CPS' Great Interest Rate Swap. Running schools "like a business".

"I have 30 years in the business," said Vitale, a former bank executive and former president and CEO of the Chicago Board of Trade. "I'm not a neophyte." -- David Vitale

Today's Trib blows the lid off of the Great CPS Interest-Rate-Swap in which the mayor and his hand-picked school board traded the future of the public school system for cash. If this sounds a lot like former Mayor Daley's parking meter deal -- it should.

It was Daley's $1/yr. man David Vitale, who engineered the dirty deals which also had support from a bill run through the state legislature by Sen. Pres. John Cullerton. Cullerton defended the bill, calling it part of "an effort to run government [schools-m.k.] more like a business."

The CEO at the time was none other than Arne Duncan (although for some reason, the Trib report spares him any mention). From 2003 through 2007, the district issued $1 billion worth of high-risk auction-rate securities, nearly all of it paired with complex derivative contracts called interest-rate swaps, in a bid to lower borrowing costs. But lower costs they didn't. Over the life of the deals, the district stands to pay an estimated $100 million more in today's dollars than it would have on traditional fixed-rate bonds.

The banks benefited, of course. Derivative contracts created new profit opportunities, and fees on auction-rate securities were higher than for other types of bonds.

The Tribune reports:

No other school district in the country came close to CPS in relying so heavily on this exotic financial product. In fact, market data show the district issued more auction-rate bonds than most cities, more than the state of California.

Even though this latest scandal preceded Rahm Emanuel, the current mayor is still tied to it. It was Rahm who brought Vitale over from turn-around company, AUSL and made him Board President. Vitale is still Rahm's go-to financial guy and the district continues to pay through the nose for his dealings.

 Vitale is now president of the Chicago school board. Since Mayor Rahm Emanuel named him to the post in May 2011, he has presided over slashed budgets, teacher layoffs and the closing of more than 40 schools. As the Tribune reported last year in its "Broken Bonds" series, tens of millions of dollars in borrowed money went into schools that are now closed.

AUSL's clout-heavy "turnaround" schools among city's worst

Clout-heavy banker David Vitale,  former AUSL board chairman, now runs the Board of Education

Founded and run by Chicago venture capitalist, Martin Koldyke, the Academy for Urban School Leadership (AUS) has used its connections and political clout to become a powerhouse in the school turnaround business. Despite its schools ranking at or near the bottom of the system, AUSL has benefited from backing from former mayor Daley, current mayor Rahm Emanuel and Sec. of Ed Arne Duncan. Emanuel even selected a former AUSL top executive to oversee CPS' finances and named AUSL's previous board chairman, David Vitale, as president of CPS' Board of Education.

Koldyke, has donated heavily to political candidates, including $25,000 to Daley's re-election campaign in 2006 and $25,000 to Emanuel's mayoral fund in 2010. In total, Koldyke and AUSL board members have contributed more than $100,000 to various political campaigns since 2003, according to state election records.

Now running 19 schools, six of which are now designated "among the worst in the city", AUSL is now locked in a public battle to add six more. The group has become a force inside CPS, a virtually autonomous "district within the district" supported by millions in public and private funding, diverted away from cash-strapped neighborhood schools, according to a report today in the Chicago Tribune. 

"Yet for all the public attention, AUSL's results have been mixed; many students have made considerable progress, but as a group they still lag well behind district averages ... with many ending up on par or even below comparable neighborhood schools."

According to the Tribune report, all of AUSL's turnarounds remain on academic probation and few if any of AUSL strategies have found their way into other CPS schools.

Marie Antoinette, Meet David Vitale

As soon as one speaker was removed by security guards, another stood up to take their place.

"Moral courage comes in many forms, but sometimes not at all. Faced with adversity last week, David Vitale retreated into executive session. Mr. Vitale is a banker who was picked by Rahm Emanuel to be president of the Chicago Board of Education. And as the Missile confidently presided over a cowed City Council on Wednesday, his schools emissary co-starred in melancholy political theater that gave insight into the mayor’s ultimate challenges."  -- "Marie Antoinette, I'd like you to meet David Vitale" by James Warren, CNC

CPS board chair Vitale out as head of AUSL

Vitale

Banker, real-estate mogul and former Board of Trade president, David Vitale chairs Rahm Emanuel's hand-picked Chicago school board. At the same time, he chairs the board of the Academy for Urban School Leadership (AUSL), the "turnaround" company that contracts with the board to operate 19 schools around the city. Emanuel recently announced plans to double the number of teacher residency training academies run by AUSL.

This obvious conflict of interest (or is it?) has forced Vitale to leave AUSL. It's a pain in the ass for AUSL patron, venture capitalist Mike Koldyke, but that's life in the big city.

So he's appointed John Cook to take Vitale's place. Cook is a board member of AUSL and director emeritus of McKinsey & Co. Cook also serves on the boards of Brown-Forman, Winona Capital Management and the dean's advisory board of the Ross School of Business at the University of Michigan. Perfect!

Koldyke's Chicago 'turnaround' investment

Koldyke

It all began when venture capitalist and Mayor Daley golf buddy, Mike Koldyke (Frontenac Capital) decided he could save the public school system by running it like a business. Frontenac had been a big investor in for-profit colleges like DeVry and Rasmussen College, which trained technically skilled workers for local businesses. Scrutiny of for-profit colleges by the feds has them, and everybody across the for-profit sector, examining how they measure student success and relying more and more on standardized testing.

In 2001, with lots of political clout and years of good will built up from his days sponsoring the Golden Apple Foundation, and as a trustee of  the Chicago Public Education Fund, Koldyke decided to get into the heavily D.O.E.-funded school-turnaround business by establishing his own non-profit venture, the Academy for Urban School Leadership (AUSL).

Koldyke brought in Chicago banker and corporate power broker, David Vitale to run his operation. Vitale was then tapped by Mayor Emanuel to become Chicago school board president along with another AUSL exec, Tim Cawley, coming over  to serve as CPS Chief Administrative Officer. With virtual control of the board and the central office, Koldyke can now assure a stable funding pipeline to his 19 turnaround schools, even in the midst of the current budget crisis when neighborhood schools are being starved of operating cash.

"Clearly they're very tied in to the political establishment in Chicago and they're getting opportunities in funding not available to anybody else," said Julie Woestehoff, executive director of Parents United for Responsible Education. -- Chicago Tribune

The Trib goes on to report:

The new CPS administration backs the organization but critics are concerned that turnaround schools, which are championed by President Barack Obama and Education Secretary Arne Duncan, get resources at the expense of neighborhood schools.

...the 19 turnaround schools — failing schools targeted for overhaul by CPS — are run by the nonprofit Academy for Urban School Leadership, which will train 90 teachers in its academies this year. The number of AUSL training academies will double to 14 within the next two years. The program partners with National-Louis University, placing graduate students in AUSL-run turnaround schools.

With those extra millions in CPS funding at its disposal, AUSL claims to have produced an 8-point rise in elementary school test scores but little or no gain in high school scores. But with the modest bump in test scores has come lots of chaos and disruption in the lives of thousands of the neediest of Chicago's school kids. Koldyke's prescription for the city's so-called "failing schools" is the mass firing of teachers and their replacement with AUSL teachers along with an accompanying movement of kids from one school to another. This disruption and break in relationship between students, teachers and their former schools, was one of the factors in the 2009 melee at Fenger High School which led to the death of Derion Albert. In a column on the Fenger tragedy published in the Chicago Sun-Times (October 2, 2009) former CTU president Deborah Lynch wrote,

“School turnarounds have turned out to be the deadliest reform of all. How could anyone expect that completely eliminating all the professionals and staff of a tough high-poverty high school could be a good thing?”

Rahm Emanuel's School Team

The lead into the Chicago Sun-Times story says it all: "Charter schools. Turnaround schools. And knowing where the money is." Among those guiding Rahm's hand-picked CEO Jean-Claude Brizard will be:

David Vitale

Vitale gives new meaning to the words top-down. The former bank president was even booted from his position as head of the Chicago Board of Trade for not being able to play well with others.  I wrote about him back in '05 (""Do we need a lot of public decision-making about replacing lug nuts? I don’t think so."--David Vitale") and here last October, remembering the Little Village High School hunger strike. Vitale once told me he thought  the hunger strikers' victory was "one of the greatest disasters in CPS history." Vitale saw the hunger strike tactic as "blackmail" rather than community and parent engagement. 

I'm pretty sure that Vitale is there to ride herd on Brizard. He and the corporate reformers will have the real power, not the new CEO.

Penny Pritzker

A member of the billionaire Pritzker family, Penny Pritzker is a huge charter supporter and a long-time education advocate. She was a contributor to Stand for Children, which led the writing of an Emanuel-backed school reform bill that trims teacher union power while giving CPS enhanced muscle to extend the school day and year. Her Pritzker Traubert Family Foundation contributes to the Academy for Urban School Leadership, the Young Wopmen’s Leadership Charter School and the Nobel Street Charter School network — all of which Emanuel wants to expand. Noble Street’s Pritzker College Prep is named after the Pritzker family. She also is chair of the Chicago Public Education Fund and led President Obama’s 2008 funding drive.