EPISD superintendent, former board president accused of fraud in California lawsuit
The superintendent of El Paso’s largest school district and a former board president have been sued in California over allegations they defrauded a group of charter school investors.
El Paso Independent School District Superintendent Juan Cabrera and former EPISD board President Dori Fenenbock were sued in California state court on Sept. 15. Among other allegations, the civil lawsuit said Cabrera pledged to resign as EPISD superintendent if Sean McManus and Joseph Shrock, the founders of a California-based charter school empire called A3 Education, agreed to invest $5 million in a venture with Fenenbock and him.
Cabrera and Fenenbock have not responded to requests for comment from El Paso Matters.
The lawsuit involves the companies eSchool Inc. and Virtual Education Services, LLC, which manage at least one online public school in Texas and which the lawsuit says are controlled by Fenenbock and Cabrera.
Cabrera has been EPISD superintendent since 2013 and is paid nearly $500,000 a year in salary and benefits. Fenenbock resigned from the EPISD Board of Trustees in 2017, two years into her first four-term term, to run for Congress. She lost to Veronica Escobar in the March 2018 primary.
The lawsuit alleges Cabrera and Fenenbock “decided to parlay their positions of public trust into a for-profit enterprise, a state-licensed virtual, internet-based school.” To do this, “they reached out, and engaged in a fraudulent scheme to solicit and induce McManus and Schrock to provide them with the intellectual property and expertise needed to build a virtual school; provide them with the necessary cash investment to develop and operate same; and to enter into an operating agreement that Defendants would ultimately use to defraud McManus and Schrock …”
McManus and Schrock founded A3 Education, which has been described as “an online charter school empire that covered more than half the state of California.” In May 2019, the San Diego County District Attorney announced criminal charges against McManus and Schrock and nine alleged co-conspirators, for their role in a charter school scheme aimed at stealing more than $50 million in state funds by opening 19 charter schools. McManus and Schrock pleaded not guilty and have yet to go to trial.
The September lawsuit against Cabrera and Fenenbock was brought by Richard Kipperman, who was appointed by a judge as a receiver in 2019 to “take control over the schools previously managed by A3, as well as control and possession of certain assets of the various defendants and non-parties in the criminal action,” the suit said.
Kipperman alleges that Cabrera and Fenenbock approached McManus and Schrock in late 2018 about opening a for-profit online school in Texas. In November 2018, McManus, Schrock, Cabrera and Fenenbock entered into a mutual nondisclosure agreement, according to the lawsuit.
Two months later, in January 2019, Cabrera and Fenenbock traveled to California to present their plan for e-School Preparatory Academy to McManus and Schrock, according to the suit. That meeting resulted in McManus and Schrock investing $5 million into eSchool and sharing “their proprietary operational protocols and procedures.”
Cabrera and Fenenbock estimated eSchool Prep would enroll 2,000 students and generate $12 million in revenue during the 2019-20 school year, its first year of operation.
Last school year, the virtual school enrolled 1,160 students, according to Texas Education Agency records from February.
Cabrera, who the lawsuit said referred to himself as a co-founder of eSchool Prep, allegedly promised to resign as EPISD superintendent. The lawsuit notes that “Cabrera’s continuation as the highly compensated superintendent of the El Paso I.S.D. could jeopardize the enterprise because it would raise ethical questions and create either a real or perceived conflict of interest … (and) hobble the enterprise and jeopardize the investment made by A3, McManus and Schrock.”
In June 2019, Fenenbock and Cabrera demanded McManus resign from the eSchool board, and when he did not agree, removed him from the board and ended all communications with him and Schrock, according to the suit. They paid McManus $483,000 in January 2020, which the lawsuit alleges defrauded him of most of the $5 million initial investment..
Cabrera, Fenenbock and Rudy Colmenaro, Cabrera’s personal attorney and former law partner, are accused of fraud in the inducement, breach of fiduciary duty, negligent misrepresentation and unjust enrichment. The lawsuit seeks unspecified compensatory and exemplary damages.
The El Paso Times first reported on Cabrera and Fenenbock’s involvement in eSchool Prep last October. Cabrera declined to be interviewed at the time, but through a district spokesperson said he was “advising” the company in an “informal” manner despite emails showing he had a company email and took a lead role in negotiating state funding with the Texas Education Agency.
School board reaction
Reached Monday, EPISD President Board Bob Geske said he had not heard of the September lawsuit. He said he understood Cabrera had strictly an unpaid consulting role in the company, similar to what Geske told the Times last year.
“If I was going to start a school and if I knew Juan Cabrera, I’d talk to him about it because he’s a very knowledgeable, smart man,” Geske said in an October 2019 interview. Cabrera’s involvement in Fenenbock’s virtual school was “a non-issue,” he said at that time.
Trustee Josh Acevedo said Cabrera contacted him Friday to alert him of the lawsuit because an unnamed media source had knowledge of it. The superintendent communicated that he was notifying the entire board of the suit, Acevedo said. Board members were notified a month after the lawsuit was filed.
Cabrera described his role to Acevedo in eSchool Prep as an unpaid academic advisor. He also indicated Fenenbock had sold the eSchool company at some point last year.
“I told him that I appreciated this (heads up), because a year ago he didn’t do that (before the Times story on eSchool Prep), but that I was still very disappointed in this and I don’t think this (consulting) should be happening, whether he’s getting paid or not,”Acevedo said.
Trustee Freddy Klayel-Avalos said Cabrera called him and Trustee Daniel Call over the weekend to inform them of the lawsuit.
“He refutes the fact that he is a shareholder in (eSchool) and he offered to show the trustees his tax returns to prove that he is not part of the (company) and that he has not been compensated in any way by eSchool Prep,” Klayel-Avalos said. “And the question that we asked him was why is your name tied to this? And he freely admits that he was working as a consultant (without pay) for Dori Fenenbock, as a friend.”
Klayel-Avalos said he was disturbed by the allegations in the lawsuit, which he read for the first time Monday.
“My concern still is, and something that I plan to vigorously research, is I need to know whether or not he really is part of the ownership group of eSchool Prep for the following reason: starting an online charter that directly competes with EPISD in Texas is a conflict of interest,” Klayel-Avalos said.
Klayel-Avalos said he would be concerned even if Cabrera is working without compensation to support Fenenbock’s initiative.
“His employer is the school district. And from an ethical point of view, I think he should remain focused on the person who was paying him to do a certain job,” he said. “And if he’s really doing this as a consultant, that’s not paid, there’s even less of a reason or less of an incentive to want to travel and do things like that, which, in my opinion, is a distraction of his main job, which is our district.”
Klayel-Avalos said he plans to speak with the school district’s attorney to find out if the EPISD internal auditor or another expert could investigate whether Cabrera has financial ties to eSchool Prep.
Cabrera’s 2017 amended contract, which Fenenbock, Geske and current trustees Diane Dye, Charles “Chuck” Taylor and Al Velarde approved, allows Cabrera to “participate in consulting and speaking engagements (“Consulting”) provided the activities do not interfere with the performance of his duties as Superintendent, conflict in any way with the business of the District, or violate state law …” The contract provides no definition of what constitutes an interference of his duties or a conflict with district business.
Klayel-Avalos said he wants the school board to eliminate that contract provision for future superintendents.
“I’d like to make sure that future boards, if I’m part of them, definitely negotiate in the favor of the school district and not so much in favor of the liberties of the superintendent,” he said.
Acevedo said the board needs to amend Cabrera’s current contract so at the very least he cannot consult for Fenenbock’s business ventures. On the whole, Acevedo said he is not supportive of a superintendent being allowed to engage in consulting on the side.
In accordance with state law, Cabrera must get board approval to participate in paid consulting, and he cannot be compensated for consulting for companies that do or solicit business with the district.
Last year, district spokesperson Gustavo Reveles said Cabrera was not being paid for his informal advising and used personal time for this consulting work.
In a statement Monday, Reveles said EPISD had no comment on the civil lawsuit because “this is a non-district matter.”
El Paso Matters CEO Robert Moore contributed to this story.