Charleston Day School is accused of misusing COVID relief funds and retaliating against a board member who raised concerns about financial misuse, according to a lawsuit filed in federal court in Charleston.
Attorney Matt Austin, a partner at Nelson Mullins and former member of the school’s board of trustees, filed the 26-page civil suit June 21. He alleges that fellow board members voted to remove him as a trustee after he questioned the school’s handling of money awarded through federal COVID-19 relief programs.
Austin’s attorney, Bill Nettles, declined to comment on the lawsuit.
When asked for a comment on the lawsuit, officials with Charleston Day provided a letter to The Post and Courier they sent to parents on June 23.
The private school with grades K-8 in downtown Charleston was awarded a $570,200 Payment Protection Program, or PPP, loan in April 2020. Administrators said the money would help cover the payroll for 43 employees, according to the complaint.
The school was also awarded nearly $80,000 through the Emergency Assistance to Non-Public Schools program, a pandemic program that provided financial assistance to non-public schools that enrolled low-income students, the suit contends.
According to the suit, the school wasn’t struggling to make payroll when administrators applied for a PPP loan. Charleston Day reported an operating surplus of $727,797, the suit lists, and in October 2021 the board of trustees voted to transfer the surplus — which included the federal pandemic relief funds — to the school’s endowment.
“CDS’s representations in its applications for PPP funding and forgiveness were not true,” the lawsuit reads.
In a letter sent to the school community on June 23, Charleston Day officials said they “followed the spirit and letter of the law” in applying for the relief funds. An independent review of the applications “raised no concerns,” according to the letter, which was signed by board of trustees chair Ross Hostetter and head of school Judith Arnstein.
“Mr. Austin’s removal was for his own conduct, not for voicing concerns about the propriety of the Board’s financial stewardship,” the letter reads.
In their application for assistance for low-income students, Charleston Day administrators said the school enrolled 131 students from low-income families during the 2019-2020 school year, according to the lawsuit. The “vast majority” of families at the school are “upper middle class” and annual tuition runs up to $25,000, the suit states.
In the suit, Austin additionally accuses school administrators of using a method of assessing economic demographics that inflated the number of low-income students at Charleston Day.
Austin, who is married to the city of North Charleston deputy attorney Francie Austin, was elected to the board of trustees in June 2021. He began voicing his concerns about what he perceived as the misuse of money to board of trustees’ chairperson Emmie Hershey in December 2021, according to the suit. Five days later, the board removed his access to prior meeting minutes.
In a Feb. 5 text message to Hershey, Austin called the treatment “retaliation for my asking about the PPP loans and for the meeting minutes going back to the beginning of the pandemic,” according to the lawsuit.
Austin continued to approach board members with his concerns after learning of “potential misrepresentations” on the school’s application for assistance for low-income students and its “misuse of PPP funds” and offered to oversee an audit several times in early 2022, the lawsuit states. On Feb. 5, Austin brought his concerns to the U.S. Attorney’s Office, the suit reports.
First Assistant U.S. Attorney Brook Andrews declined to comment June 23 on the lawsuit.
On Feb. 11, the board of trustees held a special meeting and removed Austin from his position. He was later informed that his three children would not be allowed to enroll for the 2022-23 school year.
Austin claims school officials punished him for trying to stop a perceived violation of the federal False Claims Act, which protects against “false or fraudulent claims for payment to the United States government,” according to the lawsuit.
Named defendants in the case are Charleston Day School, Hershey and Arnstein, the head of school.
Austin seeks unspecified monetary damages along with legal fees. He has requested a jury trial.
