Archived Story
Saturday, October 22, 2005
By GRETCHEN LOSI/Staff Writer
RIVERSIDE -- The head of the now-defunct California Charter Academy is seeking more than $120 million in damages from the state Department of Education for allegedly scuttling the charter school and forcing a bankruptcy filing, which a judge dismissed.
A U.S. Bankruptcy Court judge in Riverside dismissed the bankruptcy petition against Educational Administrative Services Corporation and C. Steven Cox on Tuesday.
Contending that the involuntary bankruptcy proceeding had no merit and was the "brain-child" of the State Department of Education, Cox is fighting back with a $120 million claim. If the state rejects the claim, Cox could sue for damages.
"They took away his property, furniture, cars , office equipment and sold it," said Cox's attorney Tristan Pelayes. "This (bankruptcy dismissal) ruling is the court telling the state, 'you had no right to do that.' "
Pelayes said the judge asked the state for proof as to why EASC should be in bankruptcy, but the state could offer none and instead asked for a dismissal. State officials then offered to pay Cox's attorney fees -- some $25,000 according to Pelayes.
"The owner of the company is left with no property, has been completely defamed and his business is shut down. Now it's our turn to go after the state and recoup everything EASC and Cox lost," Pelayes said.
Documents also show Cox is filing claims against the state Department of Education, various individuals within that department "for wrongful seizure and conversion of property." Also included in the claim is an auditing firm, MGT, which prepared a controversial audit of CCA's operations.
"We have a strong case on behalf of California taxpayers that they are owed money back from California Charter Academy," Hillary McLean press secretary for state Superintendent Jack O'Connell said.
"Superintendent O'Connell stands by his decision to audit CCA and the erroneous practices found in that audit have been referred to law enforcement authorities," McLean said. "We don't believe their suits have merit."
The state Department of Education forced two of Cox's endeavors, California Charter Academy and its management company EASC into involuntary bankruptcy. The bankruptcy filing against California Charter Academy is still pending.
The involuntary bankruptcies against EASC and California Charter Academy came after the completion of an audit conducted at the request of the Department of Education earlier this year.
Gretchen Losi may be reached at 951-6233 or gretchen_losi@link.freedom.com.