referred to as “operators” or
“management companies.” Operators/management companies sometimes assist
the community schools they contract with in accessing State operating funds
and/or federal grant funds, or perform those functions themselves on behalf of
those community schools.

9.

Because community schools are public bodies and operate on public funds, they
are subject to statutes and common law doctrines protecting public funds:

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a. Community schools are subject to R.C. Chapters 117 and 149, the chapters
of the Revised Code that control the records, finances, and audits of
publicly funded entities.
b. Members of a community school’s governing authority, its officers,
employees, agents, and authorized representatives are public officials for
purposes of R.C. 9.39, R.C. 102.03, and R.C. 2921.42.
c. Officers, employees, agents, and authorized representatives of community
schools are fiduciaries of their schools.
10.

Ohio community schools serve more challenged students than do schools on
average. Community schools generally also have fewer resources to devote to
their students than traditional schools.
Parties and Relevant Persons/Entities

11.

The Electronic Classroom of Tomorrow (“ECOT”) is a community school
organized under R.C. Chapter 3314.
a. As a community school, ECOT is a political subdivision and its property is
public property.
b. ECOT’s operations were formally suspended on or about January 19, 2018.
c. This Court appointed an Interim Special Master to protect ECOT’s assets
in Franklin County Common Pleas Case No. 18 CV 00324. A true,
complete, and accurate copy of the order making that appointment is
attached to the Complaint which commenced this action (the “Original
Complaint”) as Exhibit 1.
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12.

William Lager (“Lager”) was ECOT’s founder and was actively involved in and
on behalf of ECOT throughout its entire existence, as discussed more fully below.

13.

Altair Learning Management I, Inc. and its predecessor Altair Learning
Management LLC (collectively “Altair”) are private, for profit, companies that
managed significant portions of ECOT’s operations. Altair served as ECOT’s
operator/management company at all times relevant to this case. Lager had a
significant ownership interest in Altair and was its chief executive officer at all
times relevant to this case.

14.

IQ Innovations, LLC (“IQ”) is a private, for profit, company that contracted to
provide ECOT with curricular materials and related service. Lager had a
significant ownership interest in IQ and was its chief executive officer at all times
relevant to this case.

15.

Rick Teeters (“Teeters”) was ECOT’s superintendent.

16.

Michele Smith (“Smith”) was ECOT’s treasurer.

17.

Christopher Meister (“Meister”) was ECOT’s vice president of accounting.

18.

Ann Barnes (“Barnes”) was ECOT’s EMIS director.

19.

Regina Lukich (“Lukich”) was ECOT’s director of federal programs.

20.

Travelers Casualty and Surety Company of America (“Travelers”) issued a bond
or bonds guaranteeing the faithful performance of Smith’s duties as ECOT’s
treasurer, and is sued on those bonds.

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21.

The School Districts bring this case to recover public funds wrongfully paid out
by ECOT and wrongfully received by ECOT, Lager, Altair, IQ, and the other
Defendants herein.

22.

Lager conceived of ECOT and brought it into existence. His actions in that regard
included:
a. Developing the concept of delivering K-12 educational services
throughout the state via the internet.
b. Developing ECOT’s name.
c. Formulating the business plan for ECOT, including sources of
capitalization.
d. Pursuing a charter for ECOT, first with ODE and ultimately receiving a
charter with an entity now known as the Educational Service Center of
Lake Erie West (“ESCLEW”).
e. Recruiting the members of ECOT’s governing authority.
f. Recruiting and supervising ECOT’s key staff.
g. Selecting and/or developing curricular materials for ECOT.
h. Searching for and negotiating with vendors who would provide necessary
goods and services to ECOT.
i. Representing ECOT in interactions with the press and the general public.

23.

ECOT entered into a preliminary agreement with ESCLEW’s predecessor to
obtain a charter in February of 2000. It received its first charter from ESCLEW’s
predecessor in April of 2000.
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24.

Lager continued to be intimately involved in ECOT’s operations after it was
chartered and operating:
a. He was personally involved in many aspects of ECOT’s day-to-day
operations, including curricular matters, budgeting, and staffing.
b. He represented ECOT in its interactions with ODE, the Auditor of State,
ESCLEW and its predecessor, and other state and federal governmental
entities regarding such matters as ECOT’s public funding.
c. He exercised influence on ECOT’s staffing.
d. He exercised influence over which vendors ECOT did business with and
on what terms.

25.

Lager regularly represented ECOT in the media, to government officials, and to
the general public throughout the time that ECOT operated.

26.

Although ECOT had the legal ability to control Lager’s actions on its behalf, and
was aware of Lager’s actions on its behalf, it never objected to those actions. To
the contrary, those actions continued, without interruption, for more than 17
years.

27.

Lager was also an owner, member, and key officer of Altair. Altair had a series of
contracts with ECOT. There were two types of contracts.

28.

The first type of contracts between Altair and ECOT were management
agreements. There were four such agreements:
a. A Management Agreement effective from May 16, 2000 through June 30,
2003.
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b. An Amended and Restated Management Agreement effective from July 1,
2003, through June 30, 2006.
c. An Amended and Restated Management Agreement effective from July 1,
2006, though April 30, 2009.
d. A Management Agreement effective from May 1, 2009, through ECOT’s
closure (collectively “the Management Agreements”). Copies of those
contracts are attached to the Original Complaint as, collectively, Exhibit 4.
29.

The Management Agreements, among other things:
a. Expressly designated Altair’s members as agents of ECOT.
b. Authorized Altair to make multiple actions on behalf of ECOT including
contracting, supervising key educational staff, public relations, managing
ECOT’s compliance with its charter, and helping manage ECOT’s
compliance with applicable law.
c. Gave Altair responsibility in a number of ECOT’s core functions as a
public school, including the setting of ECOT’s educational program,
budgeting, and overall finances.
d. Directly involved Altair in ECOT’s public funding by, among other things,
involving Altair in ECOT’s grant funding, budgeting, tracking, and
reporting on ECOT’s funding. The Management Agreements made Altair
“primarily responsible for [ECOT’s] fiscal management and
performance[.]”

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30.

The second type of contracts between Altair and ECOT were licensing
agreements. There were two such contracts:
a. A License Agreement effective from September 1, 2005, through June 30,
2006.
b. A License Agreement effective form July 1, 2006, through June 30, 2009.
(the “Altair License Agreements”). True, complete, and accurate copies of
those contracts are attached to the Original Complaint as, collectively, Exhibit
5.

31.

ECOT’s Internal Revenue Service form 990s report that it paid Altair at least
$76,672,930.18 pursuant to the Management Agreements and the Altair License
Agreements between July 1, 2000, and June 30, 2017. ECOT likely paid Altair
additional funds after June 30, 2017. Further, ECOT likely paid Altair significant
funds during fiscal year 2002, a year for which ECOT did not file a form 990.

32.

Lager was also an owner and key officer of IQ. IQ had a series of contracts with
ECOT whereby it licensed curricular materials and agreed to provide services to
ECOT. Those contracts were:
a. A License Agreement entered into May 1, 2009.
b. A First Amendment to License Agreement, entered into June 22, 2010.
c. A Second Amendment to License Agreement, entered into on May 22,
2012.
d. A Purchased Services Agreement, entered into on January 1, 2014.

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Those contracts are collectively referred to as “the IQ Contracts.” True, complete,
and accurate copies of the IQ contracts are attached to the Original Complaint as,
collectively, Exhibit 6.
33.

The IQ contracts required ECOT to transfer set percentages of ECOT’s state
operating funds to IQ. ECOT’s filings with the Internal Revenue Service report
that it paid IQ at least $122,595,383 pursuant to those contracts between May 1,
2009, and June 30, 2017. ECOT likely paid IQ additional funds after June 30, 2017.

34.

ECOT’s FTE Reviews and FTE Appeals for the
2015-2016 and 2016-2017 School Years
ODE conducted an FTE Review of ECOT for the 2015-2016 school year. It
determined that ECOT could not document any basis for 58.8% of the payments
it requested and received from ODE pursuant to R.C. 3314.08. ODE therefore
determined that ECOT must return those funds.

35.

ECOT took a FTE Appeal from the results of the 2015-2016 FTE Review. The
issues raised in that FTE Appeal were exhaustively litigated. The administrative
hearing proceeded over the course of 10 days. ECOT produced seven witnesses
and had 2,305 exhibits entered into evidence. On May 10, 2017, the hearing
officer issued a report and recommendation concluding that ECOT could not
document bases for between $60,054,630 and $64,054,630 of the funds it received.
A true, complete, and accurate copy of that report and recommendation is
attached to the Original Complaint as Exhibit 7.

36.

ECOT filed written objections to the May 10, 2017, report and recommendation,
but the State Board of Education accepted the report and recommendation and
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found that ECOT must return $60,350,791 of the State operating funds that it
received during the 2015-2016 school year. That was 55.4% of what it received for
that year. A true, complete, and accurate copy of the State Board of Education’s
resolution on this matter is attached to the Original Complaint as Exhibit 8.
37.

ODE conducted an FTE Review of ECOT for the 2016-2017 school year. It
determined that ECOT could not document any basis for 18.5% of the payments
it requested and received from ODE pursuant to R.C. 3314.08. ODE therefore
determined that ECOT must return $19,295,957.70 of those funds.

38.

ECOT took an FTE appeal from the results of the 2016-2017 FTE review. The
issues raised in that FTE Appeal were exhaustively litigated. The administrative
hearing proceeded over the course of three days. ECOT produced multiple
witnesses and had multiple exhibits entered into evidence. ECOT filed post
hearing briefs. On January 22, 2018, the hearing officer issued a report and
recommendation concluding that ECOT had received $19,295.957.70 it was not
entitled to, an 18.5% overpayment. A true, complete, and accurate copy of that
report and recommendation is attached to the Original Complaint as Exhibit 9.

39.

ECOT filed written objections to the January 22, 2018, report and
recommendation, but the State Board of Education accepted the report and
recommendation and found that ECOT must return $19,295,957.70 of the State
operating funds it received during the 2016-2017 school year. A true, complete,
and accurate copy of the State Board of Education’s resolution on this matter is
attached to the Original Complaint as Exhibit 10.
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40.

The State Board of Education’s resolution of ECOT’s 2015-2016 and 2016-2017
FTE Appeals are final under R.C. 3314.08.

41.

ECOT’s Insolvency and Suspension
ODE began enforcing the State Board of Education’s findings, described above,
by reducing the State operating funds otherwise due ECOT. ECOT began
experiencing financial difficulties.

42.

ECOT’s sponsor, ESCLEW, therefore suspended ECOT’s operations pursuant to
R.C. 3314.072, effective January 19, 2018.

43.

ECOT’s sponsor filed an action to obtain the appointment of a receiver to protect
ECOT’s assets. That action is pending as Case No. 18CV00324 before this Court.
The Court appointed an interim special master to protect ECOT’s assets. ODE
formally notified the Interim Special Master of the claims resulting from ECOT’s
2015-2016 and 2016-2017 FTE Appeals.

44.

The most recent state audit of ECOT, covering the year ending June 30, 2017,
reported that ECOT’s liabilities far exceeded its assets. The interim special master
appointed in Case No. 18CV000324 reported that in February of 2018, ECOT had
a total of $2,268,602 on deposit. ECOT therefore no longer has the funds it
received as a result of its unsupported requests for State operating funds, as
determined in the FTE Reviews and FTE Appeals described in above.

45.

On July 25, 2018, this Court entered an order assigning certain claims to the State.

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Count I
(Public Official Strict Liability against Defendants Lager, Altair, Teeters, Smith
Meister, Barnes, and Lukich)
46.

The School Districts hereby restate and reallege all matters set out in paragraphs
1 through 45 above as if they were fully set forth in this paragraph.

47.

R.C. 9.39 and Ohio common law make a public official strictly and personally
liable for all unauthorized disbursements of a public office’s money if the official
is directly involved in the receipt or collection of the office’s public money or has
supervisory authority over those involved in those activities.

48.

A community school is a public office.

49.

Employees, officers, agents, and authorized representatives of community
schools are public officials.

50.

All the money involved in the following transactions were either State operating
funds transferred pursuant to R.C. 3314.08 or federal grant funds:
a. The overpayments determined in the 2015-2016 and 2016-2017 FTE
Appeal (paragraphs 34-39 above).
b. The payments made pursuant to the IQ Contracts (paragraphs 31 and 32
above and paragraphs 75-80 below).
The funds are now gone, having been disbursed without authority of law.

51.

Lager was a public official of ECOT, within the meaning of R.C. 9.38(A) and R.C.
117.01(E) in several independently sufficient respects.

52.

Lager was an officer of ECOT because:

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

a. He was a public officer of ECOT under common law standards because he
exercised control over ECOT’s public property, over the performance of
ECOT’s public functions, and over ECOT’s exercise of the sovereign
authority delegated to it as part of the State’s program of education, both
directly and through Altair, as summarized in paragraphs 21, 23-25, and
28 above.
b. He was a de facto officer because he repeatedly represented himself as an
officer or executive of ECOT in disclosures mandated by R.C.
3517.10(E)(2).
53.

Lager was an agent of ECOT because:
a. He was ECOT’s promoter based on the actions summarized above, and a
promoter is an agent of the entity he promotes.
b. He was expressly designated as an agent of ECOT through the Altair
Management Agreements. The Management Agreements designated
members of Altair as agents of ECOT, and Lager was a member of Altair.
c. Independent of the express designation just discussed, Altair was an agent
of ECOT and was a fiduciary of ECOT as its operator. Lager was a
subagent of Altair, and as such, he was an agent of ECOT.
d. Lager took multiple actions on behalf of ECOT over an extended period of
time, as summarized in paragraphs 23-25 and 28 above. ECOT could have
prevented that, but did not.

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54.

Lager was an authorized representative of ECOT for the reasons summarized in
paragraphs 23-25 above.

55.

Lager was involved in the receipt and collection of ECOT’s public monies in
various ways, including:
a. Working with ODE and the Auditor of State to determine the enrollment
figures driving ECOT’s public funding and in negotiating resolutions of
disputes about ECOT’s enrollment funding.
b. Repeatedly engaging with state officials to encourage the State to continue
to fund ECOT.
c. Upon information and belief, as Altair’s CEO Lager supervised staff
members of Altair and/or ECOT who were directly involved in ECOT
receiving and collecting public funds.
d. Upon information and belief, Lager actively devised strategies to protect
ECOT’s continued public funding after ODE began actions that lead to the
2015-2016 and 2016-2017 FTE Reviews and Appeals

56.

Altair was an agent and authorized representative of ECOT because it took
multiple actions on behalf of ECOT and served as ECOT’s operator, some of
which are summarized in paragraphs 27, 28, and 30 above.

57.

Altair was involved in the receipt and collection of ECOT’s public monies in
multiple ways. Those included assisting ECOT in purportedly complying with
the laws and regulations controlling state operating funds, assisting ECOT in
obtaining federal grant funds, and monitoring ECOT’s public funding on behalf
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of ECOT’s governing authority, and participating in ECOT’s budgeting and
spending of those public monies.
58.

Rick Teeters was an employee, an officer, and/or an authorized representative of
ECOT. He was ECOT’s superintendent. He represented ECOT in connection with
ECOT’s federal grant funding.

59.

Teeters was involved in the receipt or collection of ECOT’s public money. He
was directly involved in ECOT obtaining federal grant funds.

60.

Michele Smith was an employee, an officer, and/or an authorized representative
of ECOT. She was ECOT’s treasurer and was authorized to sign checks on behalf
of ECOT. She also represented ECOT in connection with federal grant funds.

61.

Smith was involved in the receipt or collection of ECOT’s public money. She was
directly involved in ECOT obtaining federal grant funds. Upon information and
belief, the State alleges that she had authority to and did access the accounts
receiving ECOT’s public funds by signing checks drawn on those accounts
during that time.

62.

Ann Barnes was an employee, an officer, and/or an authorized representative of
ECOT. She was ECOT’s EMIS Director.

63.

Barnes was involved in the receipt or collection of ECOT’s public money. She
participated in and/or supervised the submissions to ODE that resulted in ECOT
receiving state operating funding pursuant to R.C. 3314.08.

64.

Regina Lukich was an employee, an officer, and/or an authorized representative
of ECOT. She was ECOT’s Director of Federal Funds.
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65.

Lukich was involved in the receipt or collection of ECOT’s public money. She
participated in and/or supervised ECOT’s efforts to draw upon federal grant
funds.

66.

Christopher Meister was an employee, an office, and/or an authorized
representative of ECOT. He was ECOT’s vice president for finance.

67.

Meister supervised ECOT staff members/representatives who were involved in
the receipt or collection of ECOT’s public money. More specifically, he
supervised Barnes and Lukich, who, respectively, were involved in ECOT
obtaining operating funds pursuant to R.C. 3314.08 and federal grant funds.

68.

Lager, Altair, Teeters, Smith, Meister, Barnes, and Lukich are therefore each
strictly liable for all improper disbursements of ECOT’s public funds made
during the times that they were public officials of ECOT and involved in the
receipt or collection of ECOT’s public moneys. Those improper disbursements
include, but are not limited to:
a. All funds ECOT improperly received pursuant to R.C. 3314.08, as
determined in the 2015-2016 and 2016-2017 FTE Appeals, that have not
been preserved, plus costs, interest, and attorney fees;
b. All amounts paid pursuant to the IQ Contracts, as discussed in
paragraphs 31, 32 above and paragraphs 75-80 below.
c. All amounts paid pursuant to the Altair Management and Licensing
Agreements, as discussed in paragraphs 27, 28, and 29 above.

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69.

Count II
(Breach of Fiduciary Duty by William Lager)
The School Districts restate and reallege the matters set out in paragraphs 1
through 68 above as if they were fully set forth in this paragraph.

70.

Lager was a fiduciary of ECOT in several independently sufficient ways:
a. Lager was ECOT’s promoter because of the actions summarized in
paragraph 21 above.
b. Lager was expressly designated as an agent of ECOT through the
Management Agreements. The Management Agreements designated
members of Altair as agents of ECOT, and Lager was a member of Altair.
c. Independent of the express designation just discussed, Altair was an agent
of ECOT and was a fiduciary of ECOT as its operator. Lager was a
subagent of Altair, and as a subagent of Altair, Lager shared Altair’s
fiduciary duties towards ECOT.
d. He was a public officer of ECOT under common law standards because he
exercised control over ECOT’s public property, over the performance of
ECOT’s public functions, and over ECOT’s exercise of the sovereign
authority delegated to it as part of the State’s program of education, both
directly and through Altair, as summarized in paragraphs 22, 23, 24, and
28 above.
e. He was a de facto officer of ECOT because he repeatedly represented
himself as an officer or executive of ECOT in disclosure mandated by R.C.
3517.10(E)(2).
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71.

As a fiduciary, Lager had a duty of loyalty to ECOT. That fiduciary duty
prohibited him from doing business with ECOT, either directly or through
companies he had substantial interests in.

72.

Lager violated his fiduciary duty of loyalty by doing business with ECOT
through Altair via the Altair License Agreements described in paragraph 29
above.

73.

Lager independently violated his fiduciary duty of loyalty by doing business
with ECOT through the IQ Contracts described in paragraphs 31 and 32 above
and paragraphs 75-80 below.

74.

The School Districts therefore are entitled to recover from Lager all profits he
received from the Altair License Agreements and the IQ Contracts. Further,
Lager holds all property purchased with those profits as constructive trustee for
ECOT. The School Districts there are entitled to recover any compensation paid
to Lager during the period of time that he was in violation of his fiduciary duties.

Count III
(Recovery of public funds paid IQ and Altair on contracts violating R.C. 2921.42)
75.
The School Districts hereby restate and reallege the matters set out in paragraphs
1 through 74 above as if they were fully set forth in this paragraph.
76.

ECOT was a political subdivision because it was a community school.

77.

Lager was public official of ECOT within the meaning of R.C. 2921.01(A) in
several independently sufficient respects:

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a. He was an officer of ECOT for the reasons summarized in paragraph 52
above, ECOT was a political subdivision, and an officer of a political
subdivision is a public official pursuant to R.C. 2921.01(A)
b. He was an agent of ECOT for the reasons summarized in 53 above, ECOT
was a political subdivision, an agent of a political subdivision is a public
official pursuant to R.C. 2921.01(A).
78.

The IQ and Altair Contracts were public contracts within the meaning of R.C.
2921.42(I) because they were for the purchase or acquisition of property and/or
services by ECOT and ECOT was a political subdivision.

79.

Lager had an interest in the IQ and Altair contracts because he was an owner and
officer of IQ and Altair.

80.

All of the IQ and Altair contracts were therefore void under R.C. 2921.42(H), and
ECOT is entitled to recover from IQ and Altair all funds paid pursuant to such
contracts.

81.

Count V
(Damages under the Ohio Corrupt Practices Act, R.C. 2923.34)
The School Districts hereby restate and reallege all matters set out in paragraphs
1 through 80 above as if they were fully set forth in this paragraph.

82.

ECOT was an enterprise within the meaning of R.C. 2923.31(C). That status had
at least three independently sufficient bases. First, ECOT was a corporation.
Second, as a community school ECOT was a governmental agency. Third, ECOT
was a legal entity.

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83.

ECOT was also a person within the meaning of R.C. 2923.31(G) and R.C. 1.59(C)
because it was a corporation.

84.

IQ was also a person within the meaning of R.C. 2923.31(C) in at least two
independently sufficient respects. First, it was a corporation or group of
corporations. Second, it was a group of persons associated in fact with a common
purpose: to do business with a school.

85.

Altair was also a person within the meaning of R.C. 2923.31© in at least two
independently sufficient respects. First, it was a corporation or group of
corporations. Second, it was a group of persons associated in fact with a common
purpose; to do business with a school.

86.

William Lager, Rick Teeters, Christopher Meister, Regina Lukich, Ann Barnes
and Michelle Smith are each individuals and hence persons within the meaning
of R.C. § 2923.31(G).

87.

Lager, Teeters, Meister, Lukich, Barnes and Smith each participated in a pattern
of corrupt activity, and conspired with each other to participate in a pattern of
corrupt activity, within the meaning of R.C. § 2923.31(E) and (I)(2)(a), in that they
were aware of and approved the IQ and Altair Contracts.

88.

The IQ and Altair Contracts were a pattern of corrupt activity, within the
meaning of R.C. 2923.31(E) and (I)(2)(a), in that:
a. They each violated R.C. 2921.42 and there were more than two such
contracts.

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

b. The IQ and Altair Contracts were not isolated actions, but were part of a
pattern in that:
i. Each had the same purpose (to transfer ECOT’s public funds to a
private entity controlled by Lager).
ii. Each had similar results (ECOT’s public funds were diverted to the
use of a private entity controlled by Lager).
iii. Each had a common participant (Lager).
iv. Each had similar victims (ECOT, its students, the school districts
whose funds were transferred to ECOT, and those districts’
students).
Although the IQ and Altair Contracts were similar in the ways just recited, they
were not a single event. Instead, they were separate agreements with separate
subjects and terms, and upon information and belief, they were approved by
separate votes of ECOT’s governing authority at separate meetings.
89.

The pattern of activity described in the immediately preceding paragraph was
conducted in connection with an enterprise: ECOT.

90.

ECOT was injured by that pattern of corrupt activity because it paid millions of
dollars pursuant to contracts that were void as a matter of law pursuant to R.C.
2921.42(H).

91.

Lager, Teeters, Meister, Lukich, Barnes and Smith are individuals and hence
persons within the meaning of R.C. 2923.31(G).

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

92.

Lager, Teeters, Meister, Lukich, Barnes and Smith were associated with ECOT as
employees, officers, agents, and public officers of ECOT.

93.

Lager, Teeters, Meister, Lukich, Barnes and Smith each participated in a pattern
of corrupt activity and conspired with each other to participate in a pattern of
corrupt activity, within the meaning of R.C. 2923.31(E) and (I)(2)(a), in that:
a. They participated in ECOT entering into and performing multiple
Contracts with IQ and Altair that violated R.C. 2921.42.
b. Lager received proceeds from the IQ and Altair Contracts, either directly
or indirectly, and upon information and belief, invested those proceeds,
either directly or indirectly, in various types of property, including
interests in multiple companies, real property in Ohio and Florida,
multiple automobiles, and multiple boats.

94.

R.C. 2923.34(E) therefore makes Lager, Teeters, Meister, Lukich, Barnes and
Smith liable to ECOT for three times the amount paid pursuant to the IQ and
Altair Contracts, plus costs, interest and attorney’s fees.

95.

Count VI
(Claim on Bond against Travelers)
The School Districts hereby restate and reallege all matters set out in paragraphs
1 through 91 above as if they were fully set forth in this paragraph.

96.

Travelers issued a bond guaranteeing faithful performance of Michele Smith
duties as ECOT’s treasurer. A copy of that bond is attached as Exhibit 13 hereto.

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

97.

Smith did not faithfully perform her duties as ECOT’s treasurer because she
allowed or participated in the improper dispositions of public funds entrusted to
ECOT as summarized in paragraphs 50 and 68 above.

98.

Travelers is therefore liable to ECOT for the penal amount of its bond.

99.

The School Districts believe but have not yet been able to verify, that other bonds
and insurance policies may have been issued for ECOT’s protection concerning
other officials. It reserves the right to assert claims on those bonds and policies as
they are discovered.

WHEREFORE the School Districts pray that:
A. As to Count I:
1. That judgment be entered against Lager, Altair, Teeters, Smith, Meister,
Barnes, and Lukich, jointly and severally, in amounts equal to:
a. Unpaid portions of the amounts ECOT was found liable for in the 20152016 and 2016-2017 FTE Appeals, and
b. The payments made on the IQ Contracts during their respective times as
public officials of ECOT; and
B. As to Count II:
1. An accounting be had establishing all payments and other property Lager
received from Altair and IQ while in violation of his fiduciary duty of loyalty
to ECOT and the disposition of such funds and property; and
2. That Lager be ordered to disgorge all compensation he received from ECOT
and the Altair License Agreements and the IQ Contracts; and
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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

3. To the extent that any payments he received from the Altair License
Agreements and the IQ Contracts can be traced into any other property
owned by Lager, that property be declared to be held in constructive trust for
the benefit of ECOT.
C. As to Counts III:
1. Judgment be entered against IQ and Altair in an amount equal to all amounts
it received from ECOT pursuant to all IQ and Altair Contracts.
D. As to Count IV:
1. Judgment be entered against Lager, Teeters, Meister, Lukich, Barnes and
Smith in an amount equal to all amounts ECOT paid pursuant to all IQ and
Altair Contracts, subject to possible trebling pursuant to R.C. 2923.34(E).
2. Judgment be entered against Lager, Teeters, Meister, Lukich, Barnes and
Smith for all costs, interest and attorney’s fees incurred by the School Districts
in this proceeding.
E. As to Count V:
1. Judgment also be entered against Travelers for the full penal amount of the
bond or bonds it issued to ECOT.
F. As to all counts:
1. That all amounts recovered be distributed pursuant to R.C. 3314.074 under
this Court’s supervision, either in this case or Case No. 18CV00324.
2. That it be granted all other relief that is appropriate.

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 Franklin County Ohio Clerk of Courts of the Common Pleas- 2018 Sep 24 9:40 AM-18CV007094

Respectfully submitted,
COHEN ROSENTHAL & KRAMER LLP
/s/ Ellen M. Kramer
Ellen M. Kramer (0055552)
emk@crklaw.com
James B. Rosenthal (0062872)
jbr@crklaw.com
Joshua R. Cohen (0032368)
jcohen@crklaw.com
3208 Clinton Avenue
Cleveland, OH 44113
216-815-9500 [Telephone & Facsimile]
JURY DEMAND
The School Districts demand a trial by jury of all eligible claims and issues.

/s/Ellen M. Kramer
Ellen M. Kramer
 

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