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Arizona Education: A Pocket-lining, “Conflict of Interest” Mecca

March 25, 2013

I am from Louisiana, and ethics in general in Louisiana has its tarnished reputation, for sure.  However, I have never witnessed anything quite like the Arizona legislature’s conflict of interest definition. The entire regulation hinges upon the distinction between a public officer’s having a “substantial interest” or a “remote interest” in some transaction that could benefit the public official.  Those with a “substantial interest” are to “refrain” from participating in transactions that benefit them.

“Substantial interest”: Refrain. Sounds good.

The Danger of “Remote Control”

The definition of “remote interest” is what makes Arizona’s conflict of interest guidelines virtually useless.  In short, if nine others stand to benefit in equal measure to the potential benefit gained by the public official, then the transaction is not restricted.

Go ahead and take a moment to read that last sentence one more time.

It gets better: There is no established agency to oversee, monitor, investigate, or otherwise determine whether a situation even meets the incredibly loose definition of “remote interest.” Those with “substantial interests” are told to “make known” the interest “in the official records of such public agency.” That’s it. Just write it down for no one in particular to read.

What a corporate-reform-friendly statute this is!

Of course, the public officials assure their public that they aren’t engaging in practices that benefit them financially. No, no. There is a  nobler, higher good here:

For example, Sen. Rick Murphy, R-Peoria, is a foster parent who has proposed bills that would increase services for foster children and families.

“When you have a citizen Legislature, the whole point is for people to deal with the things they are familiar with,” Murphy said.

Hmmm.

In other cases, lawmakers’ involvement in areas their legislation would impact are more obvious, although none would violate the state’s rule of 10. Lawmakers say they proposed these bills not because they will benefit but because they understand the issues. [Emphasis and commentary added.]

How blurry can one make the line and still insist that there is a line?

Arizona: As Charter-friendly As It Gets

Ever notice of late how many corporate reformers, those who hold either public or so-called “nonprofit” positions and who are advancing the privatization agenda, also own or otherwise run education “ventures”?

Let us consider the conflicts of interest benefitting Arizona charter school board members and administrators. Those making money off of the taxpayers actually try to convince those same taxpayers that they, the reformers-gone-financial-beneficiaries, are really saving taxpayers money:

Board members and administrators from more than a dozen state-funded charter schools are profiting from their affiliations by doing business with schools they oversee.

The deals, worth more than $70 million over the last five years, are legal, but critics of the arrangements say they can lead to conflicts of interest. Charter executives, on the other hand, say they are able to help the schools get better deals on services and goods ranging from air-conditioners to textbooks and thus save taxpayers money. …  [Later in the article, the Republic notes that a number of charters that boasted of “saving taxpayer money” could not provide documentation to prove the assertion. Go figure.]

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.  [Emphasis and commentary added.]

A word about Arizona charter schools: Approved charter plans are in effect for 15 years (Arizona Department of Education [AZDE], Title 15 Article 8). A charter “must meet or make sufficient progress toward academic performance expectations.” (The term “sufficient progress” opens quite the loophole, doesn’t it?) The charter sponsor (who is declared immune from prosecution for charter operator impropriety, including unpaid bills) is the one who is to review the charter every five years to decide whether the charter is “in compliance”:

The charter may be renewed for successive periods of twenty years [based upon a sponsor review every five years]  if the sponsor deems that the school is in compliance with its own charter and this article.

Thus, the AZDE reviews the charter every 15 years, and the sponsor reviews the charter every 5 years.  That makes for some very loose oversight. In fact, the charters are mandated to “ensure that, except as provided in this article and in its charter, it is exempt from all statutes and rules relating to schools, governing boards and school districts.” No kidding. It’s right there. Title 15-183 D (5). The Arizona charters are instructed to be sure that they conduct their business as an entity exempt from statutes relating to traditional public schools.

And they are given virtual carte blance regarding curriculum.  Here’s the mandate, Title 15-183 E (3):

Ensure that it provides a comprehensive program of instruction for at least a kindergarten program or any grade between grades one and twelve, except that a school may offer this curriculum with an emphasis on a specific learning philosophy or style or certain subject areas such as mathematics, science, fine arts, performance arts or foreign language. [Emphasis added.]

“A” curriculum based upon “a” philosophy will do.  Just pass the state-mandated tests, but if you don’t, there’s that “sufficient progress” clause that can keep you in business anyway.

According to the Republic article cited above, charter schools are also exempt from any competitive bidding requirements regarding goods and services. Couple that with the virtually nonexistent conflict of interest according to Arizona law, and what one gets is an open door to corporate reform self-serving greed at the incredible expense of the Arizona taxpayer.

The financial possibilities for the reformer-profiteers abound:

The schools’ purchases from their own officials range from curriculum and business consulting to land leases and transportation services. A handful of non-profit schools outsource most of their operations to a board member’s for-profit company. The transactions are legal provided schools report the relationships on their federal tax forms and board members abstain from voting on their own contracts. (This latter statement fits the “substantive interest” part of Arizona conflict of interest legislation.)

In August 2012,, The Office of Inspector General (OIG) conducted an audit of the USDOE Office of Innovation and Improvement’s (OII) charter school monitoring by examining the charter schools in three states: California, Florida, and Arizona.  Regarding Arizona’s charters, OIG found that the Arizona Department of Education did not adequately monitor the charter school or the charter authorizing agencies and that it did not have a  sufficient system in place for selecting schools for onsite monitoring visits. Furthermore, the federal agency supposed to be monitoring state charters, OII not adequately addressing the problem– heads were turned, so to speak, on both the state and national levels.

Great Hearts, Scratched Backs, Stuffed Pockets

We are truly promoting a dichotomous school system whereby traditional public schools are held to a standard relaxed for their charter (replacement?) counterparts. For example, traditional Arizona school systems can be cited for “financial mismanagement” if they “contract for any loan not authorized by law.” Not so for Arizona charter schools. Consider the situation below in which Phoenix-based Great Hearts charters has entered into the questionable, financially-symbiotic-back-scratching relationship with Tempe-based book company Educational Sales. It turns out that Educational Sales Chairman Dan Sauer also serves as co-treasurer on the Great Hearts executive board, and this “co-treasurer” loaned Great Hearts  $300,000 in February 2011:

[Great Hearts CEO Dan] Scoggin said Sauer has been a generous donor to Great Hearts schools. Sauer has donated $50,400 since December 2007, according to Great Hearts. He also lent the non-profit $300,000 in February 2011 to buy an empty office building in Phoenix that was converted into schools. The loan, with monthly interest-only payments of $1,042 at 6.25 percent, was repaid in January 2012, Scoggin said. [Emphasis added.]

Quite the finacial arrangement: Scoggin purchases and promotes Sauer’s books; Sauer loans Scoggins’ Great Hearts money, on which Sauer collects 6.25% APR, and Sauer continues to sell books and donate money to Great Hearts:

the (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. [Let the irony of that one sink in: Sauer has profited just shy of one million dollars via his association with a nonprofit.]

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.

Great Hearts CEO Dan Scoggin said he doesn’t believe there is a conflict of interest because Great Hearts has no mandates on where its schools buy books. Many Great Hearts schools use several vendors based on pricing, service and availability, he said.  [Emphasis and commentary added.]

No mandates. Just a gentle steering to a single option on six websites. Just a nudge enough to benefit Mr. Sauer, co-treasurer of Great Hearts, to the tune of one million dollars.

If It’s Model Legislation, It’s ALEC

Let us now turn our attention to other Great Hearts collusions and conflicts of interest: Great Hearts and its connection to the Goldwater Institute.

Clint Bolick is a member of the Great Hearts board of directors.  He is also litigation director for the Goldwater Institute, a group that prides itself on being “a nonprofit organization” (red flags are waving) that offers “model legislation and court victories [that] have changed laws and lives” (red flags waving more wildly) and that has a mission to “protect freedom and prosperity.” That’s a pretty general, “American-flag-waving, apple-pie-loving” mission, with “model legislation,” to boot; it reminded me of the ALEC (American Legislative Exchange Council) modus operandi and mission:

The American Legislative Exchange Council works to advance the fundamental principles of free-market enterprise, limited government, and federalism at the state level through a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public.

So, I wondered, is Goldwater connected to ALEC?

Yes, indeed. Goldwater has members sitting on seven ALEC task forces, one of which is the Education Task Force:

Goldwater has also joined the Education Task Force. Jonathan Butcher sponsored model legislation (the “District and School Freedom Act”) at the 2012 ALEC Spring Task Force Summit. The model bill was adopted and sent to the board for approval. Mr. Butcher also sponsored the “Resolution Opposing the Implementation of the Common Core State Standards Initiative” during the K–12 Education Reform Subcommittee Meeting of the task force during ALEC’s 38th annual meeting.  Back in 2010, Matt Ladner represented Goldwater on the Education task force. He sponsored the “A-Plus Literacy Act” during the education meeting of the 2010 States and Nation Policy Summit. It was passed by the public and private sectors unanimously. [Emphasis added.]

Matt Ladner is also entrenched in Jeb Bush’s Foundation for Educational Excellence (FEE)/Chiefs for Change. See this excerpt from my Chiefs for Change post in which FEE’s Patricia Levesque advises Maine State Education Superintendent Stephen Bowen regarding drafting Maine’s education agenda:

And as to that extra FEE assistance, Patricia Levesque is there to offer help in this October 19, 2011 email:

Let us help.

Matt Ladner can assist with drafting school choice legislation– we should already have model legislation depending upon what type of choice you want to do (e.g. scholarships for kids with disabilities). [Emphasis added.]

So, Goldwater has members sitting on the Great Hearts board of directors and on ALEC task forces. ALEC promotes charter schools and attempts to choke traditional public schools. I have read hundreds of pages of the ALEC model legislation. And ALEC has even held its 2011 annual meeting in Arizona. Goldwater’s Jonathan Butcher and Arizona Senator Rich Crandall sponsored ALEC legislation at the Arizona meeting, and FEE was present for the Arizona Education Task Force meeting, as well.

The Charter School Growth and Quality Act was officially approved as ALEC model legislation at this 2011 Arizona ALEC meeting:

The fourth bill the Education Task Force members considered was the Charter School Growth and Quality Act sponsored by David Hansen of the National Association of Charter School Authorizers. After discussion, the legislation passed both the public sector with 13 Yeas, 2 nays, and the private sector with 12 Yeas and 0 Nays. The Charter School Growth and Quality Act was approved.

According to ALEC, the Charter School Growth and Quality Act is summarized as follows:

The Charter School Growth with Quality Act would expand quality public education opportunities for all children by establishing a state public charter school commission to serve as an independent statewide charter authorizer. [Emphasis added.]

Keep the intent of this act in mind.  We will revisit it soon.

Readers should realize that ALEC never intended for information from their task force meetings to be made public. This information is available to the public now because Common Cause received ALEC task force information as part of a records request resulting in this April 2012 IRS Whistleblower Request for investigation into ALEC’s misuse of its nonprofit status.

ALEC did not want the public to know that it was meeting behind closed doors to construct and advance model legislation in order to financially benefit its members.  And that ALEC influence is Goldwater influence, and Goldwater influence is Great Hearts influence.

So, you see, there’s no “conflict.” These guys get along just fine because they are all after the same thing: traditional public school funding.

It Ain’t a Conflict; It’s Experience

Let us now consider another connection between Goldwater and Great Hearts: Jay Heiler. In February 2012, Arizona Governor Jan Brewer appointed Jay Heiler to serve on the Arizona Board of Regents. Heiler’s apparent conflicts of interest did not appear to matter to Governor Brewer; indeed, the conflicts were included as part of the February 8, 2012, press release announcing Heiler’s appointment:

Heiler, a long-time Valley resident, is a political and media consultant serving the leadership of a wide variety of private and public sector clients in public affairs, issue management and crisis communications. A dedicated advocate for educational quality and reform, he is founder and president of the board for Phoenix-based charter school management organization Great Hearts Academies, a network of charter schools educating 5,000 students in the Valley. He is also president of the board for the Arizona Charter Schools Association. … He has served on the boards of both the GoldwaterInstitute and the Morrison Institute. [Emphasis added.]

Heiler has associations with both the private and public sectors. (Incidentally, connecting private and public sectors is a foundational principle of ALEC; the ALEC goal is to advance the private sector at the expense [literally] of the public sector.) Heiler is a charter lobbyist. He traveled to Tennessee promoting his product; the incredible conflicts of interest connected to Great Hearts was not lost on this Nashville Scene writer:

According to Federal Election Commission records reviewed by the Scene, Great Hearts’ 2010 and 2011 board of directors and executive members actively engaged in politics of their own, contributing more than $133,000 to political candidates between 2001 and 2011.

Overwhelmingly, that money was given to Republican candidates and right-leaning political action committees, including Arizona Congressman Rick Renzi, congressional candidate Steve Moak, and Congressman Ben Quayle, son of former Vice President Dan Quayle and sibling to Tucker Quayle, a sitting Great Hearts board member.

Many of Great Hearts’ directors are politicos, past or present, and typically on the “supply side” of the proverbial aisle in GOP-dominated Arizona. Maria Baier, a former Metro Phoenix Republican councilwoman, actively serves as both a Great Hearts director as well as Arizona State Land Commissioner under Republican Gov. Jan Brewer. Clint Bolick, director of the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation, also serves on the Great Hearts board. Most recently, conservative talk-radio host Hugh Hewitt was named to the board last year. [Emphasis added.]

Kevin Huffman and His Great Heart

Jay Heiler attempted to launch Great Hearts in Nashville, Tennessee, but Great Hearts was turned down four times by the Nashville school board. And former -TFAer-gone-State-Education-Commissioner Kevin Huffman clearly wanted Great Hearts in Nashville:

In the Great Hearts case, Huffman wasn’t merely an observer. He contemplated how the charter group should best proceed with its appeal. He wondered why the local chamber of commerce wasn’t involved. He coordinated with Great Hearts officials. He watched in dismay over the course of the summer as the Metro school board on multiple occasions balked at approving Great Hearts. And after the board denied Great Hearts and KIPP Nashville (a separate charter that it later approved) on May 29, Huffman relayed disappointment to Gov. Bill Haslam the next morning….

Emails The City Paper reviewed through the Tennessee Public Records Act, however, show the state’s discontent with the Metro school board on the Great Hearts matter began well before the local board defied any order.

Huffman, who serves at the pleasure of the governor, has never publicly announced support for Great Hearts, yet he was clearly in its corner. On the Sunday before the school board would reject Great Hearts for a second time on June 26, Huffman considered but ultimately rejected having [Governor] Haslam himself call Great Hearts officials to encourage the charter group to move forward.

“Puts the gov [sic] in an awkward position,” Huffman wrote to Barbic. “They might still say no, and the gov’s office wasn’t thrilled with my previously intervening in local issues.

“The thing is, he wd [sic] do it if I asked,” Huffman continued. “But puts him in a funny spot.”

By this point, Huffman had already facilitated a July 26 meeting to discuss Great Hearts’ next move, a gathering that took place just hours before Great Hearts’ revised application would go before the Metro board for second consideration. The meeting site: the office of Mayor Karl Dean, also a Great Hearts backer. In attendance, among others, were Huffman, Dean, Barbic, Deputy Mayor Greg Hinote, Great Hearts officials Dan Scoggin and Peter Bezanson, and Bill DeLoache, a wealthy Nashville investor and one of the state’s leading charter school proponents.

DeLoache recounted details of the meeting in an email to Kevin Hall, president and CEO of the Charter Growth Fund. The email, copied to Huffman and Dean, suggests Huffman talked to Great Hearts officials about appealing to the state even before the charter organization had publicly declared its intention to do so. In fact, the group’s application was still navigating its way through the local board’s authorization process.

“Most of the discussion was around the idea of GH [Great Hearts] appealing to the state and then opening school #1 in 2014 with 5 charters already in hand (whether or not one charter is approved tonight),” DeLoache wrote to Hall, describing the June 26 morning meeting.

Emails show DeLoache, long known as an unofficial education adviser to Dean, served as a resource for Huffman, as well. After the Metro board denied Great Hearts in May, DeLoache told Huffman he hoped its rejection might “provide an opportunity to highlight to the Governor” the need to push for a statewide charter school authorizer during the 2013 legislative session. (A statewide charter authorizer would effectively supersede and therefore negate authority of local charter authorizers such as Metro.) [Emphasis added.]

Remember the ALEC model bill promoted at its 2011 Arizona meeting, the Charter Growth and Quality Act?  The one promoting statewide charter authorizers? DeLoache calls such an act “an opportunity” even though the goal is to completely divest local school boards of any power to avoid complete charter takeover.

The insistence of no conflict of interest is a lie. Indeed, the conflicts associated with Great Hearts extend beyond Arizona’s borders.  If there is any “conflict” (resistance), corporate reform will actively pursue avenues promoting its own “interest.”

For refusing to acquiesce to the reform agenda, State Education Superintendent Kevin Huffman punished the Nashville Schools by cutting its funding:

Tennessee’s TFA Commissioner of Education Kevin Huffman ordered the Metro Nashville school board to grant a charter to a school run by Arizona-based Great Hearts. The School board voted no. It voted no four times. It said the school wanted to locate in a neighborhood where it would draw mainly from well-to-do white families; the board wanted assurance that the school would serve a diverse enrollment. Great Hearts expects families to make a “voluntary” contribution of $1200-1500 upfront.

Huffman retaliated by cutting state funding to the Nashville schools by $3.4 million in the middle of the term. It’s his way or the highway. What a lesson for the children of Tennessee. [Emphasis added.]

And what a lesson for the children of Arizona: It’s okay to make money at the expense of others, so long as nine of your buddies are also cashing in.

Remember, Arizona Is a Desert

Arizona is well on the path to bankrupting the public school system as it indiscriminately lines the pockets of a handful of education profiteers, those who cannot possibly advocate for the public’s interest when their own interests are served by fiscally starving traditional public schools.

That, my friends, is where Arizona education is headed due to its legislative and ethical failure to temper corporate reform self-interest.

8 Comments
  1. Suzanne Winkel permalink

    Dear Dr. Schneider,
    Thank you for your detailed analysis of the charter school debacle in Arizona. Please tell me what I can do to fight this insidious collusion between the Arizona governor/legislature/charter schools. Where is the best place to start? Do you know of anyone in Phoenix who has started a movement to save our public schools?
    Help!
    Suzanne Winkel

  2. lindathomas724 permalink

    Reblogged this on Restore Reason and commented:
    AZ…leading the way once again (not in a good way)

Trackbacks & Pingbacks

  1. Schneider: Arizona, the Land of Conflicts of Interest | Diane Ravitch's blog
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