K12, the indictment said, actually managed Agora Cyber Charter School "while Brown and Cynwyd did little more than collect millions of dollars . . . from Agora while providing little or no services to Agora."
Until the fall of 2008, Brown collected three full-time salaries for being the executive officer of three schools she founded and controlled, including Main Line Academy, a private school in Bala Cynwyd for children needing special-education services.
The indictment accuses Brown of persuading her four coconspirators to participate in her schemes by paying them six-figure salaries and allowing them to use school money and resources for personal use.
Among other things, Brown permitted Michael A. Slade Jr., a codefendant and her grandnephew, to spend more than $40,000 of Main Line funds for a truck for his personal use.
The sweeping 66-page indictment is the fifth and largest federal criminal case the U.S. Attorney's Office has lodged against a local charter-school operator in the last six years.
"The indictment in this case alleges that Dorothy June Brown and her four coconspirators used the charter-school system to engage in rampant fraud and obstruction," Memeger said at an afternoon news conference.
"My office will continue to vigorously investigate and pursue those charter-school operators who defraud the taxpayers and deprive our children of funds for their education."
Memeger was joined at the announcement by FBI Special Agent in Charge George C. Venizelos and Steven D. Anderson, the special agent in charge of the U.S. Department of Education's Office of Inspector General for the mid-Atlantic region. Agents from both federal agencies were involved in the probe, with Assistant U.S. Attorney Anthony Kyriakakis, that led to the indictments.
"The bottom line is, running a charter school does not give you a license to steal," Venizelos said.
Gregory P. Miller, one of Brown's attorneys, issued a statement describing Brown as "a nationally recognized educator with a long and outstanding history of service to Philadelphia's schoolchildren."
Brown, Miller said, "denies all charges in the indictment and intends to vigorously defend herself against these unfounded charges."
A former Philadelphia school district principal, Brown founded three small charter schools in Philadelphia: Laboratory, which has campuses in Northern Liberties, Overbrook, and Wynnefield; Ad Prima in Overbrook; and Planet Abacus in Tacony.
In addition, in 2005 she helped create the Agora Cyber Charter School, which provides online, in-home instruction to students from across the state.
Brown served as the chief executive officer simultaneously at Laboratory and Ad Prima and as a consultant to Planet Abacus until October 2008, according to the nonprofit tax forms the schools filed.
She stepped down from the posts after the state law was changed in July of that year to bar charter administrators from collecting multiple salaries from schools or from companies that provide services to charter schools.
Brown was paid $150,000 for working 30 hours per week at Laboratory until October 2008 and $115,904 for a 30-hour week at Ad Prima. In addition, she was a paid consultant to Planet Abacus and Agora, which at that time had its headquarters in Devon.
Despite relinquishing the administrative titles, Brown retained control of day-to-day operations of Ad Prima, Laboratory, and Planet Abacus, according to sources with knowledge of the schools.
The Philadelphia School Reform Commission is reviewing applications for new, five-year operating charters for Laboratory and Planet Abacus.
Michael A. Davis, the Philadelphia School District's general counsel, said late Tuesday that the district "will review the indictment from the U.S. attorney and determine the appropriate course of action. We are very concerned about allegations of financial wrongdoing involving certain charter schools reportedly associated with Dorothy June Brown."
Davis said Michael A. Schwartz, a lawyer at Pepper Hamilton and a former federal prosecutor, would help investigate the allegations and advise on future action. In the meantime, Davis said, the renewal of charter schools mentioned in the indictment "will be placed on hold."
The indictment released Tuesday alleges that Brown created and used two private management companies - Cynwyd and AcademicQuest - to defraud Agora of $5.6 million and Planet Abacus of more than $700,000.
Memeger said Brown and her codefendants obstructed justice by fabricating documents, including contracts and board resolutions, meant to justify the payments in response to questions from federal investigators.
"These false documents made it appear that the schools held meetings to discuss and authorize Brown's two private management companies, when in fact," Memeger said, "Brown did all of this without any board approval or any board meetings actually occurring."
One false document was signed "by a person who, unknown to Brown, was actually dead," he said.
Also charged are longtime administrators at Brown's charters: Joan Woods Chalker, 74, of Springfield, Delaware County; Slade, 31, of Philadelphia; Courteney L. Knight, 64, of King of Prussia; and Anthony Smoot, 49, of New Castle, Del., who had been a business manager.
None of the codefendants could be reached Tuesday for comment.
Brown, of Haverford, is married to William H. Brown 3d, a prominent lawyer who chaired the commission that investigated the 1985 MOVE bombing and is a member of the city's Board of Ethics.
Tuesday's announcement came four years after federal authorities began examining Dorothy Brown's operations in connection with a probe of another charter leader: Brien Gardiner, founder and a former top administrator of Philadelphia Academy Charter School in the Northeast. Brown and Gardiner cofounded Agora and were partners in Cynwyd Group.
In April 2008, The Inquirer reported on allegations of fiscal mismanagement and nepotism at Philadelphia Academy and on an investigation begun by the School District's inspector general.
Gardiner committed suicide the following spring, shortly before federal criminal charges were announced. Philadelphia Academy's former CEO and former board president were sentenced to federal prison after pleading guilty to fraud charges.
"This was an offshoot of that investigation," said John F. Downs, the district's inspector general, whose office worked with federal authorities on the probe of Brown. He said Tuesday's indictment should be a caution to "those charter-school operators who want to take advantage of the taxpayers."
In January 2009, Brown sued several Agora parents who had asked questions about the school's finances and its relationship with Cynwyd, which not only was collecting management fees but also owned Agora's charter headquarters in Devon. Brown alleged that the parents and the Agora Parent Organization had defamed her and Cynwyd.
According to that civil suit, the parents made statements "that give the clear but false impression that Dr. Brown is corrupt, incompetent, and possibly criminal."
Several months after filing that suit, Brown was forced to sever all ties with Agora to settle several civil suits.
Now based in Wayne, Agora continues to operate under new leadership and a new board.
The slander suit against the parents is pending in Montgomery County.
Contact Martha Woodall
at 215-854-2789 or email@example.com.
Inquirer staff writer Robert Moran contributed to this article.