Pink Hula Hoop 2: Follow the money.

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Pink Hula Hoop--a crime?
Pink Hula Hoop–a crime?

The Pink Hula Hoop isn’t about education.  It’s about money for privatized charter schools.  Money and how connections among powerful  people  beget more money. It starts at the top, with Gov. Chris Christie who, while starving traditional public schools of operating and construction funds, has allocated an unprecedented amount of public money to privately-operated charter schools, including TEAM Academy.  Last year alone, in 2013, he allocated $125 million in construction funds to charter schools–$40 million to TEAM. In 2011 and 2012, TEAM projects, directly or indirectly, received some $30 million in public loan funds.

Christie’s generosity with public money to charter schools like TEAM allowed Cami Anderson, the woman he appointed schools superintendent in Newark, to come up with “One Newark,” her plan to close neighborhood public schools and expand privately-run charter schools. TEAM will grow from four charter schools to 10.

Getting all that public money to TEAM has required the help, not only of the governor,  but also of familiar Christie allies—Michele Brown, Christie’s former assistant and mortgagor and now head of the state Economic Development Authority (EDA); the law firm of Wolff and Samson of Bridgegate fame;  Christopher Cerf, the recently departed state education commissioner who was both a TEAM trustee and former business partner of Tim Carden, the head of TEAM’s trustees and former EDA board member, and, of course,  Anderson, who can now impose  her controversial “One Newark” plan with the taxpayer money flowing to TEAM and other charters.

They aren’t the only players, of course.  Former Newark Mayor Cory Booker , who brought Anderson to Newark, was heavily involved in funding the privatization of Newark schools. It was, as he told me in an interview years ago, his “greatest passion”—an even greater passion than keeping cops on the street. Booker was rewarded with an easy path, opened by Christie,  to the United States Senate where he now represents, well, whoever put him there—but not, certainly, the people of Newark.

But, before we trace the history of Pink Hula Hoop, let’s look at how TEAM has responded to the controversy generated by the first reports about Pink Hula Hoop. The response is both instructive and helps us understand the complicated financial dealings that led to the creation a for-profit corporation that, at a steeply discounted price, bought the 18th Avenue School, a publicly-owned, taxpayer-purchased, asset, from Anderson.

In a letter to charter families, Ryan Hill, the founder of TEAM Academy and the CEO of the firm, points out that, legally, charter schools may not borrow money to buy or build schools. So, he says, “In order to find new facilities at affordable rents, we work with nonprofit organizations that work with a range of federal tax credit programs to fund the construction, purchase, or renovation of buildings for us.  In this case, we collaborated with two nonprofit organizations—Friends of TEAM Academy and Kingston Education Holdings—to fund the purchase and renovation of the 18th Avenue building.”

What Hill does not say is that TEAM gets around the prohibition against borrowing and achieves other ends by creating a stable of related  non-profit and, ultimately, profit making corporations, all controlled by the same people, that exist only to channel money and other assets to TEAM Academy. For him to write, “we work   with non-profit organizations” is an obfuscation. These guys are all working with themselves.

Here are the corporations that TEAM and its allies created and funded, not just to buy 18th Avenue School, but to create a TEAM empire that, in a year or two, will have 10 schools in Newark, dominating the city’s South Ward:

Friends of Team Academy, Inc. (FOT)

NCA Facility, Inc.

FOTA Finance 1, LLC.

Kingston Educational Holdings, Inc.

Ashland School, Inc.

Pink Hula Hoop 1, LLC.

How these companies—really one tight-knit group of people controlled all of them—raised money  is complicated. And it’s complicated because, as Ryan Hill himself admits, the purpose was to borrow money while avoiding both high interest rates and taxes. The ultimate goal was to get tax-free bonds into the hands of the people who would buy them for the benefit of TEAM.

So these corporations, created just for the purpose, began buying and selling and loaning these bonds to each other, in some cases, transferring tax breaks.

Much of this dealing is laid out in a document that got into my hands courtesy of the Newark Teachers Union, the minutes of the Friends of Team Academy Charter School meeting of June 6, 2013, just three months after Christie announced he would give charter schools $125 million in public construction loans—and just two months before the EDA awarded $40 million to Kingston Educational Holdings, one of the self-created corporations that already had received more than $25 million in EDA funds.

Following this will be difficult, but hang on. FOT—Friend of Team Academy—owns  buildings in which its tenant, the TEAM Academy charter schools–operates.  In 2010, the EDA issues bonds for the Newark Collegiate Academy, one of those tenant charter schools.  In February, 2011, FOT buys $30 million of those bonds by borrowing money from Manufacturers and Traders Trust (M&T) and The Prudential Company and by receiving an ”investment” from  KIPP. KIPP is the national parent organization of TEAM charter schools. One M&T employees serves on the FOT trustee board but Hill says he recuses himself from votes that deal with M&T.

In December, 2011,  FOT’s wholly-owned subsidiary, FOTA Finance 1 LLC, buys $25 million in EDA Bonds and loaned the bonds themselves to Kingston Educational Holdings. To do that, it borrowed the money from Goldman Sachs and received another “investment”  from KIPP.

A year later, in December, 2012, FOTA borrows $32 million from Manufacturers & Traders Trust both to pay for the refinancing of the Goldman Sachs loan and to buy $31 million more in bonds issued by the EDA and loaned to Kingston.

In June, 2013, EDA issues  $17 million in bonds to Ashland, Inc. Ashland, created by the same group around FOT,  is the borrower of those bonds. Ashland uses the money to buy private school facilities on Ashland Street and Custer Avenue  from FOT, to buy nearby property from the city, to build a gym, and to pay off debt service.

Kingston then lends its bond money to Ashland, Inc. for construction at the Ashland and Custer sites.

M&T and Prudential then want to refinance their loans. FOT renews the loans for $46 million and use the proceeds of the sale of Ashland and Custer to Ashland and to pay off previous debt on those two schools that are now Rise and TEAM Academy. Then FOT submits a bid to buy the 18th Avenue through Pink Hula Hoop with money borrowed from Kingston.BLOGSMASON

It’s hard to follow but basically FOT–which can borrow private money–is borrowing money from private sources to buy publicly-funded bonds and then using the EDA money to pay off the private loans. The group around TEAM is selling bonds to itself and selling property to itself.

The law firm that helped put together the bond transactions is, by now, familiar to most New Jerseyans–Wolff & Samson. Although the EDA has approved 21 law firms to serve as bond counsel, Wolff & Samson was hired by charters that received all but $8 million of the $125 million allocated to charter schools by Christie last year. One of its partners is David Samson, chairman of Port Authority, a public figure who has done well since Christie became governor. Take a look at the comprehensive piece by The Asbury Park Press–although the paper did miss its involvement in charter schools.

I asked Ryan Hill to explain this to me. I also asked him a number of other questions, including:

  1. Can you please tell me what TEAM expects to do with the $40 million plus set aside by the EDA?
  2. Can you tell me whether TEAM loans from M&T, Prudential, and Goldman Sachs are still open?
  3. Can you tell me whether EDA funds have been used to pay off any or all of those private loans or the interest attached to them?

I showed him what I was going to write–something I rarely do– and I offered him the chance to challenge any of it.

That was last week. I am still waiting.

Still to come: How TEAM—and other charter schools—gets by with a little help from its friends.

Kathleen Kleinbeck contributed to this report.

17 comments

  1. DeeplyConcerned

    Another impressive piece of investigative reporting (while your former employer continues to cheer on the plan). Almost sounds like a money laundering scheme!

    • Newarkbluesman

      We have lost our moral compass,this is plain and simple fraud.Cami Anderson must see jail along with the others who put this scheme together.We can not allow this Ponzi scheme to continue.

  2. annie

    I had volunteered at TEAM Academy through a program at a majorly generous national retail chain that was the first to support the KIPP format of education. In supporting KIPP they funded 65 schools nationwide. When we were volunteering, the TEAM school were in the buildings that housed the closed St. Charles Borromeo School near Peshine Avenue (TEAM Academy) and St. Rocco (RISE Academy and Newark Collegiate), which I can only state was near the old Hoffman Soda plant. Are they still trying to acquire buildings owned by the Archdiocese of Newark?

  3. Source1

    Bob,

    This is well beyond issues of educational philosophy. Anderson may have crossed over into the world of criminality. If so, she should be arrested along with the others who are involved. Hopefully the legislative investigation called for by a Senator Rice will move forward.

    By the way, Moran is still not interested, eh?

  4. NPS TEACHER

    Another stunning revelation regarding the diabolical plan that is being executed. In simple terms we as educators are against a well funded and well organized enemy! -Meanwhile the inept union leadership is fighting back with “black dress Friday”….!

    • Greytone

      Did you read the post? Much of the information was provided by the Newark Teachers Union. That sounds like smart leadership to me. They are doing the legwork to uncover the details and expose the truth. Quite the opposite of inept.

  5. Richard Kress

    This is far too convoluted for the majority of financial investigators to grasp. It is no mistake that it appears confusing,because it is. It is designed to skirt the law and at the same time line the pockets of the group of insiders whose names continually appear with any look at the Christie circle of friends.
    Ask yourself if it is any coincidence that NJ Education Commisioner Cerf came from the same Charter Industry and after he accomplished his and the circle of friends agenda, he resigns and goes back into the employ of these same friends.
    Get one thing straight, a lot of the teachers and administrators working for Charter Schools have no idea that they are nothing but under trained, lack of experience teachers with misguided intentions. They are employed solely for profit of the few in power at the expense of the students, teachers and educational future of Newark.
    DO NOT BE MISGUIDED INTO THINKING THAT THE PROFITEERS AT THE TOP OF THIS FOR PROFIT SCHEME HAVE ANY CONCERN FOR THE EDUCATION OF NEWARKS STUDENTS!
    This scheme to make few in the circle of friends extremely rich at the expense of the real teachers and the real citizens of Newark.
    Not to use the race card, but look for Black and Hispanic teachers and Administrators in Newark Charter Schools. You will not find them because they are not part of “saving” Newark.
    No Bob Braun is not a crazy zealot, he is a sincere, intelligent reporter who is using his time and talent to attempt to educate the masses and inform the public what is really behind these bogus Charter Schools.
    If Bernie Madoff had used some of the illegal diversionary methods of financing utilized by the Charter Schools, he would still be in business. No one believed several reporters who wrote about the Madoff Ponzi crime for years. No one wants to believe the truth when it has been schemed to appear to be too good to be be true. Open your minds and follow the names of the same people involved and look at the financing of the Charter Schools and hopeefully enough people will stand up for the children of Newark and the devoted teachers who are being discredited and financially ruined so a select few profit immensely.
    Ask yourself why no Newspaper has taken the time to investigate this sham and when you realize their blind eye caused the Free Press into bankruptcy because they are afraid! It will not be long before there is no Star Ledger. Their building is for sale in Newark, they have laid off most of their staff and like the Public Education in Newark will not be around much longer!
    Newark deserves better, NJ deserves better, do not let down the students of Newark. If you think education is expensive, consider the price of ignorance!

  6. Vickie Leaverette

    Why don’t you write an article about the number of charter students returning to public school. I have 3 in my class within the last month

    Bob Braun: That is a very good idea. Bruce Baker did some work on attrition at charter schools. I’ll ask but NPS has not been very forthcoming with information.

  7. educationwillsetyoufree

    Bob,
    I have had a number of students admitted back to NPS after October 15th. Most of these children, at least in my experience, are kids with special needs. The parents tell me that the IEP was mostly, if not completely,ignored. To add salt to the wound, the charters have a punitive style of “motivation”.For instance, iIf a child does not do well academically they take the aspects of school that they enjoy away. I’ve even heard of them isolating the kids to the point where the parents just finally end up yanking their children out. I can honestly say that not one parent has had anything good to say about how charters have treated their kids. This is 2014, we should be in a good place but instead it appears the powers that be (Christie, Cerf & Cami) have whisked us back to the 1950’s when segregation was alive and well.

  8. MomsUnite

    The usual players, yes. But, this is just the tip of the iceberg. There are plenty more organizations involved in the mess that is TEAM charters. In fact, there are so-called public school allies funding these schools with their own money and organizations.

    Bob Braun: Let me know here or at bob@bobbraunsledger.com

  9. Zinn at heart

    Thanks Bob. Hopeful To Know There Is True Journalism Hero’s Still Among Us. Look Forward To Reading TheTruth Every Day.

  10. La. Ed. Watcher

    If ever a story needed a graphic, this is it! I need a visual to get all of these groups and actions straight.

  11. Jen

    Brilliant write up!! I really enjoyed whatever shared about pink hula hoop 2 follow the money. It’s good to see how education sector been developing through using such new concept.

    Bob Braun: Happy to help.

  12. Pingback: Flipping Schools: The Hidden Forces Behind Education Reform | Seattle Education
  13. Pingback: An Open Letter to Star-Ledger Editorial Board Director Tom Moran | teacherbiz

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