Short-selling hedge-fund billionaire throws millions more at Moskowitz charters

Charter hustler Moskowitz & her billionaire hedge-funder Paulson

Clout-heavy Eva Moskowitz runs N.Y.'s Success Academy which is already one of the richest charter school networks in the city. Tax documents show the non-profit took in a whopping $34.6 million for the financial year ending June 2013.

Now John Paulson, the infamous scam-artist, hedge-fund billionaire from Queens, is throwing $8.5 million more her way. Moskowitz pays herself more than an half-million a year to run her network of charters.

Paulson's connection with privatization of public schools began with the notorious Boston Consulting Group in 1980. But he made his real fortune during the global financial collapse (which he helped cause, according to these economists), by betting against subprime mortgages using derivatives. His shady deals, including involvement in the Abacus scandal resulted in Goldman Sachs paying a $550 million penalty, the largest ever paid by a Wall Street firm.

This from Deep Capture:

It is not clear which banks ultimately participated in Paulson’s scam, but Fiderer quotes Bear Stearns trader Scott Eichel as saying that his bank refused. “It didn’t pass the ethics standards;” Eichel said, “it was a reputation issue and it didn’t pass our moral compass. We didn’t think we could sell deals that someone was shorting on the other side.” Bear Stearns’ moral compass was usually pointed towards the darker regions, but perhaps this is why Paulson subsequently became one of the more eager short sellers of Bear Stearns’ stock.

Paulson and Moskowitz make a great pair. Don't they?

Wall St. public school strategy: Loot, pillage, burn...

Sen. Mark Warner (D-Va). - Reuters

The Senate has passed an amendment to new proposed federal legislation, which would steer hundreds of millions of dollars intended for impoverished school districts and classrooms, into the pockets of Wall Street consultants. The legislation, authored by Sen. Mark Warner (D-VA) was tucked into the Senate version of a massive K-12 education funding bill currently up for congressional reauthorization.

Among the chief proponents of the congressional bill was the Center for American Progress (CAP), a Washington, D.C., think tank that is closely associated with Bill and Hillary Clinton.

Bank of America, which made fees off of school district swap deals made in Chicago and Denver, has donated at least $50,000 to the Center for American Progress. Other major donors to the Center for American Progress include the Bill and Melinda Gates Foundation, which has given at least $500,000, and the Walton Family Foundation (of the Walmart fortune), which has also given at least $500,000 to the think tank. Both the Walton and Gates foundations have partnered with the Boston Consulting Group.

David Sirota at IBT is hot on the trail. He writes;

As budget-strapped Chicago follows a mass school closure with a new plan to layoff more than 1,400 teachers, one set of transactions sticks out: the city’s moves to refinance $1 billion in debt through complex financial instruments called swaps. The deals were spearheaded over the last few years by financial advisory firms brought in by the city to help find money saving efficiencies. Instead of saving money, though, the Windy City took a big hit: The school system has lost more than $100 million on the transactions and has paid millions in fees to its financial consultants.

 Chicago is not alone. School districts across the country have been increasingly relying on high-priced consultants and Wall Street firms for financial and management advice. While proponents say many of the ensuing consultant-driven initiatives have resulted in cost savings, critics note that other initiatives have resulted in investment losses, layoffs and school closures. What is clear is that school districts’ reliance on outside advisers has created business opportunities for the financial industry. And now, thanks to an amendment to federal education legislation moving through Congress, that lucrative market for financial and consulting could become even more flush with cash -- specifically, with federal money meant for impoverished school districts.

The amounts that consulting firms can earn for work on public school policy can be eye-popping. In Philadelphia, the Boston Consulting Group was reportedly paid $230,000 per week for its work pushing for privatized education services and closures of up to 88 schools in the city. 

Nowak out as Penn Fund chief. 'Differences in approach..."

Nowak

I have posted here several times about the role of the Wm. Penn Foundation and the Boston Consulting Group, two of the main architects of Philly's school privatization plan. Today we learn that Penn Fund power broker Jeremy Nowak is out as the foundations' chief exec. The Penn Foundation has already given $1.45 million directly — and helped obtain at least $1.2 million more — to pay the Boston Consulting Group to develop a so-called “Blueprint” for restructuring the troubled district.

The Philadelphia Business Journal reports that critics are complaining that the foundation’s funding model favors charter schools  at the expense of the rest of the public school system, which may have been a factor in Nowak's departure.

According to The Notebook,

The William Penn Foundation, citing "differences in approach," has announced that it is searching for a new president, and that Jeremy Nowak has left. The foundation's press release says that its leadership and Nowak, who became president in June, 2011, "mutually decided that the time is right for Nowak to transition out of his current role." Nowak guided the foundation through a strategic planning process, but had also become a lightning rod for controversy - especially regarding William Penn's role in paying for the Boston Consulting Group to develop an austerity plan for the School District.

Philly schools have to go begging to Wall Street

Chief Recovery Officer Thomas Knudsen is resigning. He ran the show in Philly. Former head of former head of Philadelphia Gas Works, his loot-and-burn job was to cut $100 million or more from the school budget while protecting high-paid consultants and execs.

According to the Daily News, Philly's school district is "broke" and forced to go begging to Wall Street for a $300 million loan to pay its bills. But this hasn't stopped them from giving fat raises to non-union administrators and consultants while asking union teachers for give-backs. 

"Union leaders were surprised by the news."

 What?

"It seems immoral to me," said George Ricchezza, 1201 District Leader for 32BJ SEIU. The union agreed this summer to forgo raises for four years and contribute $100 million back to the district.

"If I would have known prior [about the raises], I would have had a more intense conversation about it so I could absorb the thinking of the district," Ricchezza said of a meeting he had with Hite last week. "It's going to be difficult for our members to understand this."

You bet it will. 

Also, check out Boston Consulting Group's role here.

Consulting companies the bane of public space, schools...

BSG

Daniel Denvir has a great post over at The Atlantic Cities blog, "As Local Governments Shrink, Private Consultants Reap Rewards."

Denvir describes the trend of supplanting public space and decision making with corporate consulting companies. One of the main proponents of this strategy is Mitt Romney, who started in business with the Boston Consulting Company. After leaving BCG, Mitt Romney went on to work at Bain and Company consultants, from where he launched the controversial private-equity firm Bain Capital. For decades, consulting has been a top choice for MBA graduates like Romney.

In 2010, the Gates Foundation gave 15 cash-desperate states $250,000 to hire consultants to write applications for Obama's Race to the Top competitive education grant. The grants, which encourage districts to tie teacher evaluations to standardized tests and loosen restrictions on charter schools, draws heavily from the corporate-education reform model funded by the big three foundations.

Denvir writes,

Consultants, like Romney, have the appeal of "real-world" experience which, in early 21st-century America, means experience in the hard-nosed competitive marketplace outside of the public sector's one-time easy comfort. Since August 2008, the number of public employees has already been cut by 662,000 nationwide. Consultants draw on experience from a private sector that has relentlessly slashed employment, broken unions and outsourced work for decades.

 Consultants often recommend privatizing services like education and slashing public employee workforces, though sometimes governments might just be looking for outside expertise to validate decisions that have already been made.

 In Philadelphia, the $2 billion William Penn Foundation paid the bill for a Boston Consulting Group plan to restructure the city's fiscally-distraught (and state-government run) public schools in the wake of massive state budget cuts. The resulting "Blueprint" proposed a radical overhaul that would dismantle the central office and potentially transfer school-level management to private charter school organizations. 

Daniel Denvir is a staff reporter at Philadelphia City Paper and a frequent contributor to Salon and The Atlantic Cities.

Philly plan to "reform" collective bargaining

The Boston Consulting Group is pushing Philadelphia's school district to "undertake comprehensive collective bargaining reform” with the Philadelphia Federation of Teachers and, simultaneously, “pursue legislative changes” in the school code.

According to The Notebook writer Ron Whitehorne, the “reforms” advocated in this document would roll back important protections that are afforded teachers under the school code and union contract.

Writes Whitehorne:

The attack on tenure and the call for laying off teachers based on performance rather than seniority is another familiar theme that has profound implications. “Performance” is mainly about standardized test scores, always a dubious metric, but even more so after the revelations about pervasive tampering and cheating. But putting this aside, in the context of budget austerity, administrators would be looking for way to get rid of costly senior teachers, as well as those pesky activists who might challenge their authority.

Best yet on Boston Consulting Group

I hadn't seen this amazing post by B-Town Errant, from May 18th, until Diane Ravitch passed it around today. It's an solid piece of power-structure research on the favorite consulting group of the Ownership Society, BCG. I have written about them at length and so has Diane, Daniel Denvir, Philly Notebook and others. But if you take a deep breath and work your way through this one, you can put it all together.

By it, I mean the grand conspiracy against public schools. No, I'm not a conspiracy theorist. But you don't have to be one to see one.

Boston Consulting Group -- Engineers of school privatization

CEO Hans-Paul Buerkner of BCG.

Where Romney got his start

They're the Bain Capital of public education. Politically connected Boston Consulting Group consultants are paid million of dollars, much of it from public funds that might ordinarily be used to fund public education. Instead they are financing the dismantling of public education, mainly in urban school systems, responsible for the education of primarily poor kids and children of color. BCG can take credit for the ongoing replacement of these public institutions with networks of private education management companies operating charter schools, distance learning companies, and tutoring programs.

With 4,800 consultants in 74 offices in 42 countries, the firm ranks as one of America's Largest Private Companies, according to Forbes magazine. BCG's consultants include notables such as Mitt Romney, Indra Nooyi, CEO of Pepsi; Jeff Immelt, CEO of General Electric; Sally Blount, dean of the Kellogg School of Management; and Israeli Prime Minister Benjamin Netanyahu. Romney and Netanyahu became close associates while both were consulting for the group and Romney was recruited to Bain Capital directly out of BCG.

Romney & Netanyahu at BCG

Former Ed Secretary and architect of NCLB, Margaret Spellings who currently operates something called the Campaign for Free Enterprise, is a senior BCG advisor. Kermit King, who played a major role in bankrolling anti-gay legislation in California is one of BCG's leading consultants.

The group was also brought into Chicago by Arne Duncan and the Gates Foundation in 2008 to design the failed high school reform and school privatization component of Mayor Daley's Renaissance 2010. Duncan continues to involve BCG in his Race To The Top initiative.

In Philadelphia, BCG has been deeply involved in nearly every hot-button issue faced by the District, including continued expansion of charter schools. After decades of this corporate-style reform however, there is no evidence that BCG's work has produced any better outcomes for students or for the communities in which they live. 

According to a report in Huffington,

BCG has identified up to 60 Philadelphia school buildings as potential candidates for closure and helped line up private vendors willing to replace the School District's unionized blue-collar workforce at a $50 million discount. The broad scope of BCG's efforts this spring are detailed in previously unreleased "statements of work" obtained by the Notebook/NewsWorks under Pennsylvania's Right to Know law. 

But in Philly, where BCG is credited with identifying some $122 million in "achievable savings," the result has been an even larger and rapidly growing budget deficit, now estimated at around $282 million. 

Documents obtained Friday by the Notebook/NewsWorks outline the complex relationship connecting BCG with the William Penn Foundation and United Way of Southeastern Pennsylvania. William Penn has directly contributed $1.5 million and helped raise $1.2 million more to fund BCG's work, and United Way has served as a fiscal conduit for those funds.

In separate interviews Friday, top leaders from William Penn and United Way lauded BCG's work and dismissed as "conspiracy theory" the claims by some critics that the firm and the private philanthropists supporting its work are part of a coordinated effort to privatize the city's public education system.

I'm one of those critics who believes there really is such a conspiracy.