Clout-Heavy Charter School Group Charged With Defrauding Investors

By Chuck Sudo in News on Jun 2, 2014 9:50PM

United Neighborhood Organization, the charter school group with connections to nearly every major politician and power broker in Illinois, was charged by the Securities and Exchange Commission Monday with defrauding investors on a $37.5 million bond offering for construction work by failing to disclose conflicts of interest. Oops.

The conflict of interest centers on companies owned by brothers of UNO’s former senior vice president of operations Miguel D’Escoto. The companies received $8.5 million in business from $98 million in state grant money. Furthermore, the SEC alleges UNO failed to inform investors about the financial impact the contracts with the companies would have on its ability to repay the bonds.

“UNO misled its bond investors by assuring them it had reported conflicts of interest in connection with state grants when in fact it had not,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Investors had a right to know that UNO’s transactions with related persons jeopardized its ability to pay its bonds because they placed the grant money that was primarily funding the projects at risk.”

UNO is settling the charges with the SEC and by promising to take measures to improve internal procedures and training, including appointing an independent monitor. The group did not admit to any wrongdoing in the settlement.