A real estate holding company based in Syracuse cleared more than $300,000 in profit at the expense of a charter school in Greece earlier this year, according to real estate and financial records obtained by the Democrat and Chronicle.
Both the company, Terra Science and Education Inc., and Rochester Academy Charter School, which opened in 2008 as the first local charter high school, have evident connections with each other, and broadly with the nebulous network of Fethullah Gulen, the reclusive and controversial Turkish cleric living in exile in rural Pennsylvania.
Both the school and Terra deny there is a connection, but the D&C investigation has found numerous examples of overlapped personnel, lax invoicing, a lack of auditing and shared community affiliations.
Many Gulen-suspected schools across the country have entered into questionable real estate transactions with related parties, something critics label an attempt to siphon off the public money charter schools receive for their pupils. The importance for Monroe County residents, though, is the disbursal of hundreds of thousands of public dollars to a connected organization.
Such transactions, while not illegal, point to an oversight weakness in charter schools, which rely more heavily on contracted space and services than traditional public schools.
The Democrat and Chronicle has rebuilt the timeline of the deal that generated the substantial return for Terra.
- May 2016: Terra Science and Education Inc. buys a shuttered school building on Latta Road from Our Mother of Sorrows Church for $700,000.
- August 2016 to June 2017: Terra spends between $1.2 million and $1.5 million in renovations. Rochester Academy Charter School (RACS) leases the building from Terra in the meantime for $30,000 a month, paying a total of $300,000.
- June 2017: RACS purchases the newly renovated building for $2.5 million — at least $300,000 more than Terra's costs for purchase and renovation, not including the lease payments.
The fat profit margin for Terra comes from public funding intended for the hundreds of students attending the school — about $5 million in 2016-17, and growing as the school adds grade levels each year.
Under normal circumstances, if a developer turned a $300,000 profit after owning a property less than one year and selling it to a public school, it would be evidence of ruthless commercial skill for the one party and hapless poor luck for the other.
When there is evidence the two parties are connected, it is a different story.
The charter school said it couldn't have purchased the property any other way, because its charter had not yet been renewed and banks were wary to lend. It pointed out that the current mortgage payments will save it $2.5 million in 15 years compared to the erstwhile lease payments.
It did, though, receive what it termed a reasonable mortgage offer several months before its charter re-authorization.
Rochester Academy Charter School insists it has no formal relationship with Terra, much less with Fethullah Gulen. The real story, its leaders say, is a graduation rate above 90 percent, one of the highest marks for schools serving mostly Rochester students.
"RACS is governed by seven independent board members; they make the decisions," the school's Executive Director Mehmet Demirtas said.
Demirtas and a number of other RACS leaders have connections with other Gulen-linked organizations. The RACS board president, Mahmut Gedemenli, was Terra's treasurer in 2010 and 2011, and two other leaders have been identified as representing Rochester's Turkish Cultural Center, an explicitly Gulenist organization.
"I may be a part of any social group, but that doesn’t make the school whatever you call it," Demirtas said.
Over the last 20 years, dozens of charter schools (a minority of the overall sector) have opened across the United States with a few things in common. They're run and partly staffed by Turkish-Americans with professional and personal ties to Gulenist organizations; they sign sizable contracts with Gulen-related entities; and they deny any Gulen affiliation.
Rochester Academy Charter School is one such school.
Allegations of a national or international Gulen network are based not on formal affiliations — RACS denies any connection whatsoever — but rather a well-established pattern of tactics in procurement, hiring and real estate.
One is reliance on Gulen-suspected contractors such as Apple Educational Services, with which RACS has a $15,000 no-bid annual contract for tablet computers. Likely Gulen schools elsewhere in New York have large contracts with the company as well.
A 2013 audit from the New York State Comptroller found RACS had issued split payments to four related companies in a bid to avoid seeking board approval.
Demirtas said this month he couldn't recall who the four vendors were. The Comptroller's office, though, identified them this month as four arms of a New Jersey business co-founded in 2009 by Murat Kaval, the CEO of the openly Gulenist Peace Islands Institute and a former public relations officer for Apple Educational Services.
Another recurring pattern is the widespread use of H1-B skilled worker visas to recruit employees from Turkey. RACS has applied for five H1-B skilled worker visas since 2013, more than every other Rochester-area K-12 school combined.
Former Gulen-suspected school employees elsewhere have alleged they were forced to give up part of their salary in exchange for the visa, a charge those schools have denied.
Demirtas said the school has used the H1-B visas simply to recruit for workforce needs it could not fill locally, including a science teacher and IT administrator.
More generally, he wrote in an email: "We routinely network with other local and regional charter schools, as well as social organizations. To imply that these professional and social intersections are inappropriate is irresponsible."
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