Press Releases

SACRAMENTO — State Controller Malia Cohen has agreed to lead a state-wide multi-agency task force along with the Office of the San Diego District Attorney, and William Robert Ayres the Successor Receiver in the People v. Sean McManus case, no. SCD266439-01, San Diego Superior Court. The purpose of the task force will be to develop audit criteria and best practices for purposes of detecting and curtailing future fraud in charter schools. The Task Force order was signed today by San Diego Superior Court Judge  Robert C. Longstreth. In accordance with an agreement made by the parties, the Controller will serve as Task Force chair. The first meeting of the task force will be scheduled for October 2023. 

In the case, Sean McManus and Jason Schrock, as well as nine other co-defendants, including a school superintendent, were charged back in 2019 as part of a complicated scheme intended to defraud California families and the state that involved enrolling fake students into their online charter schools, A3 Education, and collecting public money for each student. Over a several-year period leading up to 2019, McManus and Schrock’s schools brought in roughly $400 million in revenue, prosecutors from the San Diego District Attorney’s Office have said. 

As part of McManus and Schrock’s plea deal, they have agreed to turn over all remaining cash and assets owned by A3 and its subsidiary companies. So far, that includes at least $215 million that will eventually make its way back into state coffers. Controller Cohen was sworn into office as State Controller on January 2, 2023, and was not a party to the litigation. Nevertheless, upon learning of the case, Controller Cohen immediately directed her counsel to intervene in the matter. 

“As the State’s chief fiscal officer and the office responsible for developing audit guidelines to be followed by auditors when auditing school district, I could not in good conscience allow this matter to proceed through the judicial system without offering my office’s assistance in drafting guidelines to detect and prevent a recurrence of this untenable situation,” said Controller Cohen. “To do otherwise would be to neglect the confidence placed in my office to safeguard taxpayers dollars.”

During the course of the investigation of the case by the Successor Receiver, there were ongoing concerns that some of the underlying problems in discovering the depth and breadth of the theft of California State resources in the case due to the inadequacy of the audit services performed by the online charter schools' auditors. Indeed, in one of the auditor's depositions, he contended that there was little guidance or trained concerning the appropriate standards for the audit. This new Task Force will work to set clear audit guidelines on such matters in the state moving forward, thereby using this most recent example of oversight failure to ensure stronger future protections. Controller Cohen also commended the work of both, the San Diego District Attorney, Summer Stephan, and the Successor Receiver. “The dedication and hard work of the District Attorney and the Successor Receiver cannot be overlooked and those offices are to be commended for bringing this matter to justice,” stated Controller Cohen.

Multi-Agency task Force Memorandum of Understanding

As the chief fiscal officer of California, Controller Cohen is responsible for accountability and disbursement of the state’s financial resources. The Controller has independent auditing authority over government agencies that spend state funds. She is a member of numerous financing authorities, and fiscal and financial oversight entities including the Franchise Tax Board. She also serves on the boards for the nation’s two largest public pension funds. Follow the Controller on Twitter at @CAController and on Facebook at California State Controller’s Office.

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