StudentsMatter Is Millions in Debt from Vergara Lawsuit, Yet It Keeps on Suing

On August 22, 2016, the California Supreme Court denied reviewing the appellate court decision in Vergara et al. vs. State of California et al. The appellate court decided in April 2016 that Vergara did not prove constitutional violation of equal protection. Vergara was originally filed in 2012; four years later, it had reached its litigious end.

The following day, on August 23, 2016, the same group responsible for astroturfing education litigation like Vergara, StudentsMatter.org, filed a fresh, corporate-reform-promoting lawsuit in Connecticut, Martinez vs. Malloy. In short, the goal of Martinez is not to improve Connecticut’s “failing” public schools; it is to promote a dual school system in which those who choose to “escape the failing schools” are provided with magnet and charter schools to which to flee.

StudentsMatter is a corporate reform lawsuit factory, and the organization is okay with that. From its home page:

Our Mission

Students Matter promotes access to quality public education through impact litigation, communications and advocacy.

StudentsMatter has an advisory board, and interestingly, at the top of the board bio web page, StudentsMatter offers this disclaimer:

Note: The individuals below are representing themselves on Students Matter’s advisory board and not representing the organization for which they work.

The corporate reform litigation factory does not want to be held responsible for its own board. That’s funny.

Board members include

• former StudentsMatter policy director and former Parent Revolution exec director Ben Austin;
• former Chief of School Family and Parent/Community Services for Los Angeles Unified School District Maria Casillas;
• former LAUSD superintendent John Deasy;
• former California state senator Becky Morgan;
• former chief of staff to VP Joe Biden and former chief domestic policy advisor to former Pres Bill Clinton, Bruce Reed;
• investment banker and venture capitalist Arthur Rock, and
• former chairman of the National Venture Capital Association and founding CEO of Fortify, a pioneer in the software security market, Ted Schlein.

StudentsMatter lists a single staffer, David Stanley:

David Stanley leads major gifts fundraising at Students Matter. He enlists philanthropists to serve as key partners to Students Matter and helps sustain the organization’s high-performing Board.

Prior to joining Students Matter in January 2014, David was Executive Director of Teach For America….

As for the StudentsMatter founder, well, that’s Dave Welch, who is all in for *public schools*:

David F. Welch grew up in Maryland where, along with his six siblings, he was educated in public schools. His passion for public education arises from his roles both as a parent of three school-aged children and as an employer in two highly successful start-ups in Silicon Valley. Dr. Welch founded Students Matter in 2011 with the goal of creating positive structural change in the California K-12 public education system.

Note that “structural change” means the market-driven reform model of limiting (better yet, killing) teacher job protections; evaluating teachers using student test scores, and feeding public money into cap-lifted, privately-run charter schools.

Of course, StudentsMatter has a featured law firm: Gibson, Dunn, and Crutcher, which was founded in Los Angeles.

Even though StudentsMatter lost its centerpiece case, Vergara, it still has a California case alive in the Contra Costa Superior Court, Doe vs. Antioch, which StudentsMatter features as follows (and which was filed in July 2015, before losing Vergara):

The California Constitution guarantees every student in California equal access to a quality education, including equal access to effective teachers. As the evidence presented in Vergara v. California overwhelmingly demonstrated, teacher quality is the most important in-school factor affecting student success. In order to ensure that all students are being taught by effective teachers, school districts need a fair and consistent way to evaluate educators. Originally enacted by the California Legislature in 1971, the Stull Act requires school districts to evaluate the performance of teachers and other certificated employees using multiple measures of performance, including student progress toward district and state academic content standards, as measured by standardized tests.

Extensive research has shown that effective teaching can be measured, and that evaluations composed of multiple components—including, but not limited to, students’ progress on state standardized tests—demonstrate the greatest reliability and the least volatility from year to year.

Yet, for over 40 years, many California school districts have ignored or outright defied the Stull Act. At least thirteen school districts, serving nearly 250,000 students, have entered into collective bargaining agreements with their local teachers unions that explicitly prohibit the use of any standardized test results in teacher evaluations, in clear violation of the Stull Act.

We think it’s simple: reward and retain excellent teachers and hold accountable those who are failing our children.

However, the StudentsMatter argument regarding the Stull Act is not airtight. Note the term “reasonably” in the language of the bill (bolded):

(b) The governing board of each school district shall evaluate and assess certificated employee performance as it reasonably relates to:

(1) The progress of pupils toward the standards established pursuant to subdivision (a) and, if applicable, the state adopted academic content standards as measured by state adopted criterion referenced assessments.

If I were a lawyer opposing StudentsMatter, that one word, “reasonably” would offer me a lot to work with in empirically establishing just how unreasonable it is to try to tie teacher evaluation to test scores.

And now, for some news on the nonprofit behind StudentsMatter, the Students First Foundation (SFF) (EIN 27-3816952). SFF was founded in 2010 and received its nonprofit status in 2011;

As to 2011 finances:

• the largest contribution was $320,000 from David and Heidi Welch.
• David Welch also loaned SFF $472,764, without interest, for foundation expenses.

And in 2012,

• the Welch Trust contributed $550,000 to SFF;
• the Broad Foundation contributed $200,000, and
• Tammy and Bill Crown contributed $100,000.
• There were also several contributions under $100,000.
• Moreover, SFF received gifts of various stocks (Facebook, LinkedIn, Zillow, Ehealth, Imperva, and others) with an estimated fair market value of $647,361.

At the outset of 2012, SFF was in the red, with net assets of -$420,331 and end-of-year assets also in the red at -$799,486.

In 2012, SFF paid Gibson, Dunn and Crutcher $1,115,912 for “litigation.”

A second SFF 2012 990, filed in August 2013, is the first to mention StudentsMatter and the Vergara lawsuit (Note: the first 2012 990 includes a request for the August 2013 extension.):

THE ORGANIZATION SPONSORS IMPACT LITIGATION TO PROMOTE ACCESS TO QUALITY PUBLIC EDUCATION.

***

THE ORGANIZATION IS MANAGING AND FUNDING LITIGATION (VERGARA V CALIFORNIA) WHOSE GOAL IS TO IMPROVE THE QUALITY OF TEACHERS IN CALIFORNIA. IN THIS CAPACITY IT IDENTIFIED THE ATTORNEYS WHO SERVE AS LEAD COUNSEL IN THE LAWSUIT. IT FURTHER ASSISTED BY HELPING TO IDENTIFY EXPERT WITNESSES AND TO ANALYZE STUDIES THAT HAVE BEEN CONDUCTED IN THIS AREA TO HELP ESTABLISH THE STRATEGY FOR THE PROSECUTION OF THE LAWSUIT. THE RESULTS OF THIS LITIGATION WILL IMPACT VIRTUALLY EVERY STUDENT IN THE STATE OF CALIFORNIA.

Note that the above statement stops just short of claiming that StudentsMatter played any role in “identifying” the individual plaintiffs, who must have serendipitously happened upon an astroturf ed reform organization that just happened to be planning to sue the state in the name of teacher quality. An amazing coincidence, to be sure, but less likely as one continues reading the info in the SFF 2012 990:

THE ORGANIZATION HELPED TO MANAGE A CAMPAIGN FOR EDUCATIONAL REFORM AND OUTREACH IN SUPPORT OF THE LITIGATION. IN SOME INSTANCES THE ORGANIZATION WAS ALIGNED WITH OVER ONE HUNDRED EDUCATIONAL ORGANIZATIONS TO CREATE A COMMON VIEWPOINT. THE CAMPAIGN ALSO CREATED THE NECESSARY OUTREACH TO EDUCATIONAL ORGANIZATIONS INCLUDING SCHOOL SUPERINTENDENTS, EDUCATION PROFESSIONALS AND OTHER PHILANTHROPIC ORGANIZATIONS.

“Creating a common viewpoint.” Now that’s not serendipity.

The above “common viewpoint” campaign cost SFF $491,758.

This next part is my favorite: Creating grass-rootsish buy-in for top-down-birthed education litigation. Also included on the second 2012 tax form:

THE ORGANIZATION ENGAGED IN A PROGRAM OF COMMUNITY OUTREACH TO CREATE A GRASS ROOTS EXPANSION OF ITS EDUCATIONAL PHILOSOPHY AND STRATEGY WITHIN THE COMMUNITY. THE ORGANIZATION SUCCESSFULLY CREATED AWARENESS OF ITS VISION, MISSION AND THE BENEFITS ITS ACTIVITIES WOULD BRING TO THE COMMUNITY.

That 2012 grass roots only cost SFF $40,000.

By the close of 2012, SFF still owed Welch a total of $949,122, which it listed on its 2013 990 as its “total liabilities.”

By the end of 2013, the SFF total liabilities had risen to $5,576,311, and its total net assets was listed in the red, at -$5,128,268.

Even though SFF reported total 2013 revenue of $2,752,824, it costs a lot of money to sue; Gibson, Dunn and Crutcher was SFF’s highest paid independent contractor, at $5,693,876, for “project srvc.” The second highest expense was $608,012 to Griffin Schein for “public relation.”

As to the SFF 2013 revenue, top donors included

• Arthur Rock Foundation, $500,000
• Bill and Susan Oberndorf Foundation, $100,000
• Bloomfield Family Foundation, $100,000
• East Bay Community Foundation, $150,000
• Emerson Collective, $200,000
• Schwab Charitable Fund, $212,000
• Silicon Valley Community Foundation, $357,000
• Tammy and Bill Crown, $500,000
• Walton Family Foundation, $500,000

SFF managed to reduce its debt to Welch from $949,122 to $480,429. However, it also took out a line of credit to the tune of $4,249,122 with Bancorp for SFF operating expenses.

In 2014, SFF received $6,441,741 in total revenue and had $5,510,409 in total expenses. Of course, it also still had the Welch and Bancorp debt as liabilities ($5,576,311 total). The result was another year of negative total net assets: -$4,196,936.

As was true in 2012 and 2013, in 2014, SFF’s highest expense was Gibson, Dunn and Crutcher, this time for $3,842,832 in “project srvc”; the second highest expense was to a Los Angeles-based organization, Rally: $809,955 for “public relation.”

The largest contributions to SFF in 2014 (> $100,000) include

• Dave and Heidi Welch Foundation, $250,000;
• Tammy and Bill Crown, $250,000;
• Walton Family Foundation, $1,250,000;
• Silicon Valley Community Foundation, $3,191,800;
• Bloomfield Family Foundation, $200,000;
• Arthur (misspelled as “Author”) Rock, $250,000;
• Jewish Communal Fund, $100,000;
• Schwab Charitable Fund, $317,350, and
• John Scully, $500,000.

By the end of 2014, SFF paid the balance owed to Dave Welch, $480,429. However, that Bancorp loan increased by roughly $60,000 to a total end-of-year balance of $4,308,029, presumably from accrual of the 2.5% interest rate. However, the terms of repayment for the Bancorp loan was supposedly “interest only payments.”

By the end of 2014, SFF was in the hole for over $4 million due to expenses related to its astroturf-incited Vergara suit, which appeared to be in the bag based upon Judge Rolf Treu’s June 2014 ruling that teacher job protections, such as tenure, violate student civil rights. The 2014 SFF tax form includes the following description of the organization’s “direct charitable activities”:

The Organization believes the future of a high quality education for each student depends on every child having an effective teacher in every classroom on each and every instructional day. The Organization believes Californian’s can create an education system that gives every child an effective, passionate and motivated teacher and gives those teachers the respect and rewarding careers they deserve. In carrying on this mission, management has assembled a quality public relations firm and an outstanding legal firm to sue the State of California for legislation written into the California Education Code that is being challenged as unconstitutional, as follows; the permanent employment law – tenure, grants or denies permanent employment to teachers after eight-teen months of employment, which does not provide enough time to determine a teacher’s performance. In addition, dismissal statutes require an inordinate amount of documentation to terminate ineffective teachers and layoff rules under the statute require the newest teachers to be riffed first, regardless of performance. On June 10, 2014 the Superior Court of California issued a historical decision striking down five harmful provisions of the California Education Code as unconstitutional. According to the court the laws in question that cover teacher tenure, dismissal and layoffs impose substantial harm on students by forcing administrators to push passionate and inspiring teachers out of the school system and keep grossly ineffective teachers in the classroom year after year.

However, Vergara was not over, and when it was, it was not a win for StudentsMatter. Still, one year after the initial Vergara ruling, StudentsMatter filed its second lawsuit, Doe vs. Antioch (July 2015, noted above), and then, the initial Vergara decision was overturned (April 2016) and was officially appealed as StudentsMatter petitioned the California Supreme Court (May 2016).

And now, the day after StudentsMatter’s appeal to the California Supreme Court was denied review, StudentsMatter files Martinez vs. Malloy previously discussed in this post.

Looming question: How is SFF able to afford its astroturf ed litigation? SFF owes Bancorp over $4 million, and SFF paid Gibson, Dunn and Crutcher a total of $10,652,620 from 2012-2014, with Vergara alone, pre-appeals.

SFF has apparently notified the IRS that it plans to convert its status from private foundation to public charity. One of the benefits of doing so is that the public charity allows for donors to remain anonymous. As a private foundation, SFF must include details about its donors (including names, addresses, and amounts) as part of its 990 tax reporting.

Perhaps SFF will draw more corporate-reform billionaire cash if those billionaires are able to hide even as they still benefit from the nonprofit-donor tax breaks.

To keep feeding Gibson, Dunn and Crutcher, the SFF behind StudentsMatter must attract more money. Much more.

Can’t wait for the continuing saga as told by SFF’s 2015 990 tax forms.

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Released July 2016– Book Three:

School Choice: The End of Public Education? 

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Schneider is a southern Louisiana native, career teacher, trained researcher, and author of both A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?.

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