Former El Paso Independent School District Superintendent Juan Cabrera and former school board President Dori Fenenbock have agreed to give a court-appointed receiver a stake in the online school they launched in 2019 to settle a lawsuit that led to Cabrera’s ouster.

In an undated joint statement, Fenenbock, Cabrera and receiver William Robert Ayres said that Ayres will receive an undisclosed sum of money and an ownership interest in the school to resolve the civil lawsuit that his predecessor filed in September 2020. That lawsuit sought to collect the $5 million that the founders of a fraudulent California online charter school network had invested in the Texas school.

Fenenbock told El Paso Inc. that the settlement agreement was reached in late April. She did not respond to requests for comment from El Paso Matters.

“We are excited about this resolution, the opportunity to continue to pursue a ‘best in class’ virtual school in Texas and to be part of the recovery for the victims of the crimes committed in California,” Fenenbock said in the prepared statement, which El Paso Matters obtained by a person who asked not to be identified.

San Diego County court records indicate that the parties agreed to settle the case in February, but are still finalizing the agreement. On April 8, a state appellate court judge gave them 60 days to request a dismissal of Fenenbock and Cabrera’s appeal of a trial court judge’s decision not to compel private arbitration of the dispute.

The trial court judge must approve the settlement agreement before the appeal can be dismissed, according to a court filing. Court records do not indicate that has happened.

Attorneys for Fenenbock and Cabrera directed El Paso Matters to their clients for comment. The attorneys did not provide the date when the settlement agreement was finalized.

Cabrera has not responded to a request for comment.

In the joint statement, Cabrera is quoted as saying, “I am excited to have our name cleared and return to our passion which is creating innovative programs and initiatives in support of all students.”

The revelation of the lawsuit’s existence led the EPISD board to negotiate Cabrera’s exit from the district he’d led since 2013. His resignation — which cost EPISD more than $558,000 — took effect Feb. 1, 2021, though Cabrera placed himself on paid leave starting in November 2020.

The civil lawsuit stems from the $5 million investment A3 Education creators Jason Schrock and Sean McManus made to eSchool Texas, LLC, the joint venture they entered into with Fenenbock in March 2019 to open a for-profit online school in Texas, according to court documents. In exchange for the investment, Schrock and McManus received a 30% stake in the company, of which Fenenbock is CEO.

eSchool Texas, LLC operates eSchool Prep, an online program affiliated with the Texarkana Independent School District. The virtual school opened in the 2019-20 school year.

In May 2019, a San Diego County grand jury indicted Schrock and McManus on multiple charges related to a charter school scheme that defrauded California of millions of dollars in state education funds.

Following the indictment, Fenenbock converted the LLC into a corporation and bought out Schrock and McManus’ share, according to the appellants’ opening brief. She sent McManus a $483,000 check, the receiver’s opening brief states.

Schrock and McManus pleaded guilty in a San Diego County Superior Court to conspiracy to misappropriate public funds in February 2021. Schrock also pleaded guilty to conflict of interest and in September 2021, he was sentenced to four years in state prison. McManus has not been sentenced.

Ayres, the court-appointed receiver, is quoted in the joint statement as saying: “We found no evidence that Dori Fenenbock and/or Juan Cabrera engaged in any fraud or that eSchool knowingly received investment funds wrongfully obtained by Sean McManus and Jason Schrock.”

Ayres’ attorneys said they could not comment on the settlement.

It remains unclear how Fenenbock and Cabrera became involved with the A3 charter school network. Fenenbock served just two years on the EPISD board before stepping down in 2017 to unsuccessfully run for Congress, losing to Veronica Escobar in the 2018 Democratic primary.

Fenenbock and Cabrera allege, in their opening brief, that McManus and Schrock approached them “on several occasions at various education-related conferences to discuss potentially working together to open an online virtual school in Texas.”

However, the receiver’s brief alleges that Fenenbock and Cabrera were the ones who approached McManus and Schrock in late 2018 “with a proposal to develop a for-profit internet school system and have their entity, A3, run their multiple ‘schools-within-a-school.’” According to the brief, Fenenbock and Cabrera “referred to themselves as the ‘co-founders’ of eSchool Prep.”

Cabrera has long maintained that he has never received “any financial benefit” from eSchool Texas, LLC and has acted as an unpaid advisor to Fenenbock. The company’s ownership is obscured through trusts managed by Cabrera’s former law partner, Rudy Colmenaro, who also manages a number of LLCs Cabrera created during his time at EPISD.

The receiver’s brief and the initial lawsuit, however, say that both Fenenbock and Cabrera were issued shares in the company.

After resigning from EPISD, Cabrera rejoined O’Hanlon, Demerath & Castillo, an Austin-based law firm that specializes in school law, in May 2021.

Molly Smith has been a reporter for the El Paso Times and The (McAllen) Monitor. She’s covered education, criminal justice and local government. A Seattle native, she’s lived in Texas since 2014, with...