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by Maisie McAdoo | June 3, 2010 New York Teacher issue
Who paid for the recent mass mailing of the glossy flier attacking the UFT? In two words: hedge funds.
In the corner of the back page of the flier is the note “Paid for by Education Reform Now” and a Manhattan return address.
Education Reform Now is an arm of Democrats for Education Reform, started by former Daily News education reporter Joe Williams and boasting a board of major hedge-fund managers. Education Reform Now also promotes charter schools, mayoral control of schools and school choice (including vouchers for private and parochial schools) in New York, Michigan, Rhode Island and several other states.
But what they have is a business plan, not an education plan.
John Petry, a partner at Gotham Capital Management, chairs the board of Education Reform Now. Petry’s Gotham Capital LLC, founded in 1985 with $7 million from junk-bond king Michael Milken, is a privately owned hedge fund that manages investments for wealthy clients, investing in equities as well as spin-offs, restructuring and takeovers.
The other board members are Sidney Hawkins Gargiulo of Hawkshaw Capital, founded in 2002 by a former Lehman Brothers analyst; John Sabat of SAC Capital, a Stamford, Conn.-based private investment firm; and Brian Zied of Maverick Capital, a Dallas-based investment advisor managing hedge funds and private investment funds.
Tracing their philanthropic interests leads quickly to New York City’s charter schools. Petry and Gotham Capital founder Joel Greenblatt fund Eva Moskowitz’s Harlem Success Charter Network and paid her $371,000 salary in her startup year. Goldblatt is chairman of Harlem Success’ board as well as chair of two of her individual schools. Petry sits on the boards of the Harlem Success Charter Network plus two schools. SAC Capital’s Sabat is a board member of two Harlem Success schools, Hawkshaw’s Gargiulo is a member of another, and Maverick Capital founder Steve Galbraith chairs yet another.
Education Reform Now spearheaded a $2 million media campaign this spring to try to lift the New York State charter cap without reforms. Its chapter in Milwaukee is lobbying for a mayoral takeover of the Milwaukee schools and for the survival of that city’s school voucher program. And the group recently campaigned for a slate of school board candidates in Buffalo pushing a charter school agenda.
The money trail
The latest public filing available for Education Reform Now shows it received contributions and grants of $1.3 million in 2008, up from $173,500 the year before. (Without doubt, the level of donations has skyrocketed since then.) The filing does not list the group’s benefactors, but one is the Robertson Foundation, the private foundation of Julian Robertson, the founder of the Tiger Management hedge fund.
The Robertson Foundation, which has assets in excess of $1 billion, gave away $71 million in 2008, including $250,000 to Education Reform Now, $1 million to the Achievement First charter network, $2 million to KIPP charters, $3 million to the New York City Center for Charter School Excellence, $7.1 million to Teach for America and $200,000 to the New Teacher Project, along with large grants to conservative churches.
In the process, hedge fund executives have become, in the words of The New York Times, “perhaps the first significant political counterweight” to teacher unions.
Why do they care?
Hedge funds follow different investment strategies, but one thing that unites them is the absence of virtually any public information about them. Hedge funds are open only to select investors who can put up sizeable funds, and they are exempt from many financial regulations. The latest best guess is that they manage more than $2 trillion in assets exclusively for wealthy investors.
What gets hedge fund managers involved in charter schools and school reform? “Charter schools appeal to the maverick instincts of many who run hedge funds,” speculates one blog post on The New York Times website.
By tapping into this instinct, Williams has helped make charters the “hot cause,” in his words, for hedge funds. He has harnessed their anti-regulatory instincts to oppose teacher unions and advocate for private management of public schools.
The hedge funds are perverting charter schools for the purpose of attempting to privatize public education. There is already close to $2 billion in public funds in the charter school system in New York State, and the hedge funds are angling to control a chunk of that money.
The political agenda
Democrats for Education Reform is part of a Wall Street effort to influence the Democratic Party. Williams and his colleagues see trade unions, a traditional backbone of the party and defender of workers’ rights, as bureaucratic stumbling blocks to the privatizing reforms they advocate.
What’s wrong with the picture is that it excludes most teachers’ views about how to fix public schools.
Comments on the petition website of Education Reform Now didn’t exactly parrot its suggested message. One person replied, “Workers organize themselves to protect themselves from folks like you. Playing politics with teachers is what hurts the kids, not seniority.” And another: “Please, even I know it takes years to become a good teacher. Removing experienced teachers so that you can save inexpensive teachers is not going to help.”
Maybe Education Reform Now could direct some hedge fund money to prevent layoffs instead of exploiting teachers’ fears about losing their jobs to further its own political agenda.
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