Court: Ex-charter school director not liable for funds treasurer embezzled in Dayton

Carl Shye Jr. was convicted of embezzling money from charter schools in Dayton and elsewhere in Ohio.

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Carl Shye Jr. was convicted of embezzling money from charter schools in Dayton and elsewhere in Ohio.

A former Dayton charter school director cannot be held liable for the more than $50,000 that the school’s former treasurer embezzled during the 2009-2010 school year, according to an Ohio Supreme Court ruling issued Tuesday.

The treasurer, Carl W. Shye Jr., was sentenced in 2012 to two years in prison in a federal court case. But the Ohio Attorney General’s Office later sued New City Community School Director Robert Burns, Shye, and three others in 2018 trying to recoup the funds.

As the director, Burns approved the grant fund applications for the charter school and approved the school’s annual budget. But Shye did not report to Burns — he was an independent contractor based in Columbus who reported to the board of education overseeing the charter school.

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The Ohio Supreme Court’s ruling was that Burns did not have oversight authority over Shye. The court’s 4-3 majority ruling said Burns must have “received or collected” the public money to be held liable for its return. Those terms indicate some element of control, Justice Michael P. Donnelly wrote, and “the record is quite clear that Burns did not control the misappropriated funds.”

Justices Sharon L. Kennedy, R. Patrick DeWine and Melody Stewart joined Donnelly’s opinion.

Two judges, Chief Justice Maureen O’Connor and Justice Patrick F. Fischer, dissented from the new court ruling. Fischer, who wrote the opinion, said the meaning of “collect” involves an “active seeking of funds” and noted Burns was the one who sought state and federal grants to operate the school.

The law does not state Burns had to “control” the money to be responsible for paying it back, and he can be held liable, Fischer concluded.

Justice Jennifer Brunner dissented without a written opinion.

Shye stole more than $470,000 in federal education funds that went to four now-closed charter schools, including three in Dayton — George Washington Carver Preparatory Academy, NuBethel Center of Excellence and New City Community School, according to court records. He handled the finances of more than a dozen former charter schools in Columbus, Dayton and Youngstown.

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Ohio audited New City for the 2009-2010 fiscal year and in April 2012, the Ohio auditor’s office issued a finding for recovery of $51,670. The audit cited questionable expenditures by Shye and others. The auditor made a separate finding for recovery against Shye for $28,320. It is the $51,670 amount that was in question in this case.

When Shye was sentenced, he also forfeited his CPA license, meaning he could no longer practice as an accountant, and was required to repay the money he stole.

An FBI investigation found Shye accessed the money in many ways between 2005 and 2011, including changing his contract without telling his bosses, making loans to another school and then pocketing the money when the loan was paid back and falsely reporting services that never occurred.

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