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How About Some Rhee-lated Information from Tax Documents?

October 23, 2013

I have been reading tax forms. 990s– the form of the nonprofit organization (no 1040s for them).

It might sound boring, but I guess that all depends upon whose tax forms they are.

Two 990s are the subject of this post. The first is the 2011 (August 2011 to July 2012) 990 for Michelle Rhee’s reform lobbying organization, StudentsFirst (SF). The second is the 2011 990 from the lesser-known SF sister organization, StudentsFirst Institute (SFI).  Both forms were signed by Michelle Rhee on June 13, 2013 and filed with the IRS in Ogden UT on June 18, 2013.

The Best of Both Worlds: 501(c)3 and 501(c)4

Both SF and SFI are nonprofits. However, SF is a 501(c)4, and SFI, a 501(c)3. A 501(c)3 is limited in the percent of its budget that it can devote to lobbying. (Violation of this restriction is the reason that Common Cause filed its whistleblower complaint with the IRS against the American Legislative Exchange Council [ALEC] in April 2012.) However, a 501(c)4 does not have such a restriction. Therefore, SFI needs SF in order to unleash as much lobbying as it likes in statehouses around the country. Here is the 501(c)4 freedom that causes reformer faces to light up:

501(c)(4) organizations can engage in unlimited lobbying so long as it pertains to the organization’s mission. 501(c)(3) organizations are not permitted to engage in political activity, endorse or oppose political candidates, or donate money or time to political campaigns, but 501(c)(4) organizations can do all of the above. [Emphasis added.]

One might wonder why Rhee is operating both 501(c)3 and 501(c)4 organizations. After all, why not just operate SF, the 501(c)4, if the goal is unregulated lobbying?

Tax deductions.  As a 501(c)3, SFI allows for deductions not allowed to the SF 501(c)4:

In regards to supporting these organizations, donations made to 501(c)(3) organizations are deductible to the full extent of the law as charitable contributions. Donations made to 501(c)(4) organizations are not deductible, though some businesses who make these contributions often write them off as advertising or business expenses. …

If you want the best of both worlds, you can have two separate but affiliated organizations – one a charitable 501(c)(3) and the other a 501(c)(4) lobbying arm. Many trade organizations lobby extensively on behalf of their members, but have an affiliated 501(c)(3) foundation for charitable giving and educational purposes. [Emphasis added.]

Rhee wants “the best of both worlds.”

(Rhee has a second 501(c)4, the Hartford, CT-based Great New England Public Schools Alliance (GNEPSA). GNEPSA portrays itself as “grass roots.” However, it contributors include NY Mayor Michael Bloomberg, the self-proclaimed “most trusted educator” Steve Perry, and, of course, SF.)

Rhee Is on a Mission

Each of Rhee’s two tax forms requires the respective organization to state its mission. Here’s the SF mission as stated on its 2011 990:

Our mission is to build a movement  to defend the interests of children in public education and pursue transformative reform so that America has the best education system in the world.

And the SFI mission, as noted on its 2011 990:

Our mission is to research and develop model policies that defend the interest of children in public education and pursue transformative reform, so that America has the best education system in the world.

One should realize that StudentsFirst was founded by the same Michelle Rhee who made children’s mouths bleed and spoke casually (and fondly) of the incident years later to an audience of new teachers. This is the same Michelle Rhee seriously implicated in cheating during her time as DC chancellor and who was never thoroughly and competently investigated.  I note as much in my post on the highly-questionable DC IMPACT study. (Whistleblower and former DC principal Adell Cotherne discusses the shoddy nature of DC teacher evaluation in this interview.)

In order to gain a better sense of the SF “mission,” consider this excerpt from Reuters reporter Stephanie Simon:

Schools don’t need more money, Rhee says; they need to be held accountable for how they spend it.

Rhee wants all teachers to be evaluated in large measure by how much they can boost their students’ scores on standardized tests. Scores are fed into a formula that rates how much “value” a teacher has added to each student over the year. Rhee says teachers who consistently don’t add value should be fired; those who do well should be rewarded with six-figure salaries.

She has also successfully pushed legislation in several states, including Florida, Michigan, Nevada and Tennessee, to abolish seniority systems that protect veteran teachers and put rookies first in line for layoffs without regard to job performance.

Also high on Rhee’s agenda: giving parents more choices. She calls for expanding charter schools, which are publicly funded but often run by private companies. She wants to let parents seize control of failing public schools and push out most of the staff. She also supports tax-funded vouchers, which can be used to pay private and parochial school tuition, for families living in neighborhoods with poor public schools. [Emphasis added.]

In short, Rhee is full speed ahead for “reforms” that in no way touch her life. She has millions. She has not been held accountable for cheating in DC. Via her TFA experience, Rhee exited the classroom before she faced any evaluation– and she was never held accountable for taping her students’ mouths. She has been politically elevated by philanthropic reform money– no seniority issues for her. And she is for charters, vouchers, and “parent trigger”– the consequences of which do not touch her privileged children.

Rhee is also connected to the Common Core State Standards (CCSS), which SF endorses.

And now for those 990s.

The 990s: Overall Revenue and Top Three Program Services

In 2010, SF reported $4.6 million in revenue. The amount rose to $15.6 million in 2011.

In 2010, SFI reported $3 million in revenue, which rose to $13 million in 2011.

In 2012, SF reported the following as its first of its “three largest program services”:

StudentsFirst has an active presence in state legislatures where they work to address legislative policies that promote transformative reform concerning teacher quality, parental empowerment, and fiscal responsibility. The team works to ensure proposed legislation meets the goal of transformative education reform. StudentsFirst conducts research, prepares policy briefings, hosts forums for the public and meets with legislators and members of their staff to discuss specific education strategies.  Expenses: $4,116,572  [Emphasis added.]

In the second “program service,” SF dares to write that its goal is to “empower teachers,” among others, to “create awareness about education issues and policies.” The expense: $3,300,635.

Finally, its third “service” is “to engage in electoral activity through direct support… and paid media campaigns including independent expenditures in support of candidates to further education reform.” [Emphasis added.]  The expense: $3,289,994.

In other words, SF is purchasing its will in public education.

SF is a lobbying machine.

As for SFI, its top three program expenses do not include the language of lobbying; however, SFI does report on “public policy development methods and analyses”; “oped articles,” and “meetings, events, and workshops.” The total top three expense: $6,987,719.

Let’s talk about “the” board.

SF and SFI: Two Organizations; One Board; Same Employees

Both SF and SFI share the same 23-member board and the same employees. Listed below are the paid board members/employees, including their titles and combined compensation. The combined SF and SFI hours for all listed below total 40 per week.

Michelle Rhee, Founder, CEO, and Director   $306,063

Dmitri Mehlhorn, Chief Operating Officer   $230,019

Enoch Woodhouse, VP of Operations   $89,027

Talya Stein, VP of Development   $187,221

Eric Lerum, VP of National Policy  $120,566

Mayyappan Sevugan, VP of Communications   $115,893

Timothy Melton, VP of Legislative Affairs  $59,829

Ximena Hartsock, Director of Outreach   $163,249

Kathleen Delaski, Senior Advisor  $166,906

Katherine Gottfredson, National Policy/Legislation Manager   $134,476

Dana Peterson, State Director,   $126,295

Mafara Hobson, Manager, National Marketing   $123,835

Bridget Davis, State and Issue Manager   $119,178.

Do not confuse “nonprofit” with “volunteer.” There is money to be made as a compensated nonprofit board member/employee.

Amid public questioning regarding Rhee’s “Democrat” status, in 2013, three Democrat board members– Stein, Sevugan, and Hartsock— resigned from SF.

Some additional noteworthy information on SF/SFI compensated employees: Mehlhorn is the chief operating officer of Bloomberg Law; Woodhouse is a former DC Public Schools Office of Data and Accountability employee, and Eric Lerum, author of the SF position article on CCSS, is VP of National Policy for the Fordham Institute.

As for the non-compensated SF/SFI board members, a number are celebrities: Connie Chung, Bill Cosby, Jennifer Johnson, Jalen Rose. Blair Taylor is chief community officer for Starbuck’s Coffee and a member of the National Assessment Governing Board (as in the Nation’s Report Card). Joel Klein, the Bloomberg-appointed, former NY schools chancellor, is on the SF/SFI board. It is only fitting since Klein influenced former DC Mayor Adrien Fenty to hire Rhee as chancellor.

Three non-compensated SF/SFI board members remain:  David Coleman, Jason Zimba, and Ann-Margaret Michael.

Both the SF and SFI FY2011 990s allude to three board members “sharing a common employer” and that such “did not impact the organization’s decision to choose them as members of the board of directors.”

I’ll bet.

The “common employer” is not named in either tax document.

Student Achievement Partners.

For a detailed account of the highly nondemocratic choreography that is CCSS, see the post in which I examine the CCSS Memorandum of Understanding.

Student Achievement Partners is at the center of CCSS. They even refer to themselves as “lead architects” of CCSS on their website.

All three Student Achievement Partners “employees” left the SF/SFI boards effective June 30, 2012.

I think they were there in the first place in order to lobby for their product– CCSS.

Mission accomplished.

SF 2011 Campaign Contributions

SF inserts itself in local political races by sending cash to reform-friendly candidates. As such, SF is doing its best to purchase democracy.

Below is a partial list of individuals/ organizations receiving SF campaign contributions and the amounts given. I have restricted my list to the first 15 SF campaign contributions on the list. However, the full list includes 170 contributions ranging from $300 to $2 million. (See pages 41 thru 53 of the SF 2011 990 for the full list.)

Parents and Teachers for Putting Students First (San Rafael, CA)   $2 million

Better Education for NJ Kids, Inc.  (New Brunswick, NJ)  $200,000

MI Republican Admin Account (Lansing, MI)  $40,000

Ferrell Haile for Senate (Gallatin, TN)   $10,000

House Republican Caucus (Nashville, TN)   $10,000

Senate Republican Caucus (Nashville, TN)   $10,000

Steve Dickerson for State Senate (Nashville, TN)   $10,000

Friends of Dolores Gresham (Somerville, TN)   $8500

Friends of Joey Hensely (Hohenwald, TN)   $8500

Aspire Michigan (China, MI)   $7500

Principle Centered Leadership Committee (Miami, FL)   $7000

Citizens to Elect Jamilah Nasheed (St. Louis, MO)   $6700

Barry Doss for State Representative (Covington, TN)  $6500

Bill Spivey for State Representative (Lewisburg, TN)   $6500

Committee to Elect Richard Montgomery (Sevierville, TN)   $6500

A quick read of the full list shows that SF focused its 2011 contributions to political races in Tennessee, Florida, Missouri, and Georgia.

How Much to Buy America?

In reading these tax documents, I cannot help but wonder if our democracy is such a farce that it will crumble beneath the weight of the wallets of the wealthy removed. I wonder what it will take for them to realize that they are foolishly destroying the foundation upon which they themselves stand. In their arrogant fiscal elevation they forget that even they require the foundational institutions that form our democracy– public education being one such institution.

Handing millions over to the likes of Michelle Rhee is idiocy. Rhee is nothing more than some Frankenstein creation of bored philanthropy.  Be careful, mainstream America. In promoting Rhee, you are confusing cash flow for substance.

Here’s a hint: When you hear that a candidate in a local election is being outspent by 10- or 20-to-1, vote for that candidate.

  1. Julia permalink

    From State Policy Network:

    What if each board of directors has the same members?

    Having some overlap between the two boards is fine but you may want to include some unique board members on the 501(c)(4) board that are not on the 501(c)(3) board to help demonstrate separation between the two organizations. Be forewarned that if the 501(c)(4) engages in any partisan activities, the IRS will look at the 501(c)(3) board of directors as a factor in determining the independence of the affiliated organizations. Therefore, it is recommended that affiliated organizations not have complete overlap in board members (Alliance for Justice, 2010).

  2. I believe that Ms Rhee has just “found” her Jean Valjean. Go Mercedes!

  3. Oh my poor addled brain! I of course meant that Ms Rhee has just found her Javert! And none too soon, I might add. Thank you again, Mercedes.

  4. You are always doing such amazing research. I don’t know how you find the time but I do hope you keep it up. It is so appreciated and necessary.

  5. szwood permalink

    Is CABL not set up the same way, with its other organization FABL? Council for a Better Louisiana and Foundation for a Better Louisiana? Just yesterday before I received your post, I just happened to be looking into them because I really don’t know anything about them and it struck me as funny that they would have two organizations, but not really knowing much about that which you describe below, I just moved on to researching something else. Just wondering.

    >________________________________ > From: deutsch29 >To: >Sent: Wednesday, October 23, 2013 12:10 AM >Subject: [New post] How About Some Rhee-lated Information from Tax Documents? > > > > >deutsch29 posted: “I have been reading tax forms. 990s– the form of the nonprofit organization (no 1040s for them). It might sound boring, but I guess that all depends upon whose tax forms they are. Two 990s are the subject of this post. The first is the 2011 (August” >

    • Apparently lots of nonprofits do this if they wish to lobby without limit or mandated oversight. A 501(c)3 has less lobbying freedom than does a 501(c)4, but the tax deductions are not available to the 501(c)4 as they are to a 501(c)3.

  6. Karrie McCoy permalink

    This comment does not pertain to the article above, but I was wondering if you could write an article to explain the high school literature choices of Common Core. I ran across the following webesite:

    It is about the novel “Dreaming in Cuban”. I have never read this book, but it does seem to be an unusual choice of reading for high school students. The erotic excerpt featured on the website above is not the kind of thing most parents want their kids to read. I am not naive regarding teenagers and sex, but teaching a book with this sort of eroticism in a classroom really does seem to promote a behavior most parents are trying prevent ( or at the very least put off for a while longer).

  7. Teach for America is organized the same way. TFA is a 501(c)3, while their Leadership for Educational Equity is a 501(c)4. Matt Kramer and Arthur Rock are on both boards. What a simple work-around our government has provided. What the right hand can’t do, the left hand can.

    What organizations that don’t have a 501(c)4 arm do, such as ALEC, is argue that their lobbying is “education.” So, if ALEC can’t get around the 501(c)3 issue, no problem, they will just launch a 501(c)4.

    Instead, they should all be classified as PACs!

    • FYI, I didn’t mean to imply that PACs are an easy answer. Actually, I don’t think there is one right now, because of the SCOTUS Citizens United ruling, which resulted in SUPER PACs that can legally circumvent the maximum contribution limitations on PACs. There is also a loophole which permits some nonprofit contributions without having to disclose the source, so we’re talking about a lot of “dark money,” too…

  8. George Buzzetti permalink

    Mercedes, I really respect the work you do. You do not do the typical just blow off without knowing what you are talking about. You have to do real work to put up this and spend real time going through it and putting it in an understandable form. Almost no one does this. Want some real fun? Get into the electonic device game. This is where it is at. LAUSD is not the precursor to the end of public education. You showed the money and what it does. That is what I do in debth nationwide. The money and who and where and why is the game. When school districts buy electronic devices for $1,500-2,500 each and are bought, illegally in California and Assemblyman Kurt Hagman, naturally a republican in California as the democrats are soooooo corrupt her, is going to have an Assembly Hearing on this, with school bonds, last only maybe 3 years, take 25-30 years to pay off at 2-3 times the face value then go into bankruptcy what do you think will happen next? Privatization is the answer as the domino’s of bankrupted districts fall. Then no professional teachers, TFA, no accountability or any thing else like that. Now all, except the elite and billionaires, will be turned into indentured servants in Fascist Amerika. Ever listen to Henry Wallace, FDR’s vice-president during the war, talk about this? He said “The Fascist have wanted the U.S. since the 20’s. Hitler taught them something and that is “Do it without guns and take time.” What do you think is happening?

    Mercedes, obviously, understands the importance of research, tedious work with numbers and what that will help you understand. All should be doing this level of work we do. You must have the documents or why should anyone listen to you. The only way I get traction is by putting their own documents with their letterhead and signatures on them. This is how we drove off Marshall Tuck from Villaraigosa’s PLAS and Jaime Aquino from LAUSD when he totally freaked out and two hours after Yolande Beckles from the California Title 1 Parent Union did him a job at the Committee Meeting that Thursday. Just talking does not do it. The letter from DOE that they had broken the law and the lies on the iPads together, fully documented with their names on them, did it, along with attitude. Milktoast also does not cut it. You must get down on them. You must throw boulders through the plate glass windows to get their attention and then have the plan and outcome ready to present. You can’t throw the boulders through the windows and do nothing else.

  9. first grade teacher permalink

    Thank you for doing the heavy lifting. My brain hurts after reading one of your posts. I have to come back later and read the links.

    At this moment I am watching 3 tugboats turn a gargantuan container ship 360 degrees so it can head out to sea. These little orange tugboats have power. Not raw, mow-you-down, take-no-prisoners, get-out-of-my-way-or-I-will-flatten-you type power, like the ship they are maneuvering. They dodge, and weave, and zip. They whip that boat around like a toy. When a new ship is on the horizon, one they will have to guide into the harbor, they seem to appear out of nowhere. I turn my head to pick up my coffee and when I look up, there they are again, positioned like 3 terriers patiently sitting on their haunches, panting to let the games begin.

    For me, you are one of those terriers – one of those tugboats. You expose the weakness of that giant ship. You let it know it is nothing, useless, dead in the water, exposed, without the help and guidance of the collective small. It may still continue to pile its containers full of reform higher and higher on its deck. It may still go from harbor to harbor to unload its cargo. It may still be shy about plowing over you full throttle, but eventually the stacks of containers on its deck will disable its ability to slow down and stop, and when that happens it will crash into the dock, and all those containers will sink into the depths to rest with all the other ooze and toxins that reside there.

    Again, thank you.

  10. Karen in VA permalink

    The names you listed are not board members, they are employees of the organizations. The names with the title “Director” listed in Part VII are the board members, none of whom are compensated. I’m a CPA who specializes in nonprofits – just wanted to correct the info in this article; have no opinion for or against Ms. Rhee or the writer of this blog.

    • Thank you, Karen. Three compensated individuals (including Rhee) have “director” as a title.

      Then what we have here are two organizations with exactly the same board members and exactly the same employees.

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