By Tyler Leeds

The Bulletin

Two men accused of mishandling $17 million in state education funds have settled with the Oregon Department of Justice for $475,000 each.

Tim King and Norm Donohoe ran a chain of taxpayer-funded charter schools across the state, including three in Sisters. The DOJ filed a claim in January accusing the pair of racketeering and money laundering through their company EdChoices between 2007 and 2010. Originally the state sought to be reimbursed the $17 million and an additional $2.7 million for breach of contract and legal fees.

“When we were doing our investigation and litigation we discovered that most of the $17 million was not diverted but was spent properly on education purposes, which is why the negotiations led to the settlement we ended with,” said Michael Kron, the DOJ’s government transparency counsel. “It’s a little bit difficult to give an exact figure of the amount not used for education because of the way they commingled their funds, but we are confident most was used for legitimate purposes and that the settlement is a good deal for the state.”

Kron noted the state “likely was not made entirely whole by the settlements.”

But after determining both Donohoe and King have negative net worth, and discovering King had declared bankruptcy in 2011, the state decided the amount was acceptable under the circumstances.

The settlement also states that for a four-year period King and Donohoe “will not solicit, manage or administer State of Oregon public funds for educational purposes” or hold any teaching or education licenses. The pair also agreed to never consult with state-funded charter schools for compensation. An additional component of the deal mandates that EdChoices be dissolved.

“In any case with contested issues that have a resolution like this, the resolution is made without any stated wrongdoing and is a compromise on the part of all involved,” said Carl Rodrigues, Norm Donohoe’s attorney. “There were innumerable issues given the original allegation, but all issues have been resolved by this agreement. What’s fair to say is that everyone is glad the matter is resolved.”

Tim King’s attorney Christopher Parker did not return a request for comment.

Beginning in 2006, King and Donohoe operated 12 charter schools, including the now closed Sisters Charter Academy of Fine Arts, Sisters Web and Early College Academy and Sisters AllPrep Academy. The schools fell under a company named AllPrep, which paid the Clackamas-based EdChoices for administrative work and online education programs. King was the director of EdChoices while Donohoe was president and chief financial officer.

Oregon charter schools are funded by the state based on enrollment. Money is first sent to the sponsoring district, which takes a portion, before passing the remaining funds onto the charter. In Sisters, up to 15 percent of the state’s per-pupil EdChoices charter-school funding was taken by the district, netting the district over $3 million. After becoming concerned about improprieties in 2010, the Sisters School Board began dissolving its relationship with the charters. One red flag came early in 2010, when the Sisters Charter Academy of Fine Arts was evicted for unpaid rent.

“We want school districts to be careful when entering into agreements with public charter schools, especially if the financing is not transparent,” Kron said. “Parents should also ask questions about how the school is being run and how they are using state funding.”

— Reporter: 541-633-2160,