Tim King and Norm Donohoe, who ran

from their headquarters in Clackamas, scammed the state out of $17 million and must repay that plus $2.7 million more, the state said

.

The legal claim, brought Thursday by the Oregon Department of Justice in Marion County Circuit Court, accuses the pair of racketeering, money laundering and other fraud from 2007 to 2010.

King and Donohoe, who were the director and president, respectively, of a nonprofit they named EdChoices, submitted false, incomplete and misleading records about how many students were enrolled in the schools and how they were spending the state's money, state prosecutors say in the complaint.

"It's not true," Donohoe said when reached after 5 p.m. Friday. He said EdChoices' attorney would need to speak for him but was not available after hours. King could not be reached for comment.

The pair opened and operated at least 10 charter schools that went by various and changing names, including Baker Web Academy, Estacada Early College and Sheridan AllPrep Academy. Most were launched under the name AllPrep. They existed under agreements with the school boards in Estacada, Sisters, Baker City, Sheridan, Burns and Marcola, but enrolled students from across the state in their online programs.

The state provided startup grants of up to $450,000 per charter school. The state Department of Educationalso paid about $6,000 a year for each student enrolled, relying on the charter school operators to document the number. The state now says those records were "erroneous, false and misleading."

King was the charismatic front man for AllPrep when the schools' unraveling finances prompted

He quickly stepped down. Donohoe said Friday that he doesn't know how to reach him.

Some of the schools abruptly closed during the school year, leaving students and teachers in a lurch. Others have since stopped operating. Still others operate under new auspices.

Before starting AllPrep schools, King was a former teacher paid to create and run three North Clackamas School District charter schools: New Urban High, Clackamas Middle College and Clackamas Web Academy. Those schools are still operating, though King left in 2008.

The district discovered a trail of financial problems, including hundreds of thousands of dollars in questioned expenditures, only after his departure. The three schools agreed in 2009 to repay the district almost $400,000, a debt load that crimped their operations. But the state did not file a legal claim against King.

With AllPrep, King and Donohoe secured each small-town school board's agreement to let them start charter schools in those districts. The boards unknowingly agreed to turn over 20 percent to 25 percent of the per-student funding from the state to EdChoices, the state alleges.

When King sought startup grants to launch the schools, he agreed many times in writing to abide by the terms, including spending them only on allowable expenses at that particular school. He eventually won more than $2 million in such grants, but did not spend all the money as promised and fraudulently mingled funds from different schools to benefit EdChoices, the state says.

King and his wife filed for bankruptcy in Oregon in 2011.

The state is demanding that King and Donohoe repay all the money their schools received in grants and per-student funding, on the grounds it all was obtained under racketeering and false claims, even though the schools did legitimately educate some students. That adds up to $17 million.

In addition, the claim demands $2.7 million in damages for breach of contract plus attorney fees and the costs of investigation and litigation.

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