People of the State of California v. Eugene Selivanov and Tatyana Berkovich
On June 10, 2010 a Felony Complaint was filed against the directors of Ivy Academia Charter School. This action charged the defendants with 38 Penal Code violations relating to misuse of public funds.
On April, 5 2013, a Los Angeles County Superior Court jury convicted Eugene Selivanov of twenty-four (24) felony accounts and Tatyana Berkovich of three (3) felonies and five (5) misdemeanors related to the use of charter school funds when they served as founders, and former executive staff and board members of the Ivy Academia Charter School, authorized by Los Angeles Unified School District.
The trial began on February 25, 2012 and lasted four weeks. On October 4, 2013, Mr. Selivanov was sentenced to serve 4 years, 8 months in California State prison. Additionally, the court granted his motion for new trial for the misappropriation (Penal Code 424) conviction. Both Selivanov and Berkovich have appealed their convictions, and the appeals are currently pending in the Second District Court of Appeal.
Below are some important points about this trial and the charges these charter leaders faced.
In 2010, Eugene and Tatyana were charged with 40 felony counts alleging misuse of public funds from 2005-2009 while they founded and operated the Ivy Academia Charter School. The facts and charges are very complex, but, in general, the charges involving charter school operations covered four categories of transactions:
(1) purchases made on a credit card and reimbursed in accordance with school procedures;
(2) interest paid to the defendants for salaries deferred during the school's start-up phase;
(3) rental payments to entities controlled by the defendant; and,
(4) interest paid to defendants for personal loans they made to the school during the start-up phase.
During the course of the case, some counts were dropped, including the six (6) counts relating to the interest on loans and the deferred salary. The charges that remained for the trial involved the alleged unlawful credit card purchases, and the rental transactions between the school and the defendants' related entities.
The basis for the charges are alleged violations of several California laws: Penal Code sections 424 (misappropriation of public funds); 504 (embezzlement by a public official); 186.10(a) (money laundering); and Revenue and Taxation Code section 19705(a)(1)(false statement on a tax return).
Please explore the links on the above Related Resources tab for some important points about this trial and the charges these charter leaders face.
Frequently Asked Questions
Impact on other Charter Schools and CCSA's Involvement
The following questions regarding Mr. Selivanov and Ms. Berkovich's case have been posed to CCSA by various charter school operators. Because many charter school operators and staff members may have similar questions regarding the nature or impact of this case, CCSA has published our responses to the most frequently asked questions.
1) How will these convictions affect my charter school?
These convictions do not directly impact other charter schools in California. Each criminal case is unique, and based on the specific circumstances and facts surrounding the defendants. On the other hand, these convictions could impact how the Los Angeles County district attorney's office, the LAUSD Office of Inspector General, and other authorizers in Los Angeles County address similar facts involving charter schools, their leaders and school expenditures.
2) What does CCSA think of the jury finding the defendants guilty?
CCSA is disappointed that the jury reached a guilty verdict on the charges involved in the case. As a result, it has the effect of criminalizing many practices that are common in charter schools and, at worst, could only have been characterized as sloppy.
3) What does CCSA think of the trial or particular evidence presented at the trial?
CCSA was not involved in the trial and did not observe the evidence presented to the jury. However, based upon the information CCSA has reviewed concerning the trial, the jury was not provided the opportunity to understand the impact of the legal exemption for charter schools, also referred to as the "megawaiver" (Education Code section 47610), from most laws applicable to school districts, and its impact on school district expenditures.
4) How and why has CCSA been involved?
CCSA filed amicus curiae briefs in the trial court and Court of Appeal to provide information and context to the courts concerning the legal principles governing charter schools in California. Because the allegations appeared to apply school district rules to charters or create new obligations with criminal penalties, CCSA felt compelled to represent the interests of charter school operators. CCSA saw a need to help the court understand the legal and practical effects of the charter school megawaiver.
Some Background on the Facts and Charges in this Case
5) Were some of the charges related to buying meals and gift cards for teachers and staff in appreciation for their work? If so, why were these purchases considered criminal?
Yes, the jury considered facts relating to Mr. Selivanov and Ms. Berkovich spending funds on gift cards and meals for teacher appreciation, staff meals for work that extended beyond the typical school day, and use of miles rewards accumulated for these purchases on the credit cards. We are disappointed that the jury found these expenditures to be a misuse of public funds in light of the fact that Charter Schools Act and the megawaiver gives school boards discretion on how to spend school funds and these transactions, and it is our understanding that Ivy board approved these items.
6) I heard that they were convicted for violating school district rules on how to spend funds. Aren't charter schools exempt from those rules?
Yes, charter schools are exempt from school district spending rules because of the megawaiver. However, in this case, the Judge refused to allow testimony about the megawaiver in Charter Schools Act and withheld the Charter Schools Act from the jury. The jury was not given school district credit card policies as evidence of criminal activity. However, the prosecution used school district policies as grounds to indict Mr. Selivanov and Ms. Berkovich.
7) Are all the funds in a charter school corporation "public funds," potentially subject to charges of misappropriation or embezzlement?
The judge directed the jury to treat all funds as public funds subject to potential criminal misappropriation or embezzlement. Many attorneys representing charter schools assert that funds used by a nonprofit corporation can be segregated, so that funds received from private donations or grants can remain private and not subject to these potential crimes.
8) Is it illegal for a board member to rent a building to the charter school?
The laws governing nonprofit corporations allow for contractual arrangements between board members who have a material financial interest in the transaction and the corporation provided that certain requirements are met. (Corp. Code § 5233.) If a charter school operates under the Political Reform Act, the board member with the financial interest would need to disclose and disqualify from participating in the board's decision making process. (Gov. Code § 87100.) If a charter school operates under Government Code section 1090, this kind of transaction likely would be prohibited. Notably, the District Attorney decided not to prosecute Mr. Selivanov or Ms. Berkovich under the Political Reform Act or Government Code section 1090.
9) Isn't it common for charter schools to enter into contracts with entities that are related to board members or staff?
Yes. Charter schools organized as nonprofit corporations are governed by the Corporations Code sections governing conflicts of interest which allow transactions with interested board members as long as certain processes are followed. Although there is no specific legal authority requiring a charter school's compliance with public agency conflict of interest laws, CCSA recommends as a best practice that charter schools comply with the Political Reform Act which requires an individual with the potential financial conflict to disclose and disqualify from participating in the decision-making process. As with the Corporations Code, compliance with the Political Reform Act would not prevent these types of transactions.
10) Did the charges include violations of Government Code 1090 or the Political Reform Act?
The original charges included two Political Reform Act conflict of interest charges against Ms. Berkovich, including one for failure to complete a timely Form 700. These charges were dropped before trial. The prosecution did not pursue any charges under Government Code section 1090.
11) Isn't it common for charter school operators to use credit cards for purchases?
Yes. Charter schools often allow employees to use company or personal credit cards for school purchases. CCSA recommends as a best practice that the charter school board adopt a policy governing reimbursement or approval of such purchases in order to set appropriate limits and processes.
Ivy Academia's Operations
12) Is the Ivy Academia still an operating charter school?
Yes, LAUSD has renewed Ivy Academia's charter twice since it was first granted in 2004. In fact, the LAUSD board most recently approved the renewal in April 2013, just after the convictions.
13) Do Eugene and Tatyana still work at Ivy Academia?
No. They resigned from the board and from their school positions not long after the charges were filed in 2010.
14) I heard that Ivy Academia received clean, independent audits--how can that happen if the school leaders were engaged in illegal activity?
As required by the Charter Schools Act, the Ivy Academia board of directors obtained an independent financial audit each year of its operations. The auditor did not identify these expenditures or rental arrangements as violations of any laws.
15) Did Ivy Academia use a back-office support service?
No, Ivy Academia performed all financial functions internally. While many charter school operators have the internal capacity to perform these functions, CCSA knows that using a third-party back-office support service may assist in developing standard operating procedures that are typical best-practices for charter schools.
The Development of the Case Against Selivanov and Berkovich
16) How did this case develop?
The LAUSD Office of Inspector General developed this case and referred it to the Los Angeles District Attorney's office, which filed charges in 2010 and held a preliminary hearing in 2011. The OIG began its initial operations audit in 2006 for the 2005-06 school year. The OIG released its audit in February 2007. As part of that audit, the OIG identified some areas where there were "potential conflicts of interest" and a "higher probability of unauthorized use and/or misappropriation of funds." Ivy Academia objected to many of the OIG recommendations, but also took steps to incorporate some of the recommended practices related to online banking, bank reconciliation, and internal controls, among other things. After the audit, some issues were referred to the OIG Office of Investigations in August 2006. In May 2008, the case was referred to the District Attorney's Office, Public Integrity Division.
17) Why did the LAUSD Office of Inspector General investigate Ivy Academia? Did the OIG receive a tip?
The OIG performed its audit at the request of the LAUSD Charter Schools Division, as one of many charter schools to be audited at that time. LAUSD is the only school district in the state that has an OIG. LAUSD requires all charter schools it authorizes to consent to OIG jurisdiction as part of its charter. Even without consent via the charter, the OIG asserts it has independent jurisdiction to monitor charter schools even when operated as a nonprofit corporation and to conduct audits of charter schools. CCSA has no information suggesting that the 2007 audit was based upon a "tip."
For More Information
18) Who may I contact at CCSA if I have more questions?
Members should contact Julie Umansky, (213) 244-1446 x501) with any questions.
- June 10, 2010: Felony Complaint and Arrest Warrant
- March 18, 2011: People's Brief of Preliminary Hearing
- May 25, 2012: Selivanov's Brief in Support of Motion to Set Aside Information
- May 29, 2012: CCSA's Amicus Curiae in Support of Motion to Set Aside Information
- June 7, 2012: People's Opposition to Selivanov's Motion to Set Aside Information
- June 19, 2012: Selivanov's Reply in Support of Motion to Set Aside Information
- September 4, 2013: Selivanov's Brief in Support of Motion for New Trial
- September 30, 2013: CCSA's Amicus Curiae in Support of Motion for New Trial
- September 30, 2014: People's Appellant Opening Brief at Court of Appeal
- October 14, 2014: Selivanov's Appellant Opening Brief at Court of Appeal
- April 1, 2015: Selivanov's Respondant Brief at Court of Appeal
- April 29, 2015: People's Respondent Brief at Court of Appeal
- June 3, 2015: People's Appellant Reply Brief at Court of Appeal
- June 19, 2015: Selivanov's Appellant Reply Brief at Court of Appeal
- July 2, 2015: CCSA Amicus Curiae Brief in Support of Defendants and Appellants
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