California Charter School Files Bankruptcy After $180M Audit Scandal, $1.96M San Diego Event Flagged

A Sacramento-area charter school system accused by the California State Auditor of improperly receiving more than $180 million in K-12 funding has filed for Chapter 11 bankruptcy protection, according to a state audit and court filings.

Highlands Community and Technical Schools filed for bankruptcy in federal court Sunday, seeking protection as it fights the state's funding claim. Among the auditor's findings: a $1.96 million three-day professional development event at the Manchester Grand Hyatt in downtown San Diego in August 2023.

The state auditor described Highlands' spending as "unlawful and wasteful spending of public funds." Additional flagged expenses included $80,000 for seven employees and a consultant to attend a conference in Maui, and a $2,600 flight to Paris for a technology conference for an employee whose mother served on the school's board.

Auditors also found that a professional baseball stadium appeared on the school's list of locations. During an oversight visit, auditors found no classes and no students. Highlands later said it had terminated the lease but continued making monthly payments of more than $33,000 through April 2026 — an arrangement that included VIP tickets to games.

The audit identified 11 employees who had at least one relative hired by Highlands during their tenure. In one case, a director-level employee initiated a $1,500-per-month contract with his wife for mentor services. Approximately 200 employees donated roughly $101,000 to an affiliated foundation, with 109 survey respondents saying they felt pressured to donate.

Highlands serves adult students seeking high school diplomas and career training. Its 2023-24 graduation rate was 2.8 percent, compared to 86.4 percent statewide. Auditors also found a 51-to-1 student-to-teacher ratio and widespread teacher-credential problems.

"Highlands is taking this step to protect our students and preserve the future of our schools," Executive Director Jonathan Raymond said in a statement. The school says it will remain open and is planning to rebrand.

Auditors found Highlands received $177 million in K-12 funding it was not eligible for in 2022-23 and 2023-24, plus more than $5 million in overpayments from problematic attendance calculations.