SACRAMENTO, Calif. — “We’re currently projecting a revenue of $170.2 million,” Matthew Lemos, Highlands’ Director of Fiscal Services, announced in its February 2024 board meeting.
That’s just for this school year.
Over the last six years, Highlands Community Charter and Technical Schools told ABC10 they’ve brought in over $450 million from attendance.
It’s a lot of public-school funds, especially since Governor Gavin Newsom’s latest budget proposal and the end of COVID relief funds have many schools bracing for deficits and layoffs.
“They’re wasting money! You have the numbers!” Highlands Executive Director Doc Smith said of other public schools during our October 2023 interview. “We’re wasting nothing.”
Most public schools need funds, but Highlands has so much money they’re giving it away.
Between donations and renting out a baseball stadium for the last year, Highlands has paid $80,000 to the professional baseball league, the Marysville Drakes and its affiliated organization, the Pecos League of Professional Baseball Clubs. However, no classes take place at this baseball stadium and students don’t benefit in any way, sources told ABC10.
That’s not all ABC10 found in school records…
The youth basketball organization, Play Hard Play Smart, founded by Highlands Deputy Director Brian Hamilton, has received over $140,000. Highlands’ students are not qualified to participate in the basketball league.
Highlands paid $80,000 for a Pebble Beach golf tournament sponsorship plus the cost of their Board President Ernie Daniels to travel to the event.
Over $4.8 million dollars has gone to the creation of an app, “Highlandia.”
Highlands has given $100,000 to the California Forward Action Fund, which is a political group influencing voters.
And in a recent staff meeting, Highlands Executive Director Doc Smith told his 500+ employees he’d pay them each $150 to see a movie he enjoyed.
Those are just a few ways Highlands spends your tax dollars. How does this help students? That’s what ABC10’s sources wonder.
It’s also what education expert Dr. Frank Adamson asks when researching charter schools.
“Are you spending the money in the benefit of the students and families versus diverting it towards more private interest?” asked Adamson.
We asked Highlands.
“Highlands receives something directly benefiting students in return for all of its support for not-for-profit organizations. This could include assistance with student outreach, recruitment and the provision of support services to our students,” Highlands Community Charter and Technical Schools (HCCTS) said in a statement in response.
However, the school did not answer ABC10’s question asking if paying for a basketball organization run by their deputy director was a conflict of interest – or when exactly the expense was approved by their board.
They didn’t answer any of our questions about why money is going to a baseball field or political groups. They did justify spending millions on the “Highlandia app,” saying “Highlandia is an innovative learning tool for Highland students and staff” that was launched in 2021 and has an “average of 1,000 active users per day. However, this is still in development, and we will continue to improve the app to meet the needs of our students.”
“If you’ve ever seen the movie, ‘The Martian,’ Matthew in it says if you’re worried, do the math. Do the math!” said Smith during our October 2023 interview. “Our fund balance is well above what it’s supposed to be, significantly. We have more resources in the classroom than anybody.”
Yet, credit card statements obtained in response to a public records request show Highlands – and its leadership – spend outside the classroom often, like at expensive restaurants.
In just three months, statements show they spent more than $3,400 at fine dining establishments. Some meals happened within days of one another:
- $741.68 at Camden Spit & Larder, February 16, 2023
- $174.64 at Echo and Rig Steakhouse, February 18, 2023
- $654.96 at Shahrzad Fine Persian Restaurant, March 9, 2023
- $622.59 at Sky River Casino Prime Steakhouse, March 16, 2023
- $1,254.11 at Camden Spit & Larder, April 24, 2023
We asked Highlands how they justify these charges. They did not respond.
When we previously asked Executive Director Smith why Highlands leadership and board members have traveled to places like Maui, Pebble Beach and France, he credited lobbying.
“We have to do it to survive. Those places aren’t vacations,” said Smith.
“So, that’s part of the conundrum of charters is that they receive public money, but they’re privately operated,” said Adamson. “And that’s part of the area that you can have issues is where you have private entities having a lot of influence over the expenditure of public dollars.”
“It’s different – that’s why they invented charter schools,” Smith said. “Our students are different.”
Highlands’ students are adults. Most of them are immigrants. They’re how the school gets millions of public funds.
“Attendance is important,” said Smith. “That’s why we get funded.”
Like all public schools, Highlands gets money from students’ attendance and where they can bring in even more is online.
“Where you can potentially have 10,000 students in one classroom because it’s virtual,” said Adamson.
Highlands online, independent study side is called the California Innovative Career Academy, or ‘CICA’ for short.
“And that’s where the independent study model becomes a cash cow because we’re able to ‘serve more students’ on paper – enrolling more and more without actually providing the services that we say we are,” said Alex.
Concerned about retaliation, this source from CICA asked us to protect their identity. We’re calling them “Alex.”
“We would just keep swallowing up more and more, accepting more and more students, beyond capacity. Well beyond capacity,” said Alex.
While the in-person side has more students, the online side has grown faster; from 169 to over 2,200 students in the last four school years, Highlands reported. A 1,200% increase.
“And what really underlies that – the ulterior motive – isn’t to help more students, because we’re not even helping the ones that we’re well beyond capacity with,” said Alex. “It’s money making.”
The school told ABC10 CICA is projected to generate $56,709,082 in the 2023-2024 school year from attendance.
That’s half the amount their in-person side is expected to bring in, despite the online side only having a quarter of the students.
For online classes/independent study, attendance is taken differently. It’s calculated in one of three ways – either through student work, a student and teacher communicating via Zoom called “synchronous instruction,” or a combination of both student work and synchronous instruction.
In short, student work is important in CICA reporting attendance to the state. It’s part of the compliance report submitted to prove students were in class and learning.
“Specifically, worksheets or homework assignments that they completed,” Alex explained.
But because CICA grew so fast…
“You were never able to complete compliance reports on time,” Alex said.
To keep up, Alex said they’d work backwards – marking students in attendance and then later submitting homework samples to prove it – but there was a problem.
“We would realize, ‘Oh, this student hasn’t been active for the past six months or the past year. How is it they’re still enrolled?’” said Alex.
They’d need to track down over a thousand students for work samples.
“Sometimes the student would just disappear on us. And so, we’ve already signed, or we’ve already vetted/confirmed that they’ve attended for that learning period. So we have to, let’s say, magically come up with their work samples,” said Alex. “Fabrication, yeah.”
A single student’s work would also be used over and over again, another source said.
“Each packet was counted again as extra hours or for the days they missed,” said Sam, a former paraeducator we introduced in our last episode and renamed for protection. “That was also a thing for a while – for probably a couple of years.”
Fabrication of attendance for years at Highlands, sources say.
Highlands denies this. In a statement to ABC10 they said the following:
“All student work samples are original and complete. No student work samples or compliance paperwork for our independent study school is fabricated or falsified. Allegations that suggest otherwise are false.”
But sources say it’s another way Highlands capitalizes off newly arrived immigrants.
“If the goal is money making, that’s the incentive,” said Alex.
Because if the goal was quality education, Highlands/CICA would have less students, Alex said.
“Not because we want to have less students, but because we’re well beyond capacity,” Alex said. “You can’t serve those students you currently have by accepting more and more students.”
Oversized classes and an open enrollment system causes issues not just online, but also for in-person classes.
Highlands loads up a single class with hundreds of students – as reported in our last episode. Most of these oversized classes are for beginner English, sources explained.
“They fill up the rooms with up to 40, 50 students, beginner students, that are not able to really learn the language at all,” said Elke Dameson, a former Highlands teacher.
In response to our questions about class sizes, Highlands said the following:
“Increased student enrollment has led to large class sizes for some international high school students. In response to the high demand for English and high school diploma programs, Highlands is currently hoping to recruit 80 teachers in the new school year and is proposing to expand our facilities to meet the growing need of our students.”
“Who’s vetting this? Who’s auditing this? How do you keep track of all those students?” asked Alex.
It’s why the School Accountability Report Card is important.
Nicknamed the ‘SARC,’ California law requires every school’s board submit this annual report to the California Department of Education. It includes important information like where the school spends money and its class sizes.
Highlands Community Charter and Technical Schools didn’t tell the state about any oversized classes in its report card.
Eighteen students is the average in-person class at Highlands, the school initially reported for the 2022-2023 school year.
And online? Only nine students, HCCTS said.
These discrepancies were pointed out directly to the Highlands board at its February 2024 board meeting.
“Do you know how many rosters have hundreds of students on them? Do you know how many teachers do not have enough seats in their classrooms for those students?” asked Lena Al-Rayess, a CICA teacher, during Highlands’ February board meeting. “Several Highlands teachers currently have 300+ on their roster. That’s right! 300+ students.”
ABC10 reviewed the last nine years of school accountability report cards Highlands and CICA submitted. We discovered they’ve never reported any class sizes over 40 – neither in-person or online – which means they omitted their overcrowded beginner English classes for years.
It’s a loophole, sources say. The state gears the SARC for traditional high schools who don’t have many English language students, but at Highlands they make up the majority of the student population. Even so, the report doesn’t require Highlands to include them – and they didn’t.
“So, why are the majority of our students not reflected in the class average data?” asked Al-Rayess of the Highlands board members.
The school accountability report cards also don’t require Highlands to track English language students’ progress. It means there’s no way of knowing if students are actually learning or benefitting from funds the school receives, inside sources say.
Highlands didn’t respond to the SARC not including English Language Learners progress. They did say they use the Comprehensive Adult Student Assessment System (CASAS) testing and English Language (EL) Civics assessments to track students progress.
“We also collect and provide local measures of academic performance and workforce readiness through alternative measures, such as high school credits earned and courses completed,” Highlands said in their statement.
Several other issues in the latest SARC were also brought to the Highlands board’s attention at its February meeting.
“Our grade level data is not included (in the SARC), and the core subject data is both inaccurate and misleading,” said Al-Rayess.
Another former employee brought up concerns about Highlands’ budget and spending.
“$26 million – that’s money that’s spent outside the classroom,” said Araceli Perez, a former Highlands teacher, referring to sections of the school's budget that show where funds are going.
From all these issues, they both requested the Highlands board delay their approval of the SARC until errors and inaccuracies are updated.
After this request, Mark Lutgen – Highlands’ data manager – who is responsible for Highlands Community Charter and Technical Schools’ SARC - both for HCCS and CICA - took the podium and promised the board he’d make needed changes.
“It’s a document that’s very important and should be done as accurately as possible,” Lutgen told the board.
Lutgen didn’t respond to ABC10 when we reached out to him directly.
With Lutgen’s promise, Highlands board approved the school accountability report cards for both Highlands and CICA “pending corrections.”
After the board meeting, ABC10 tried to ask Highlands Board President Ernie Daniels about the school accountability report card he just approved.
“I don’t have anything to say at this time,” said Daniels.
We reached out after requesting an interview, Daniels’ declined. So, we asked if any of Highlands’ nine board members would be willing to speak with ABC10.
They all said no.
When we reminded the board Highlands is a public entity, run by hundreds of millions of tax dollars, therefore accountable to the public – we got no response.
Yet in their March 2024 board meeting Highlands Board Secretary Matt Powers said they welcome public scrutiny.
“One of the things I want to make sure – to the public who is listening – and also to our students and staff,” he said while referencing issues raised with their SARC in the last board meeting. “Everybody is entitled to make a call and raise a concern, so we’re not hiding anything."
Powers encouraged staff and the public to speak up when they see issues.
“Keeping with the spirit of how you (Doc Smith) runs the school,” said Powers.
So, if Highlands board says this, why won’t they give us ABC10 an interview? It’s what we asked the school after Powers’ statement – they didn’t respond.
Highlands Board President Ernie Daniels sent an all-staff email May 7, days prior to this report being released, saying of ABC10's reporting, "It is unclear why the station continues to pursue this story and relitigate allegations and themes covered in previous reporting," and "please know the story is not based on fact," but then went on to announce the Board's adoption of a new fiscal policy "to ensure public transparency," a new travel policy and the hiring of a new head of human resources... all issues ABC10's reporting has previously shined a light on.
“Regarding accountability: Highlands fully cooperates and complies with the boards and agencies tasked with overseeing the school. We welcome accountability,” Highlands said in a statement and listed several examples, included in their full statement at the bottom of this report.
Highlands also wrote: “We are disappointed ABC10 has spent months criticizing Highlands based on hearsay and vague accusations by misinformed, disgruntled former employees and anonymous sources…”
It’s a narrative Executive Director Smith has pushed since we began investigating Highlands.
“I’m not disgruntled,” said Alex. “I still believe in the mission Highlands and CICA are doing. The issue is with policies implemented and perpetuated unreasonably by leadership who don’t listen to the voice of reason, because profit is at the core of the institution, not helping students.”
It’s why Alex and around 40 other sources have spoken with ABC10.
“I think I have a responsibility to speak truth to power,” said Alex.
Weeks after its February board meeting, Highlands changed its 2022-2023 School Accountability Report Card data for both the in-person and online school.
They told ABC10 they changed several things including “the formatting of the maps, the methodology for capturing class size, some of the appendix verbiage, the fiscal reporting sheet.”
Those changes came only after ABC10’s investigation and Highlands’ own employees called out those issues, but we found Highlands reports inconsistent data often. Look at their enrollment numbers.
As early as 2014 – in Highlands’ first SARC ever, the school reported an enrollment of 864 students for the 2014-2015 school year. In the next school year’s SARC, they reported just 191 students for the same 2014-2015 school year.
It’s been an issue ever since, sources said. ABC10 has carefully followed the numbers Highlands reports for over six months and have seen the figures fluctuate drastically.
For example, in September 2023, Highlands told ABC10 they had 14,736 students enrolled: 11,018 in-person Highlands students and 3,718 online CICA students. In December they told the Department of Education in their “Notice of Concern” letter response they had a Highlands enrollment of 9,627 for September 2023 - the exact same period with two different enrollment numbers.
A month later, during our October 26, 2023 interview, Smith told ABC10 this: “We have 60 locations, by the way, and about 15,000 (students).”
Two weeks later, on November 7, 2023 they reported 700 less students enrolled – 14,326 – to Twin Rivers Unified School District, their charter authorizer, in records obtained by ABC10.
Right after ABC10’s initial investigation aired, not only did Highlands enrollment numbers switch again – they suddenly had fewer site locations, which are required to be approved by Twin Rivers Unified School District. According to a new website Highlands created on January 23, 2024, Highlands said they had “9K students” and “48 sites” throughout California. That’s 12 fewer sites and far fewer students than what Smith told ABC10.
Sixty-nine days later, their enrollment numbers doubled. On April 1, 2024, Highlands told ABC10 they now had 21,765 students enrolled for the 2023-2024 school year: 17,427 at Highlands Community Charter School and 4,338 at CICA. [Link to Item 1]
Highlands responded to our findings with the following statement:
“Enrollment at Highlands, CICA, and HCCTS varies daily, week, month, and year due to open enrollment, transfers, students leaving, and students graduating. At HCCTS, we currently see up to 200 new students enrolled per day so enrollment numbers can vary greatly. All student enrollment is tracked through PowerSchool and can be provided on any specific date. Enrollment fluctuates between years and during the year more than a typical school year because students enroll throughout the year and take a break due to life events like pregnancy, childbirth, changes in family, housing conditions, and job circumstances.”
However, Highlands did not confirm how many students are currently enrolled when asked.
Highlands is a school for adults – and adults often have other priorities like jobs or families – and students come and go, but the enrollment numbers shouldn’t change drastically experts ABC10 spoke with said.
Twin Rivers Unified School District is responsible for ensuring Highlands reports are accurate.
After our initial investigation aired in January, the public had a lot to say to Twin Rivers at a school board meeting.
“By now many of us have seen the report by ABC News 10 encapsulating the tale of corruption at work right in our community,” said Rebecca LeDoux, Twin Rivers Teachers’ Union/TRUE President.
“The extent that was exposed is reprehensible,” said Anna Aguilar, a third-grade teacher and TRUE Secretary.
“I’m here tonight because I’m also deeply alarmed at the news ABC10 aired,” said educator Britney Ward.
“Highlands pressures teachers and paraeducators to inflate ADA,” said Daniel Perez, who was a current Highlands teacher at that time. “Please look at where the money is going.”
“You’re paid to provide financial oversight at Highlands,” said former Highlands teacher Amanda Aguirre. “Please look into the attendance.”
“I am begging you to do better,” said community advocate, Maria Elena Pulido-Sepulveda.
None of the Twin Rivers Unified School District board members responded to those comments, so ABC10 tried to speak with Superintendent Dr. Steven Martinez.
“There’s only certain things we can do as a chartering district,” Martinez responded.
When we reminded him TRUSD is the oversight committee entrusted with ensuring their charters, like Highlands, spends millions of public-school dollars lawfully and ethically he responded: “But the charter school also has a board, and so the board also is exclusive to the charter school.”
It’s a theme: The California Department of Education says it’s Twin Rivers Unified School District’s responsibility to oversee Highlands. Twin Rivers says it’s Highlands board’s responsibility… and the Highlands board won’t answer ABC10’s questions.
Neither will Twin Rivers.
ABC10 has repeatedly asked Martinez for an interview – including re-requesting after the January 2024 board meeting. He never responded.
In response to our initial investigation, the California Department of Education (CDE) sent Highlands Community Charter School a “Notice of Concern” letter with the Sacramento County Office of Education and Twin Rivers Unified School District included. In the months since, CDE has referred back to TRUSD.
“CDE has continued to meet with multiple individuals about their concerns and has facilitated their correspondence to Twin Rivers Unified to ensure that there is appropriate District-level follow-through to all complaints received. The District has now issued four letters to Highlands, including two Notices of Concern, one Request for Information and one Request for Complaint Information,” CDE told ABC10 when we followed up with them asking for an update on their Notice of Concern letter.
Now, the California legislature has submitted a request to audit Twin Rivers Unified School District, Highlands Community Charter School, California Innovative Career Academy as well as the nonprofit linked to the school, The Doc Smith Legacy Foundation.
"I am joining with the Chair of the (California) Senate Education Committee, the Chair of the Budget Subcommittee on Education Funding and another member of the Assembly Education Committee," said Asm. Muratsuchi, who serves as California's Assembly Education Committee Chair. "That should speak for itself. That this is a serious audit request that deserves full consideration."
ABC10 asked the California Department of Education if this audit request changes the agency’s response in passing concerns about Highlands back to Twin Rivers. We haven’t heard back. However, the state agency did send the following statement to ABC10:
“CDE and State Superintendent Thurmond support the audit and look forward to its findings.”
Days after the audit request was announced, Highlands Board held a special meeting where they approved 12 contracts, all over $100,000. Some were millions of dollars. Multiple contracts were for lobbying and legal organizations. For example:
- The lobbying group, Bollinger Government Affairs, LLC. The contract agrees Highlands will pay $900,000 for services between 2024 to 2026. Additional expenses could include travel for consultants, the contract states.
- Burlington English, an adult English language services. The contract was entered into on October 1, 2023 for $2.8 million.
- California School Inspections, LLC - founded by former Twin Rivers Unified School District Superintendent Bill McGuire - will receive $10,000 a month - or $120,000 for the 2024 year - from Highlands, the contract states.
- The Deveau Burr Group, LLC - another lobbying and legislative organization - entered into a contract with Highlands on October 30, 2023. The contract states the monthly retainer Highlands pays Deveau is $9,615 for 26 months - a total of $249,990.
- Jackson Lewis - a legal firm hired in response to the class action lawsuit brought against Highlands, contracts states, hourly rate is up to $625.
- Law Offices of Snell & Wilmer - Highlands contract with the law firm is dated May 3 - a day after the legislator's audit request was released. The firm's current hourly rate is $885 an hour, the contract states.
Many of these contracts have already been in operation and Highlands has already paid them, records show.
When ABC10 asked Highlands' Board why they're approving contracts now, they said they "recently adopted (a) policy of approving all contracts worth more than $100,000."
But per Highlands' policy, approving contracts of this caliber was already a policy they should have been following. When ABC10 reminded the board of that and asked the reasoning for this special meeting, they said "there were some inconsistencies in the procedures for approving contracts" and they're "in the process of cleaning up all existing contracts."
When asked to elaborate, Highlands board replied, "We don't have anything else to add on this."
There have also been multiple resignations from Highlands – including Special Projects Coordinator Daniel Hahn as well as Deputy Director Kevin Taylor, who Smith referred to often throughout our interview, even saying: “Kevin Taylor should be the executive director of Highlands Community Charter School.”
When asked, Highlands would not specify how many people have resigned since ABC10’s investigation aired or comment on Hahn or Taylor’s departure.
Linda Fowler – who played a big role in founding Highlands, a topic ABC10 covered in our first episode of this investigation – lost her re-election bid to the Twin Rivers Unified School District for the first time since 1971.
It’s not enough, ABC10’s sources said, Highlands needs an overhaul – especially when it comes to leadership and their board.
When asked if Alex had a message for the California Department of Education, Twin Rivers Unified School District and the Highlands Board, they responded: “Get your head out of you’re a**. They have a responsibility to do something about this.”
These three oversight entities are entrusted to ensure Highlands operates legally and ethically, especially as many didn’t realize what they were doing at Highlands may have been illegal.
“The reason I’m doing this interview is to morally absolve myself,” said Alex.
“It’s the school’s responsibility to teach the students [what’s] right,” said Sam. “They don’t need to teach the students to cheat the system… just creating that culture is not a healthy culture, and it’s not going to help them in the long run – it’s going to create more problems for them because they’ll think that’s okay… they’ll think that’s a normal thing, which it’s not. The school needs to teach them the right thing – and they need to do the right thing.”
A statement from Highlands is below:
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