(TNS) — The leader of Pennsylvania’s largest cyber charter school earned more than $700,000 from his side job as a bank director from 2016 through 2024.

The bank, Orrstown, was the school’s primary financial institution during that time and now holds more than $230 million in deposits from Commonwealth Charter Academy, according to the financial statements provided to its trustees in June.

Acting as CEO for the charter school while getting income from its bank raises conflict of interest questions for Tom Longenecker, ethics experts told PennLive, because it could call into question whether he was making decisions with the best interest of the school in mind — or the bank.

Longenecker didn’t respond to questions directly for this story but a spokesperson for the school said Longenecker’s position at the bank does not represent a conflict.

“It is both common and appropriate for CEOs to serve on external boards when their expertise aligns with the organization’s mission and when there is no conflict of interest,” said Tim Eller, Commonwealth Charter Academy’s [CCA] chief branding and government relations officer.

PennLive learned about Longenecker’s position as a result of a law passed in Harrisburg last year that required board members at cyber charter schools to file financial interest forms with the Commonwealth by May 1, 2025.

The law required trustees to file the disclosures, not administrators. Longenecker was among only a few cyber charter CEOs who did file.

Prior to this year, CCA officials said Longenecker disclosed his relationship with the bank annually on forms filed with the school’s board secretary and available to those who filed a records request.

PennLive created a database of newly released financial information for more than 100 cyber charter school board members and CEOs.

Longenecker’s disclosure comes at a time when lawmakers in Harrisburg are trying to pass a new budget — and one of the most intensely debated proposals has been a new funding formula for cyber charter schools.

Board consultation

Several ethics experts said a key part of determining whether Longenecker’s position adhered to ethical norms is determining how he informed the school’s board of trustees about his position.

The spokesman for CCA said Longenecker consulted with the board before accepting the position. Maurice Flurie, who was the CEO of CCA at the time, also said the school notified the board.

”That’s something we have to be absolutely transparent with our board about that,” Flurie said. “Anytime there would be any type of chance for a view of impropriety or personal gain by a move like that, any of our executives would have had to share that with the board.”

Longenecker served as a director of Orrstown from January of 2016 until June of 2024 but at least six trustees who served on the school’s board during that time told PennLive they never knew about his position or the amount of compensation he was receiving. Four of those trustees were on the board in 2016.

“I’m shocked,” said Marcie Mulligan, who served on the board for over a decade, including in 2016. “I had no idea he was on the board at all,” let alone that he was receiving compensation.

Flurie thinks those board members forgot about it. “They might not have remembered that conversation,” Flurie said. “I know it was directly shared.”

Mulligan said she is confident that she would have remembered if she had been told about it because she would have raised questions about the school’s financial relationship with Orrstown. “That’s such a huge conflict of interest,” she said.

The current chairman of the board at CCA, Jeffrey Piccola, started serving on the board less than a year before Longenecker started working for Orrstown, said he was aware of Longenecker’s position with Orrstown. He couldn’t remember how he learned of it, and didn’t realize Longenecker’s total compensation over the years was approaching $1 million.

“$1 million dollars?!” Piccola said. “Where did you get that information? Before I would believe that I would have to take a look at that.”

Longenecker was compensated each year with a combination of cash and shares and, in some years, deferred retirement savings. His compensation over eight years, based on its value at the time he was paid, was just over $700,000. But the 15,330 shares of the company he received as part of that compensation have increased in value, bringing his total compensation to around $900,000 as of the end of June.

Still, Piccola said he didn’t think that presented a conflict of interest. “I don’t see the conflict,” he said. “We already were working with Orrstown.”

Switching banks

A little more than a year before Piccola joined the board in 2015, CCA kept most of its deposits at PNC Bank.

In 2014, CCA’s board voted to approve adding Orrstown as an approved bank and quickly started moving deposits into Orrstown accounts.

At the time, Longenecker was serving as the school’s second-in-command, responsible for the school’s finances. Later in 2014 Longenecker received a promotion to chief operating officer, where he continued to oversee the school’s finances.

By June of 2015 Orrstown had become the school’s main bank and no PNC accounts were listed in the financial forms it shared with the Department of Education.

In January of 2016, Longenecker accepted a position as a director at Orrstown. Longenecker’s level of compensation was typical for a bank director in Pennsylvania, according to experts. In 2024, his final year as an Orrstown director, Longenecker earned more than $400,000 in total compensation from CCA, and more than $87,000 in cash, shares and deferred retirement income from Orrstown.

Eller said Longenecker was selected by the bank because of his expertise, including “in economics, finance, and cybersecurity — areas central to both the banking industry and public cyber charter schools like CCA.”

Piccola said he believes CCA is one of Orrstown’s biggest depositors. “Banks always appreciate depositors worth [around] $250 million,” he said. “That’s a no brainer.”

CCA’s deposits at Orrstown represent about 4% to 5% of the bank’s total deposits, according to a recent bank filing. A spokesperson for Orrstown confirmed that Longenecker was a director at the bank but declined to answer specific questions for this story, including why Longenecker was appointed or what value he brought to the bank as a director.

“We do not comment on specifics concerning our clients, employees, or directors,” said John Moss, the senior vice president and director of marketing and client experience at Orrstown.

Orrstown’s financial filings did list a reason for Longnecker’s reappointments to the board: “The Board values Mr Longenecker’s experience in technology and operations and knowledge of the market area.”

Why did CCA switch banks?

Flurie, the CEO of CCA in 2014, said one of the reasons CCA decided to switch banks is that the school was separating itself from the management organization, Connections Academy, that had been primarily responsible for running the school during its first decade. Connections was based out of Baltimore.

“We wanted to use a bank that was Pennsylvania based and served us, not one that was previously managed by [Connections],” he said. “So we just decided to go with our own bank that was familiar with us and had reached out to us, would like to handle our account, more local to us.”

PNC also was a Pennsylvania bank, Flurie said, but its headquarters was in Pittsburgh. Orrstown was headquartered in Shippensburg, about an hour from Harrisburg.

“[Orrstown] was a little bit smaller. We thought it was a little more customer service based. It was a smaller bank that was going to grow,” Flurie said. “That’s why we made that jump.”

CCA didn’t respond directly to a question about whether or how Longenecker was involved in recommending Orrstown for the school. But Flurie said the process was straightforward.

“We were looking and we said, ‘Would you be interested in handling our accounts?’” he said. “What do you feel you could do for us if you take on our accounts?”

The answer, Flurie said, is that Orrstown promised to provide more customer service. “You have people directly assigned to us giving us more flexibility,” he said.

Is it allowed?

According to CCA’s employee handbooks in 2023 and 2024, any activities or conduct that even “have the appearance” of conflicting with the school’s interests are prohibited.

“A conflict of interest, or the appearance thereof, may occur when your interest in, association with, and/or employment by one of our competitors, or suppliers of goods or services,” the handbooks reads. “is such that your ability to act in the best interests of the School may be called into question.”

Longenecker’s contract as CEO allows him to “undertake consultative work, speaking engagements, writing, lecturing or other professional duties (including but not limited to teaching of graduate courses).”

The contract sets only two limits to his outside activities. It says his outside work cannot “materially interfere with his duties as president and CEO.”

Eller, CCA’s spokesperson, said that Longenecker’s work with the bank did “not interfere with or conflict with his responsibilities at CCA.”

In fact, Eller said, Longenecker’s role at the bank “gave him valuable, transferable insight into protecting data, preventing cyberattacks, and ensuring operational continuity – all directly relevant to enhancing CCA’s mission of safeguarding student and family information in an online learning environment.”

Longenecker’s contract also states that his outside work “must be disclosed to the Board Chairman or other designated Board member.”

The contract’s requirement that only one board member be notified about Longenecker’s outside work, isn’t a best practice, according to Anne Gingerich, the executive director of the Pennsylvania Association of Nonprofits.

“When the organization gets into trouble…then the full board, every board member, is both legally liable for that as a board member, but they also can be held legally liable for that as an individual.” she said. “So they don’t actually want to operate separately because it puts them both individually and as a group in legal jeopardy.”

Although she is not a lawyer, Gingerich said, she would advise nonprofit board members that CEOs serving as directors for the same bank that the nonprofit uses for its finances “presents a clear conflict of interest” because it requires the CEO to both work toward the bank’s interest and the school’s interest.

And those interests may not always be aligned, according to Chalong Young Pfeifer, a professor of law and ethics expert at the University of Pittsburgh.

“As a board of director at the bank, he’s making those decisions in the best interest of the bank,” she said. “So how can he be making decisions in the best interest of the bank at the same time, financial decisions in the best interest of the charter school?”

Several ethics experts said that it is critical for people in Longenecker’s situation to recuse themselves from any decisions involving Orrstown. CCA didn’t respond to a question about whether or how Longenecker recused himself from decisions about Orrstown, and several board members said they had no memory of Longenecker ever making an effort to recuse himself.

The school did say in a statement that it has in the last “several years” taken additional steps to “prevent any appearance of impropriety” with its banking vendor selection process. The school said that two financial administrators at the school now evaluate CCA’s banks independently and make recommendations to the board members, who have the final say.

In February, Pennsylvania Auditor General Timothy DeFoor audited CCA and four other cyber charter schools, and criticized the size of the reserves being accumulated. CCA, however, differed from the other schools in that it was transferring hundreds of millions of dollars to its capital accounts to buy land and pay for construction of new buildings.

DeFoor said it was unusual for a cyber school to invest in buildings, rather than more immediate costs, such as more teachers or curriculum. CCA’s leaders say the money being spent on its buildings are essential for their students’ educational program.

Whether DeFoor’s criticisms are justified, they underline the complexity of the ethical challenge raised by Longenecker’s work for Orrstown, according to two ethics experts who spoke to PennLive. The school’s contract with Orrstown isn’t like contracts with individual curriculum providers or staffing agencies, for example, where Longenecker could delegate decision-making and supervision in a straightforward day.

Instead, CCA has pursued a spending strategy of buying land and buildings across the commonwealth that the auditor general has described as being unique even among other cyber charter schools. And that strategic choice has had significant implications for how much money the school is saving and for how long, what kinds of accounts the money sits in and at what interest rates. CCA didn’t explain how the CEO could recuse himself from the school’s biggest strategic choices.

And according to Pennsylvania’s Ethics Law, public officials are not supposed to be involved in the “supervision” or “administration” of any contracts where they have a financial interest.

Ethics law

Mary Fox, the executive director of the Pennsylvania Ethics Commission, said Pennsylvania’s charter school law, which went into effect in 1997, specifies that CEOs and other high level charter school administrators are to be treated like public officials who are subject to the commonwealth’s ethics law.

There is a requirement in the law that would allow for a public official in Longenecker’s position to do business with an entity their school also does business with, according to the language of the commonwealth’s ethics law, if “the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.”

In this case, CCA said in its statement that it did follow the law, although the school didn’t lay out the specific steps it took when it chose Orrstown. “At every step, CCA has acted transparently and in full compliance with the law,” Eller said.

CCA only publishes three year’s worth of its board meeting minutes on its website. So the meeting minutes when decisions were made about Orrstown Bank are not immediately available.

Fox, the director of the Ethics Commission, said to make a judgement about a specific ethical question requires her investigators to look at the very specific circumstances of each situation. Typically, Fox said, investigations are initiated when a specific complaint has been made to the Ethics Commission.

CCA’s leaders believe even raising the specter of potential wrongdoing is itself wrong.

“Any suggestion of wrongdoing or conflict is simply inaccurate,” said Eller, CCA’s spokesperson.

Susan Spicka, the executive director of Education Voters PA, believes that Longenecker’s work with Orrstown Bank is an additional reason for professional investigators to look into the school’s finances. Education Voters has used records requests at CCA to raise questions about the educational value of some of its spending, such as field trips to professional baseball games, even as the school’s budget has increased to more than $650 million this year.

“Pennsylvania’s Inspector General needs to immediately open an investigation into CCA,” she said.