The Chicago Teachers’ Pension Fund (CTPF) today filed
a , the operator of the now-closed Joshua Johnston
Charter School for Fine Art and Design (Johnston). The suit
alleges that between at least January 2013 and June 2016,
Prologue failed to report the employment of licensed teachers and
to pay pension contributions to CTPF as required by the Illinois
Pension Code on behalf of those teachers. As shown in the
audit, Prologue reported only 6 out of 16 Johnston licensees in
Fiscal Year 2014 and, despite Johnston having 17 licensees in
Fiscal Year 2015 and 14 licensees in Fiscal Year 2016, Prologue
reported no teachers or other licensed employees to CTPF for
either of those fiscal years. The suit also names the
organization’s Chief Executive Officer Nancy E. Jackson and Chief
Financial Officer and Pension Officer Jack Robertson, asking the
court to hold them personally accountable for their actions.

“This is an egregious example of an employer taking advantage of
its employees,” said Jay C. Rehak, President of the CTPF Board of
Trustees. “This wasn’t just sloppy bookkeeping. This was fraud.
The employer collected contributions from teachers, but did not
turn over all of those contributions to the Fund. They also
concealed teachers who were entitled to pension benefits. These
unconscionable actions allowed Prologue’s leaders to take
advantage of our members. Our Trustees put our members first and
will do everything we can to protect them.”

The action seeks to compel an accounting of Prologue’s earlier
pension reporting on behalf of Johnston to determine if there was
additional non-reporting of licensed teachers and non-payment of
pension contributions on their behalf. In addition to seeking an
accounting and delinquent contributions, the accompanying
statutory late fees, interest and attorneys’ fees and costs, the
lawsuit also alleges breach of fiduciary duty, fraud, unjust
enrichment, trover and conversion, and violation of the Illinois
Wage Payment and Collection Act in connection with the
defendants’ failure to accurately report and pay contributions on
behalf of teachers.

CTPF filed the suit after an audit of Prologue’s finances by a
CTPF-engaged outside accounting firm, for the period January 1,
2013, through June 30, 2016, revealed widespread underreporting
of pensionable wages and a failure to pay required contributions
on behalf of licensed personnel at Johnston. The school received
more than $9.3 million in public funds from the Board of
Education between 2013 and 2016. The audit found more than $1.4
million in underreported wages and more than $130,000 in unpaid
pension contributions during the audited period.

Chicago’s licensed teachers do not participate in Social
Security. Instead, the Illinois Pension Code requires a payment
of 9% of salary to fund pensions. Prologue agreed to pay 6.2% of
the required employee contribution (the same as the required
contribution for employees participating in Social Security), and
the employees were to pay the remaining 2.8% of the contribution.
Prologue violated the Illinois Pension Code by failing to report
the employment of licensed teachers, and failing to report and
remit employee contributions deducted from salaries of teachers
or to pay its 6.2% employer share.

The Board of Education rescinded its charter agreement with
Prologue to operate Johnston in August 2016. The Chicago Board of
Education filed a separate lawsuit against Prologue on March 3,
2017, () alleging breach of contract and demanding
financial accountability after Prologue refused to provide
adequate financial records and information following the
termination of its contracts with CPS.