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Chicago Teacher’s Pension Fund Sues Charter School for not Paying Pensions

Chicago Teacher’s Pension Fund Sues Charter School for not Paying Pensions

The Chicago Teacher’s Pension Fund (CTPF) filed a lawsuit in Cook County Court recently against Prologue, Inc., who operated the now-closed Joshua Johnston Charter School for Fine Art and Design, because they failed to pay into the fund.

Between Jan. 2013 and June 2016, Prologue did not report the employment of licensed teachers and pay pension contributions to CTPF as required by the Illinois Pension Code, the lawsuit states. Prologue reported only six out of 16 licenses in 2014, and reported no teachers or other licensed employees in 2015 despite having 17 licensed teachers. The suit also named Prologue’s CEO Nancy Jackson and Chief Financial Officer Jack Robertson, asking the court to hold them personally responsible.

“It appears these people just disappeared,” pension fund trustee Bernie Eshoo told delegates at the January Chicago Teachers Union (CTU) delegates meeting.

CTPF President of the Board of Trustees Jay Rehak said that this case was not only “sloppy bookkeeping,” but also “fraud” because the employer collected contributions from teachers, but did not turn over all of the contributions to the pension fund.

“This is an egregious example of an employer taking advantage of its employees,” Rehak told Chicago Union Teacher. “These unconscionable actions allowed Prologue’s leaders to take advantage of our members.”

The lawsuit seeks an accounting of Prologue’s accounting to determine if there was additional non-reporting of licensed teachers and non-payment of pension contributions on their behalf. The lawsuit seeks statutory late fees, interest and attorneys’ fees and costs, and alleges breach of fiduciary duty, unjust enrichment and violation of Illinois Wage Payment and Collection Act, along with the defendants’ failure to accurately report and pay the contributions of its teachers.

The Pension Fund filed the suit in January after an audit between 2013 – 2016 revealed underreporting of pensionable wages. The school received $9.3 million in public funds from the Chicago Board of Education between 2013 and 2016, according to the Chicago Union Teacher. The audit found more than $1.4 million in underreported wages and more than $130,000 in unpaid pension contributions during the audited period.

“I’ve been wondering for months why this has not been picked up,” Eshoo said, “or why the investigation is so slow moving and why is it seemingly the CTPF responsibility to hold these inept record keepers accountable.”

The teachers almost went on strike before the last contract was signed over the pension pick up. CPS pays 7 percent into the pension fund for CTU members, while teachers pay 2 percent. CPS wanted to stop paying into the fund, but negotiated an agreement in which it continues to contribute. However, the union agreed to increase the retirement age of new teachers, and CPS will not contribute to the pension pickup for new teachers.

Teachers at charter schools also pay into the fund, with some charters paying the full 9 percent, other charters paying 7 percent like CPS, and some paying less than  7 percent and the teachers paying more.

Chicago licensed teachers do not participate in Social Security. Instead, the Illinois Pension Code requires payment of 9 percent of salary to fund pensions. Prologue agreed to pay 6.2 percent of the required employee contribution (similar to Social Security payments), and the employees were to pay the remaining 2.8 percent, the union newsletter stated.

The Chicago Board of Education closed down Prologue which operated Johnston in August 2016. The Board filed a separate lawsuit against Prologue on March 3, 2017 alleging a breach of contract and demanding financial accountability after Prologue refused to provide financial records and information following the termination of its contracts with CPS.

Charter corruption has plagued this city. The city sued UNO Charter Schools for awarding no-bid contracts to family members of the charter’s operations team while investors sued the charter operator for fraud. The former head Juan Rangel, who had served as Mayor Rahm Emanuel’s election chair, was forced to step down and the name UNO was changed to Acero Charter School Network. Another charter operator Aspira was also sued in federal court for strip searching its female students. An agreement was later reached in the case that had ramifications in the White House after President Obama had named former CPS Chief Arne Duncan the Education Secretary. Reporters asked Duncan why he renewed Aspira’s contract after the lawsuit was filed when he was the head of CPS.