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Pension Funds

Chicago teachers plan sues charter school operator over missing pension contributions

Chicago Public School Teachers' Pension & Retirement Fund is suing Prologue Inc., the operator of the closed Joshua Johnston Charter School for Fine Art and Design, for allegedly failing to report the employment of some licensed teachers and failing to pay pension contributions on behalf of teachers.

The lawsuit was filed Tuesday in Cook County Circuit Court as a result of an audit by Grant Thornton that showed more than $1.4 million in underreported wages and more than $130,000 in unpaid pension contributions between 2013 and 2016, the lawsuit said. The audit was ordered by the pension fund.

Under the Illinois pension code, Chicago charter schools are required to make pension contributions to the Chicago teachers' pension fund, a CTPF spokeswoman said in an email.

According to the lawsuit, between 2013 and 2016, Prologue failed to report the employment of some licensed teachers, failed to submit accurate payroll records, and failed to turn over to the pension fund thousands of dollars in pension contributions directly deducted from teachers' salaries. Prologue was also picking up 6.2 percentage points of teachers' 9% required pension contribution, of which it also failed to pay the pension fund, the lawsuit said. Some $92,000 of the $133,000 in unpaid pension contributions between 2013 and 2016 was attributable to Prologue's failure to pay the 6.2 percentage point pick-up, the pension fund spokeswoman said.

"This is an egregious example of an employer taking advantage of its employees," said Jay C. Rehak, president of the $10.5 billion pension fund's board of trustees, in a news release Tuesday. "This wasn't just sloppy bookkeeping. This was fraud. The employer collected contributions from teachers, but did not turn over all of those contributions to the (CTPF). They also concealed teachers who were entitled to pension benefits. These unconscionable actions allowed Prologue's leaders to take advantage of our members."

According to the audit, Prologue reported only six licensed employees in fiscal year 2014 and reported zero for either fiscal year 2015 or fiscal year 2016 despite having 16 licensed employees in fiscal year 2014, 17 in 2015 and 14 in 2016.

"Under the Illinois School Code for a charter school, like Joshua Johnston, that was established on or after April 16, 2003, at least 50% of the individuals employed in instructional positions by a charter school are to hold teaching licenses," the CTPF spokeswoman said.

CTPF is also requesting additional accounting of Prologue's pension reporting for Johnston prior to 2013.

Prologue's charter agreement to operate the charter school was rescinded by the Chicago Board of Education in August 2016. In March, the board of education filed its own lawsuit against the charter operator "alleging breach of contract and demanding financial accountability after Prologue refused to provide adequate financial records and information following the termination of its contracts with Chicago Public Schools," according to the Chicago teachers' pension fund release.

Officials from Prologue could not be reached for comment.