By April Witt and David S. Fallis
Washington Post Staff Writers
Sunday, December 14, 2008
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.
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.
Committee bylaws adopted last year require members to refrain from voting when they have a conflict of interest but allow them to weigh in on discussion "for points of clarification." City officials were unable to produce a complete set of deliberations and minutes. Neither Hart nor the vast majority of people who have served on the committee since 2000 have filed annual financial reports disclosing conflicts of interest.
Officials at the D.C. Office of Campaign Finance, responsible for collecting such forms for public officials, told The Washington Post that they were unfamiliar with the committee, had never required members to file and are reviewing whether they should be required to do so. "We are researching whether or not it is a committee that falls within our statute," said Kathy Williams, general counsel.
The committees' awards have been critical to some members' business deals.
In late 2006, in her capacity as a senior officer at Adams bank, Hart helped arrange a $10.6 million loan to Ideal Academy Public Charter School. That loan agreement -- according to a document signed by Hart -- was contingent on the school receiving $3 million in taxpayer loans and guarantees from the credit enhancement committee.
Voting by e-mail, Hart's committee unanimously approved the funding. City officials said Hart recused herself, but she was copied on the electronic exchange among the three who did vote, records show.
Bilingual Community Academy, another charter school that received financial help from the credit committee, had ties to two committee members.
One member, Karl Jentoft, was working for the development company building the academy. And his company financed the project with a $2.5 million loan from Hart's bank.
The academy came before Hart's committee several times during its development, securing $1.6 million in taxpayer funds to pay for improvements to its building. Jentoft said he recused himself from voting on the project.
In 2007, Jentoft's company was raising the academy's rent, and the committee voted to increase taxpayer support to the school, records show. Jentoft by then had left the committee to join the public charter board. Hart recused herself from the committee vote, but she told the two committee members who were present that "the project is complete and the school is at capacity with a waiting list," minutes show.
In another project last March, Hart and two committee members voted to award $1 million in public funding to the Charter Schools Development Corp. to help finance a school project opposed by some residents of the Brady Hall neighborhood of Northeast.
Weeks later, records show, Hart's bank conducted business with the same development corporation, proposing to lend it more than $2 million for an unrelated project -- transforming an Ohio furniture outlet into a charter school. Hart was the loan officer, attended the closing and was named in public records as the bank's representative in the transaction, according to records and interviews.
The development corporation's president and chief executive, former congressman Frank Riggs (R-Calif.), said in an interview that he had no idea Hart was not only his banker but also was chairing the public committee that awarded his company taxpayer funding for the D.C. project.
"That's news to me," Riggs said.
D.C. State Superintendent of Education Deborah A. Gist said that since the committee was transferred to her authority about three years ago, she has taken steps to manage and mitigate potential conflicts of interests and would be open to tighter rules. Some conflicts are inevitable because people who have the expertise to serve on the committee "are going to have their feet in different worlds," she said. "This world of people who loan to charter schools is actually a pretty small universe."
Staff writer Theola Labbé-DeBose and researcher Meg Smith contributed to this report.