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UNO CHARTER NETWORK: Corruption, profit, and politics. Who will

stand for our children?

by Byron SigchoUniversity of Illinois at Chicago

(October 2nd, 2013)

•THE NEXT BUBBLE…..

•TOO ‘BIG’ TO FAIL…

•… SETTING UP A NEW CRISIS AGAIN…

• BUT THIS TIME THE TARGETS ARE OUR CHILDREN’S EDUCATION!

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QUICK BACKGROUND

UNO charter network is one of the state’s largest charter school networks, with 13 schools serving approximately 6,500 students (98% Latina/o students).

Despite their demographics, UNO does not support ELL, bilingual, or ethnic studies instruction; but rather “full immersion” instruction with focus on civic engagement.

UNO was recipient of a $98 million school-construction grant in 2009 (Largest of its kind in the whole country)

In official financial documents and audits UNO projects its enrollment to reach 8,096 students by 2014-2015. In fact, they must meet this projection in order to generate enough funds to honor their financial obligations with wealthy investors who own their bonds.

Juan Rangel (UNO’s CEO) was co-chairman of Rahm Emmanuel mayoral campaign. He was appointed by Emmanuel as Board commissioner for the Public Building Commission of Chicago (PBCC), despite the clear conflict of interest with his position as UNO-CEO.

UNO’s management has been more involved in politics and political scandals than in improving our public school system. UNO is a political group, not a group of educators.

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Schools or businesses?

Approximately $13 million in contracts to friends and family friends.This represents a cost of approximately $2,500 per student.

Around $8.5 million went to UNO’s #2 family members.

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UNO’S FINANCIAL BUBBLE

2006•$8 million in debt/bonds ($4,429 debt per students)

2006•$8 million in debt/bonds ($4,429 debt per students)

2007•$18 million in debt/bonds ($10,781 debt per student)

2007•$18 million in debt/bonds ($10,781 debt per student)

2008•$65 million private loan ($19,496 debt per student)•Deficit of $1.7 million

2008•$65 million private loan ($19,496 debt per student)•Deficit of $1.7 million

2011•Refinance $45 million of the 2008 private loan with:

• $37 million in bonds.

• $20 million on a new Bank Loan.

• $13.5 million on New markets tax credit/JPMorgan financing.

•Total debt = $71 million ($21,000/student)

2011•Refinance $45 million of the 2008 private loan with:

• $37 million in bonds.

• $20 million on a new Bank Loan.

• $13.5 million on New markets tax credit/JPMorgan financing.

•Total debt = $71 million ($21,000/student)

2013•Total debt: approx. $91 million in bonds.•Approx. $61 million in private loans.

2013•Total debt: approx. $91 million in bonds.•Approx. $61 million in private loans.

2005-06•1,054 students

2005-06•1,054 students

2006-071,779 studts

2006-071,779 studts

2007-08•2,325 studts

2007-08•2,325 studts

2008-09•3,334 studts

2008-09•3,334 studts

2009-2010•3,391 studts

2009-2010•3,391 studts

2010-11•3,861 studts

2010-11•3,861 studts

2011-12•5,376 studts

2011-12•5,376 studts

2012-13•6,294 studts

2012-13•6,294 studts

First Bail out

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Bond service interest table

- Most of the payments that UNO is making go towards interest rather than principal.

- In addition, by in 2019 UNO is expected to refinanced two private loans for approximately $61 million.

- UNO’s assets (school buildings) have been used as collateral to keep borrowing.

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Deficits are transferred to students

Largest deficits = Lowest instruction/support servicesOnly $0.45 of every $1 spent by UNO goes towards instruction and educational support services. The rest goes towards debt payments and administration fees.

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Revenues and Projections

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Expenses and Debt Service

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Management and Profit

Gery Chico Zoning Lawyer for UNO. Board member of the Illinois State Board of Education – approves charter applications

Alderman 25th WardCo-Founder of UNO“Killed” bill to stop charter expansion, never has voted against the mayor. Received $30,050 in campaign contribution from D’Escoto brothers

Ed Acevedo-House Rep. Brother received security contract from UNO. Received $5,250 in contributions from D’Escoto brothers

Tony Munoz-State rep. Education committeePromoted bill to fund charters at same rate as public schools.Received $10,500 in political contributions from D’Escoto companies – UNO contractors.

Rahm Emanuel-MayorRangel was campaign

managerD’Escoto companies –UNO contractors- contributed $2,500 to his campaign.

Martin Cabrera, Jr.CEO Cabrera Capital Markets, UNO Chairman, Member Public Building Commission, received large public contracts as bond underwriter, including $35 million on state bonds for UNO. Has direct business deal with Ed Burke

Susana MendozaChicago Clerk

$9,700 in contributions from D’Escoto brothers-UNO contractors

Luis GutierrezCongressman

– family ties to Solis. “Friends of Gutierrez” contributed $20,000 for his campaigns

Joe Moreno Alderman 1st

WardMLI – UNO graduate.Received $3,600 from D’Escoto companies for his campaign.

Juan Rangel UNO CEO

At the center of Nepotism and

corruption scandal

Michael MadiganHouse Speaker – Rangel campaigned for him during his election. Received $14,500 in contributions from UNO contractors-D’Escoto brothers

Ed Burke, Alderman ties with Windy City electric - $1.67 million contract with UNO . Received $4,800 in contributions from UNO contractors – D-Escoto brothers

Silvana TabaresHouse rep.

MLI-UNO trainee$51,000 in contributions from D’Escoto companies, and other UNO contractors

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Mismanagement

Despite receiving almost $60 million in CPS contributions for this school year alone, a recent report states that UNO has not been contributing to the pension funds of at least 90 teachers and school staff in years and keeps financing deficits with debt.

UNO’s new Chairman, Martin Cabrera Jr., only lasted three months on the job after being appointed by Gov. Quinn to “clean house”, and assuring the Tribune editorial team that him and Rangel will make sure things “change” in relation to the nepotism and corruptions charges.

It is key to understand that any increase in money to charters means a decrease in funding available for traditional pubic schools. Furthermore, in the case of UNO, only 45 cents of every dollar taken away from neighborhood schools will actually be used for instruction and support services. In the mean time, public funds are being transferred to wealthy investors.

Alderman Sposato (36th ward) has questioned their recruiting practices and enrollment figures. UNO has not answered to his questions yet.

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More on UNO’s mismanagement

In New Orleans, UNO administrated Esperanza Charter school for four years 2007-2011) before handing the operations to the Choice Foundation as they did not meet academic standards. UNO’s charter was the only charter in the district that was not renewed in 2011.

Another recent report in the Huff post, links UNO as a subcontractor under UNO Janitorial and Maintenance Service LLC, in the new controversial $99 million contract to clean O’Hare airport. Hundreds of employees lost their job as a result.

Even though tax-exempt/non for profit organizations are not allowed to get involved in elections, there is significant evidence that UNO officials actively engage in election process as organizers and/or funders.

In addition, UNO has real state partnerships in Senior housing projects (ex. Senior Lifestyle corporation – multinational corporation) to supplement their revenues.

Nuveen Securities LLC and Federated Investors have purchased UNO bonds for their “High Yield” municipal bonds portfolio - high risk – high yield bonds. Their bonds have been rated BBB- (“junk bonds”)

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THE NEXT BUBBLE – SOME WARNINGS

UNO’s capitalization ratio (ability to pay their obligations), and their debt-to-worth ratio (financial leverage) show high risks and serious deficits with respect to other charter schools, according to the Civic Federation (2011 report), which is actually a pro-charter organization.

UNO replied: “As new campuses come into operation, the school management anticipated that those campuses would generate sufficient funds to address the situation (financial)”

On January 17th of this year, Parents United for Responsible Education (PURE) and Chicago Local School Councils filed a formal complaint to the Illinois Executive Inspector General, charging UNO for overleveraged its charter schools. Investigation is still pending and scandals have been booing since then.

In February, a Sun-Times investigation found nepotism in several contracts and payroll positions that UNO has signed with family and friends.

In June, Gov. Pat Quinn initially hold a portion of the $98 million grant for the new UNO Soccer Academy until all the allegations were cleared. However, after the Tribune editorial team absolved Martin Cabrera and Juan Rangel from mismanagement and endorse them as the “best people” for the job, Gov. Quinn restore funding in a matter of days.

On June 7th, Teachers for Social Justice and the Hispanic Literacy Council issued an editorial letter to the Tribune editorial team, questioning their reasons for accepting and endorsing UNO’s management. The letter was never published.

Only three months later, on September 13th of this year. Martin Cabrera Jr. stepped down as UNO’s. There has not been any communications from UNO or CPS official since then.

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The UNO “revolutionary” model

The educational model implemented by UNO has nothing to do with a curricular reform or a creative/alternative teaching methodology for students, but it is a “ponzi” financial scheme supported by corporate and political interests.

UNO was the entry point for Teach for America in Chicago. Only 25% of their teachers are certified, 25% come from TFA, and approximately 50% are not educators.

Only 15% of teachers have more than 5 years of teaching experience. Actually, many former teachers report working very long hours with a very low pay with respect to their work load.

UNO’s CEO makes more money than the Mayor and more than ten times the salary of the average teacher.

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More on UNO’s “Revolutionary” model

UNO’s board do not have parents or teachers as members, but rather members with religious and corporate affiliations.

At least two of their schools were placed on probation during the first year of evaluation under the same rules that apply to traditional public schools. Five others are not reporting scores or there is “not sufficient” data.

This year, none of the UNO schools showed significant improvements in any academic standard.

Parents have been waiting for literacy and computer classes for years; this is a key component to help children with their educational needs.

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Assimilationist model

Even though more than half of students at UNO would benefit from ELL instruction (according to their own estimates), and that the vast majority of parents’ main language is Spanish; Spanish is almost a forbidden language in their classrooms.

“UNO forcefully rejects any suggestion that the Hispanic community’ s challenges represent any systemic inequity in American Life” Juan Rangel, UNO-CEO

Furthermore, UNO argues that there is no comparison between the African American civil rights movement and the struggles of Latinos in the U.S.

This model has gained UNO millions from Rupert Murdoch, the Walton Family Foundation, Gates Foundation, Golden Apple Foundation, among others; but there is no research/evidence supporting this model.

UNO is currently trying to start their own teacher-training and certification program.

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CONCLUSION

As in the recent financial crisis, predatory lenders benefited from government bailouts as they were conceived as institutions that were “too big to fail”; none of them were accountable for their irresponsible practices.

UNO has embraced these type of practices, as it continues to borrow and expand its operations even when there is substantial evidence of mismanagement and overleverage in their finances (not to mention questionable results in their educational outcomes). All of this with public resources, and bonds that will mature in the next 20 and 30 years.

Even if UNO “cleans house” and stops the rampant corruption and nepotism in their system, their educational model is still deficient and fails to address children’s educational needs to develop their full potential.

Furthermore, in general, charter schools function with contracts with expiration dates that are replacing public schools which function through the constitutional right of every child to have access to quality education.

In the mean time, who will ‘bail out’ our public schools? Who will stand for our children?

WE MUST ACT NOW!

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For more information contact:Byron sigcho

University of illinois at chicagoPolicy studies in urban education department

Teachers for social justice

bsigch2@uic.comhttp://www.teachersforjustice.org

Thanks