Sweetheart deals with charter insiders


by David Safier

Anne Ryman of the Republic continues her excellent investigative reporting on charter schools with a long piece in today's paper, Insiders benefiting in charter deals. The gist of the article is, people directly or indirectly connected with charters — board members and family members — are making money through no-bid contracts to supply goods and services to the schools. Interestingly, the two charters the article focuses on, Great Hearts and BASIS, were both subjects of a post I wrote yesterday dealing with the charters' focus on providing education to children of white families living in affluent areas. Though these are entirely different subjects, they both indicate the need for greater public and government scrutiny of the charter school movement.

Ryman did her research on the possible sweetheart deals.

The Republic's analysis found at least 17 contracts or arrangements, totaling more than $70 million over five years and involving about 40 school sites, in which money from the non-profit charter school went to for-profit or non-profit companies run by board members, executives or their relatives.

Note the numbers only deal with non-profit charters, since for-profits don't have to reveal their finances.

While other publicly funded schools have strict rules about getting competitive bids, charters can get exemptions from the requirements. According to Ryman, "Nearly 90 percent of the state's charter holders have gotten permanent exemptions from the state Board for Charter Schools."

The Arizona Board of Charter Schools is an underfunded, understaffed state agency whose main purpose is to do as little as possible, and it performs that function well. Think of the Board as a Wild West sheriff with his feet on his desk and his cowboy hat pulled down over his eyes. The Board's Executive Director, DeAnna Rowe, says the charter school procurement rules may be tightened some time in the future. If it ever happens, expect it to be minor tweaks.

Great Hearts charters have a very sweet deal with Educational Sales Co. (ESCO), whose president sits on the board of the charters.

[Great Hearts] schools have been making regular purchases for at least the last three years from a Tempe-based textbook company called Educational Sales Co. Daniel Sauer, the company's president and CEO and a shareholder, is also an unpaid officer of the Great Hearts Academies non-profit.

Since July 2009, the schools have made $987,995 in purchases from the company.

Great Hearts also gives parents the option of buying books directly from the company. Six of the Great Hearts school websites feature links only to Educational Sales' website for parents who want to buy a second set of books for use at home.

I covered this in a September post about ways Great Hearts charters charge parents to attend this free, publicly funded school. One way, which Ryman alludes to, is requiring students to buy most of their books. In Grade 9, for instance, Great Hearts supplies only 4 to 5 books and requires parents to purchase 25 or more books. As Ryman states, the schools make it easy to buy through ESCO. The schools link to the ESCO site and parents know ESCO carries all the books, so that's the easiest way for them to make the purchases. Ryman doesn't mention that the schools get a 10% kickback on all book sales from ESCO, and then if students sell books back to the company at the end of the year, the schools get an 8% kickback on that transaction as well.

Ryman also writes about one of those secrets about BASIS charters that's hiding in plain sight. The charters began as a nonprofit, but Michael and Olga Block, who founded the schools, also created a for-profit company. Starting in 2009, about 70% of the taxpayer funds received by the nonprofit schools is funneled up to the for-profit Charter Management Organization (CMO) where the dollars disappear from public scrutiny. How much are the Michael and Olga Block paid? We don't know, since their salaries are no longer public record. Are they still outsourcing their accounting to a relative living in the Czech Republic like they used to? We have no way of finding out those details or anything else about the financial transactions of the for-profit CMO.

It's important to remember, the goverment privatization movement is also a profitization movement. The profiteering going on in charter schools is only one example.