Sajid Husain Raza, 43, the former headteacher of Kings Science Academy, was joined in the dock by his sister Shabana Hussain, 40, also a teacher at the school, and the former financial director of the establishment, Daud Khan, 44.
The three face a total of ten charges, including fraud, false accounting and acquiring criminal property.
Seven of these counts relate to the school, while the other three, two of theft and one of fraud relate to mortgage applications made by Raza, prior to setting up the academy.
Leeds Crown Court heard today that Kings Science Academy was a free school set up in 2010 by Raza and primarily run by him. The other defendants were employees.
Simon Kealey, prosecuting, told the jury that in a period of just over three years the defendants committed fraud by “dishonestly obtaining public money intended for the school”.
This money came from grants given to them by the Department of Education to set up the school and run it.
Mr Kealey said: “In summary, the prosecution allege these defendants treated public money as their own, paying themselves what they wanted whether they were entitled to it or not.
“And when challenged to provide proof of expenditure created or fabricated documents in order to cover their tracks.”
He told the court the total amount of public money involved was around £150,000.
The court heard Raza, of Bradford, had been working as a qualified teacher prior to setting up the Kings Science Academy.
He also owned several properties, the jury were told, but by 2008 he was making mortgage repayments irregularly or via credit card.
“This continued for several years, including the time he was employed as principal for Kings Science Academy, “ Mr Kealey told the court.
During this period, Raza also faced a series of county court judgments, Leeds Crown Court heard.
In June 2010 Raza applied to set up a 500-place academy, to open up in September 2011 - and the proposal was approved.
The court heard that money, in the form of a Business Case Grant, was then paid to KIFSA Ltd to set up the project.
This money came with strict guidelines to how it should be spent, including admin costs, room rental and travel expenses, but no provision for salary, the prosecutor said.
The jury heard that withdrawals were made by Raza on three occasions, and that money is “simply unaccounted for”.
There were also payments going into Hussain’s account and no records as to what it was for.
Despite several senior civil servant expressing their concerns about Raza - he had allegedly been dismissive in meetings with the Department of Education, “plucking financial figures form the air” and threatened to phone the then Secretary for State of Education, Michael Gove when challenged - he was approved as principal for Kings Science Academy on early 2011, the prosecutor said.
An application for a Lead In grant of over £196,000 was made by Khan and approved - this was to provide salaries for the teaching staff, the jury heard.
It is alleged that Raza overpaid himself from this. The court heard it was agreed he would be paid £75,000 a year, but he had agreed to take half that for the first year.
The court heard that in another count of false accounting, invoices had been falsely created and submitted for several teachers’ salaries.
The teacher would submit their valid invoices but then allegedly Khan would write a false invoice, over-inflating the money and submit that instead.
Mr Kealey also told the court that Raza had opened an account at the Co Op bank.
In July 2011 this account peaked with £28,000 “made up of three large credits from the Kings Science Academy and about half the balance was used in the same manner to make large mortgage re-payments”.
“This provided a direct link between the fraudulent activity at the Kings Science Academy and his own financial problems,” the prosecutor said.
“And the prosecution invites you to infer the other fraudulently acquired credits on his accounts were used in the same way, to alleviate his financial problems.”
Mr Kealey added: “In short, Sajid Raza, through Daud Khan a financial director, was paying himself what he wanted not what he was legally entitled to.”
After financial discrepancies came to all three were brought in a interview separately by police and later charged.
Explaining a free school, Mr Kealey said: “A free school is a type of academy, non profit making, independent, state funded school. Free to attend and not controlled by the local education authority.”
This meant the academy had control of the “significant Department of Education budget” rather than the local authority.
Mr Kealey said that while the term free school and academy are well known now, they were relatively unknown in 2010.
He added: “The Kings Science Academy was among the first wave of free schools, part of new flagship education policy initiated by the government.”
Both Raza and Khan are charged with false accounting - these charges relate to rent of a building they were using, invoicing for £1,100 a month more than they were actually paying.
Raza, of Bradford, is charged with four counts of fraud, two counts of false accounting and two counts of obtaining money transfer by deception.
Hussain, of Bradford, is charged with one count of fraud and one count of obtaining property by deception.
Khan, of Bradford, is charged with two counts of fraud and three counts of false accounting.
The trial continues.