The former director of Capital City Charter School and her mother have agreed to pay $80,000 as part of a settlement agreement in a bankruptcy lawsuit accusing them of misusing funds for personal use.

Stephanie Alicea, founder and former director of Capital City Charter School and her mother Caroletta Alicea, a trustee of the school, reached a settlement with Michael Askenaizer, trustee of the school’s estate, in federal bankruptcy court on Sept. 28. In the settlement, the Aliceas agreed to pay two installments of $40,000, one within the next 60 days and one within the next six months. As the trustee of the estate, Askenaizer is responsible for distributing the money to the school’s creditors in order of priority.

“It was a settlement intended to bring the matter to a conclusion for a highly-respected, successful 77-year-old woman based on the anticipated cost of winning the case,” said defense attorney Bill Gannon, referring to Caroletta Alicea who is a New Hampshire state representative.

Askenaizer had filed a complaint against the Aliceas in January accusing them of misusing federal funds distributed to the charter school by the Department of Education to cover start-up costs. The school was given a $223,000 grant in 2018, but Askenaizer said that Stephanie Alicea spent almost $154,000 of that on personal expenses including transportation, restaurant meals and payments to Caroletta Alicea, according to court documents. Askenaizer had originally sued for $128,837.98.

Stephanie Alicea maintains that the business and financial problems the school experienced were beyond her control and that the school’s grant funding was delayed for months, forcing her and Caroletta Alicea to lend a significant amount of their own money to cover the school’s expenses. Alicea said the discrepancies in financial documentation can be attributed to data loss that occurred during a switch in accounting software programs, and that the school’s initial audit by accounting firm Plodzik & Sanderson “misinterpreted the compensation arrangement” between Alicea and the school.

The Capital City Charter School, which operated from 2018 to 2020 in the former Bon Ton space at the Steeplegate Mall, was based on the idea of service learning – an educational model that integrates community service with instruction. Its opening was greeted with enthusiasm as an example of how charter schools can take alternative approaches, like its decision to locate in the mostly-empty mall. The state Board of Education began to raise questions about its financial records soon after it opened, pointing to missing state and federal financial audits and “excess” grant reimbursements.

The school surrendered its charter in February 2021, and filed for bankruptcy in March 2021.

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