Sunday, December 14

LEAVE NO BANKER OR DEVELOPER BEHIND: MAJOR CHARTER SCHOOL SCANDAL IN DC

This is the best Washington Post story we've seen in a long time.

David S. Fallis and April Witt, Washington Post When a band of Brookland neighbors packed a public meeting to try to stop one of the District's public charter schools from moving to their quiet cul-de-sac, their pleas seemed to receive a warm reception.

Thomas A. Nida, chairman of the board that supervises one of the nation's largest charter school systems, encouraged testimony from the group on that summer evening in 2007. "And anything else you've got to say, put it in writing and we'll take it," Nida said, noting that the charter board would not decide on the move for a month. "That way we will give everybody a chance to express their views."

What Nida failed to mention was his own stake in the matter. As a senior vice president at United Bank, he had been working on a $7 million loan to the Elsie Whitlow Stokes charter school to finance the very relocation that neighbors opposed.

By the time the D.C. Public Charter School Board approved the move in August 2007 -- with Nida recusing himself from the vote -- the loan deal was done. Nida's employer would receive hundreds of thousands of dollars in interest payments for years to come.

Homeowners on the losing end of that dispute had encountered one of the hidden financial conflicts of interest in the city's burgeoning charter school movement. Key members of the public bodies that regulate and fund the schools have taken part in official decisions that stood to benefit themselves, their colleagues, employers and companies with whom they have business ties, The Washington Post has found.

The Post's review found conflicts of interest involving almost $200 million worth of business deals, typically real estate transactions, at more than a third of the District's 60 charter schools. The conflicts are documented in thousands of pages of internal charter board documents, land records, tax returns, audits and other records reviewed by The Post.

James V. Grimaldi and Theola Labbe-DeBose,Washington Post - Thomas A. Nida often has played two roles when District charter schools enter into real estate deals. As a banker, he has arranged loans to the schools or their landlords. And as chairman of the public board that oversees charters, he has approved the schools' borrowing and spending. But in one episode, Nida ended up wearing three hats.

The deal centered on the old Kingsman public school, a Northeast landmark that closed in 1993 because of declining enrollment. Kingsman became an eyesore and a haven for drug dealers, with punched-out windows and peeling paint cascading onto the floors. In 2003, a charity bought the dilapidated edifice from the city for about $300,000 and began to renovate it for charter schools.

Nida was the bank officer who handled the initial $2.45 million construction loan to the tax-exempt organization, Charter School Development Corp., known as CSDC. Soon after, Nida was appointed to the Public Charter School Board and began taking official actions that affected CSDC and its tenants. Then, as a banker, he refinanced the loan. After that, he joined the nonprofit group's board of directors, where he further helped expand its financing to obtain city revenue bonds.

Finally, in July 2006, Nida made a move that led to a financial windfall for CSDC. He led the effort and cast the deciding vote that shut down one of the two charter schools renting space in Kingsman, clearing the way for the other tenant to purchase the 54,810-square-foot building.

CSDC made almost $1 million from the sale. "We made a nice gain on it," said Frank Riggs, the former California congressman who is the group's chief executive, "which we need, to be candid with you, to offset the risk for properties we own in northwest Indiana."

Nida did not disclose his multiple roles in the Kingsman deal at a public hearing, according to a transcript, or before the vote, according to two charter board members who voted against the closure. Nida also has not listed his CSDC board membership on the financial disclosure forms he filed with the city. Nida said yesterday that he did not think he needed to disclose the position because it was unpaid.

April Witt and David S. Fallis, Washington Post - The D.C. charter school credit enhancement committee has operated largely out of public view for most of its eight years of existence. Yet it has awarded $47 million in taxpayer loans and guarantees to more than 30 schools or their developers. That generous funding has been a decisive factor in the District's charter school system's becoming one of the largest in the nation.

The committee's generosity has also benefited banks and private companies that have business ties to committee members, including the current chairman, Barbara "Bobbie" Hart, public records show.

Committee members or their employers have had financial ties to about a third of the applicants or projects that the committee has voted to fund with public money. Since Hart joined the committee in 2006, the panel has voted repeatedly to award taxpayer funds to charter schools or developers with ties to Adams National Bank, where Hart is a vice president. Hart has recused herself from all but two votes involving applicants that had given her loan business or were about to, records show. She declined to comment.

Congress created the five-member committee to award taxpayer money to help lease, buy or build charter school facilities. The committee, which operates under the Office of the State Superintendent of Education, has awarded charter schools or their developers about $22 million in "credit enhancement" money, typically for collateral to secure commercial bank loans. The committee has lent an additional $25 million for facility-related expenses. ad_icon

The committee has been dominated by bankers, developers and investment professionals appointed by the mayor's office and the charter school board. Of the 10 people who have served as members since 2000, more than half have been involved privately in the financing or development of schools or worked for companies that were, records show. Overall, almost $20 million in taxpayer funding has been awarded to schools or developers that conducted business with committee members or their companies.

One of the original members of the credit enhancement committee was Matt HoganBruen of Bank of America. During his five years on the committee, it awarded millions in taxpayer subsidies to charter schools or their developers that were Bank of America loan customers, records show.

"It is the policy of Bank of America and the personal policy of Matt HoganBruen not to knowingly vote on transactions positively affecting" Bank of America customers, a bank spokesman said in an e-mail. The statement said it was "not uncommon" for the committee to discuss financing without members knowing which banks were involved.

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