Utah gets temporary order halting divestiture of closed charter school's assets

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SALT LAKE CITY — A state court judge has issued a temporary restraining order to halt the divestiture of American International School of Utah's assets.

Third District Court Judge Royal Hansen ordered the public charter school and its operator, American International Schools, LLC, not to divest the school’s assets unless the transfer is approved by the Utah State Charter School Board.

Hansen wrote, in part, that the "defendants acting to divest the school of its assets without the approval of the Utah State Charter School Board deprives the state of its authority, tantamount to irreparable injury to the public."

The order will remain in place until Aug. 7, when a hearing is scheduled before 3rd District Court Judge Richard Mrazik.

The Utah Attorney General’s Office sought the temporary restraining order and preliminary injunction as part of a larger complaint related to the closure of American International School.

The school’s board of directors voted to close the school in May amid growing concerns about its financial liability. The school’s last day of operation was June 30.

Following the school’s closure, AISU entered into a termination agreement with its operator American International Schools, LLC, to release one another from claims and to transfer the school’s furniture, fixtures and equipment to the limited liability corporation.

According to court documents, the termination agreement “also recites private investors allegedly made investments and loans of $5 million, presumably to the limited liability corporation. On information and belief, these investors represent the other members of the LLC, and are Chinese individuals who are not present in Utah."

The state asserts in the complaint filed in 3rd District Court on Friday that the public charter school has no authority under Utah Code to liquidate its assets and to divest itself of any claim.

The state has asked the court to declare the termination agreement “null and void, and of no legal effect.”

The complaint also asks the court to declare "that only the State Charter School Board has authority to oversee closure of AISU and liquidate its assets and divest or enforce any claim held by AISU.”

According to the Utah State Board of Education, AISU owes the state more than $415,000 in state and federal education funds for the fiscal years 2016, 2017 and 2018. State education officials allege the funds were improperly spent or there is no or insufficient documentation to support the expenditures. The funds have not been repaid, and the federal government insists on repayment of federal education funds.

According to one court decision, closure does not absolve a school from repayment.

Assistant Attorney General Alain C. Balmanno said the state’s primary interests are “to protect the authority of the State Charter School Board and to make sure the debt was being taken into account as this charter school was closing.”

The complaint also asks the court to order "that any property so transferred shall be returned to the possession of AISU for proper liquidation and disposal by the Utah State Charter School Board.

Royce Van Tassell, who was appointed to AISU’s board of directors after the school’s previous directors stepped down earlier this month, said the school intends to comply with the court’s ruling.

“Our goal is to be Switzerland,” Van Tassell said. “We will do what the courts direct.”

The disposition of the property remains the main outstanding issue, he said.

“Obviously a court filing changes who is going to make that decision. I think it is out of our hands,” he said.