Is charter school fraud the next Enron?

Source: Preston Green III, The Conversation, April 27, 2017

… As a scholar who studies the legal and policy issues pertaining to school choice, I’ve observed that the same type of fraud that occurred at Enron has been cropping up in the charter school sector. A handful of school officials have been caught using the Enron playbook to divert funding slated for these schools into their own pockets. … Enron’s downfall was caused largely by something called “related-party transactions.” Understanding this concept is crucial for grasping how charter schools may also be in danger. Related-party transactions are business arrangements between companies with close associations: It could be between two companies owned or managed by the same group or it could be between one large company and a smaller company that it owns. Although related-party transactions are legal, they can create severe conflicts of interest, allowing those in power to profit from employees, investors and even taxpayers.

… Without strict regulation, some bad actors have been able to take advantage of charter schools as an opportunity for private investment. In the worst cases, individuals have been able to use related-party transactions to fraudulently funnel public money intended for charter schools into other business ventures that they control. … Fraudulent related-party transactions can also occur between education management organizations (EMOs) and their affiliates. EMOs are for-profit or nonprofit entities that sometimes manage charter schools, and might also own smaller companies that could provide services to those schools. … Because of insufficient oversight, Fastow’s fraudulent use of related-party transactions at Enron was not stopped until it was too late. Similarly, the Ivy Academia and Renaissance Academy examples reveal insufficient checks and balances in the charter school sector. In both cases, the monitors responsible for protecting charter schools found nothing wrong with the rental agreements. …

School board votes down outsourcing custodial services

Source: Chris Ford, Mat-Su Valley Frontiersman, May 5, 2017

More than two hours into Wednesday evening’s Mat-Su Borough School District’s regular board meeting, the crowd erupted into applause following a vote not to award a more than $4.8 million, three-year contract to NANA Management Services for custodial services. The board heard from about a dozen individuals on potential budget cuts under consideration as the district continues to wrangle with unknown funding sources as its June 30 deadline to approve a balanced budget nears. Privatizing the service was expected to provide of the largest savings in the at least $11 million deficit. But when the question came, the issue failed on a 4-3 vote. …

Petition circling to stop Mat-Su school district from outsourcing custodial, cafeteria positions
Source: Sierra Starks, KTVA Alaska, March 27, 2017

Faced with a $10 million budget deficit, cuts sometimes have to be made beyond the classroom, says Matanuska-Susitna Borough School District (MSBSD) assistant superintendent Luke Fulp. As a “viable option to help reduce ongoing expenses and financial obligations,” the district is looking to outsource its custodian and nutrition service workers. In February, the MSBSD voted 4 to 3 to move forward with a request for proposal (RFP), calling for companies interested in providing contracted employees. It’s a move Fulp says could save the district up to $4.3 million. And with a $10 million budget deficit, he says the district is “exploring all options, and making sure everything is on the table, especially when it comes to support services, where we could limit the disruption to students.” … But those cuts come at the cost of connections made over the years, says Karen Salisbury, president of the Mat-Su Classified Employees Association, which oversees the borough’s custodians and nutrition workers. … Potential for a flood of new faces in the district’s schools doesn’t sit well with Salisbury, so she’s spearheading an online petition to get the school board to say no to outsourcing when the measure is up for a vote in April. … Meanwhile, the district is moving forward with the process to outsource. An intent-to-award letter was issued to Nana Management Services on Friday, Fulp says. …

Paul Ryan Still Talking Up The Idea Of Privatizing Medicare

Source: Tierney Sneed, Talking Points Memo, May 12, 2017

House Speaker Paul Ryan hasn’t let go of his cherished idea of privatizing Medicare and in an interview with a local Wisconsin radio station Friday, suggested that a blueprint for overhauling Medicare would advance in the Budget Committee again this year. … Ryan has released various versions of his so-called “Path to Prosperity” budget blueprint that have included a privatization of Medicare. The general idea he has promoted is turning Medicare into a so-called “premium support” system — i.e. a voucher system — in which seniors would get a set amount of money to shop around for private health care plans. Earlier versions of his proposal would have lead to a phase-out of Medicare altogether. Some experts have argued that even the most recent iteration of his blueprint, which ostensibly leaves some form of traditional Medicare available, would eventually lead to its phase-out as well. … It’s not just Ryan that’s trying to make Medicare privatization happen. Trump’s Office of Management and Budget Director Mick Mulvaney, a former House member with a reputation as a budget hawk, said last month that it was his “guess is the House will do either that or something similar to that.” …

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Trumpcare Will Be A Gold Rush For Private Contractors
Source: Donald Cohen, Huffington Post, March 16, 2017

… What the bill would do to Medicaid, the health care program for poor, elderly, and disabled Americans, plays right into the hands of private contractors looking to score big on taxpayer money. By including Medicaid “block grants,” which is a fancy way of saying “cuts,” the bill would force states to slash costs. And when budgets are tight, corporations come calling, claiming they’ll do the work cheaper, better, and faster. But, whether it’s running private prisons or operating water utilities, their claims often ring hollow, especially when it comes to helping those on the margins of society. Just look at what happened to cash assistance for families with children, known as “TANF.” After the program was block granted in 1996, a cottage industry sprung up to squeeze profits from the limited pool of welfare funds. Within five years, over $1.5 billion in taxpayer dollars meant for poor families had gone to contractors like IBM and Lockheed Martin. By 2014, only 26 percent of TANF dollars were going to basic assistance for poor families. … Over 60 percent of nursing home residents and two in five kids in the U.S. rely on the program. It’s also the main public funding source for family planning, like contraceptive counseling and care, and screenings for sexually transmitted infections and cancer.

… The struggle to protect Medicaid, let alone expand it, will only get tougher. On Wednesday, the Senate confirmed Seema Verma, a private health care consultant, to lead the agency in charge of the program. Verma supports block grants and has helped a number of states, including Iowa, privatize their Medicaid programs. Less than a year in, Iowa’s privatized program is spinning into disaster for 600,000 poor, elderly, and disabled Iowans. If Trump wanted somebody who knows the corporate takeover of Medicaid in and out, he certainly found her. While helping Indiana overhaul its program, Verma was also on the payroll of one of the state’s largest Medicaid vendors, Hewlett-Packard. …

Senate confirms Trump’s Medicaid, Medicare pick
Source: The Hill, March 13, 2017
 
The Senate voted to clear Seema Verma to lead the Centers for Medicare and Medicaid Services under President Trump.  Verma was confirmed in a 55-43 vote Monday evening. She will now be dropped into the fight over how to repeal and replace the Affordable Care Act and is expected to play a large role in any attempt to reform either Medicare or Medicaid. … Democrats largely said they opposed Verma’s nomination after trying unsuccessfully to pin her down on a number of policy issues during her confirmation hearing, including if or how she would reform the programs.

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Lawmakers Tour Penn Station as Christie, Cuomo Call for Privatization

Source: Lucy Yang, WABC, May 12, 2017
 
New Jersey state lawmakers toured Penn Station Friday to get a first-hand look at infrastructure in desperate need of repair after an ongoing wave of delays have left commuters frustrated and angry. And it comes as New Jersey Governor Chris Christie and New York Governor Andrew Cuomo are pushing to privatize the transit hub. … The legislators got an eye-opening glimpse at the scope of work that Amtrak will undertake this summer, including the spaghetti junction of tracks and switches that needed to be replaced after a train derailment last month paralyzed service on New Jersey Transit, LIRR and Amtrak lines for a week. … On Thursday, Christie and Cuomo issued a joint letter declaring they have lost all faith in Amtrak. … If Amtrak agrees to contract out the running of Penn Station, the governors also want the right to approve any future, private contractor. …

ICE’s Private Detention Centers Keep Data Under Lock and Key

Source: Mia Steinle, Project on Government Oversight, May 3, 2017

Hundreds of thousands of people are held for varying amounts of time in America’s privately run detention centers every year. Want to know how well these private facilities are managed? What about how they treat their detainees? Or how the federal government holds the private companies accountable for mistakes, negligence, or worse? Good luck trying to find the answers in the sparse data the federal government makes public. There are currently 112 federal detention centers in America that house people who are arrested for entering the country illegally, and non-US citizens who are deemed a threat to national security, according to Immigration and Customs Enforcement (ICE), the law enforcement agency within the Department of Homeland Security (DHS) that oversees these detention centers. ICE detention centers are either run by the government itself or, in the majority of cases, run by private contractors. The number of privately run facilities is expected to increase under the Trump Administration. … While all ICE detainees face the possibility of deportation, the stakes may be especially high for people sent to private detention centers. … Allegations of abuse may grow given that the Trump Administration is moving to reduce oversight of these private facilities. The New York Times reported that, according to unnamed DHS officials, new contracts with private detention centers will not require that the centers provide translation services or prompt medical care to detainees. Additionally, ICE’s Office of Detention Policy and Planning, which, among other things, created guidelines to help prevent sexual assault of detainees, is being shuttered.

… Even fundamental information on America’s immigrant detention complex is hard to pin down. … Based on POGO’s analysis, it is clear that even the most basic information about ICE detainees and detention facilities is not available online. … Unlike government agencies, private companies that are contracted by the federal government to run ICE detention centers are not subject to the Freedom of Information Act (FOIA). This makes it much more difficult to obtain information about these facilities. … Congress should pass the Private Prison Information Act of 2017 (H.R. 1980) into law, which would expand the Freedom of Information Act to apply to private detention facilities.

Valley Stream Contractor Charged With $700K Wage Theft

Source: Timothy Bolger, Long Island Press, May 4, 2017

A contractor from Valley Stream was arrested for allegedly cheating 10 workers out of nearly $700,000 in wages and benefits on taxpayer-funded New York City public school construction projects, authorities said. Vickram Mangru was charged with felony counts failure to pay the prevailing rate of wage or supplements and falsifying business records. He was released without bail following his initial court appearance. … Prosecutors said Mangru paid workers “well below” legally mandated prevailing wage rates on city Department of Education projects in the Bronx between December 2012 and February ‘15. … He was previously debarred and banned for a five-year period from performing public work projects by the city Comptroller’s Office for failing to pay proper prevailing wages to workers, prosecutors said. But the suspect instead changed the name of his company and continued allegedly underpaying workers, authorities said. …

More private prisons to be considered in Louisiana legislative resolution

Source: Julia O’Donoghue, New Orleans Times-Picayune, May 10, 2017
 
Louisiana lawmakers are taking a new look at privatizing management of five more state prisons. The House Committee on Administration of Criminal Justice on Wednesday (May 10) sent the full House a resolution asking for a study of privatization, an option not recommended by a host of other political leaders and analysts who have been pushing prison reform in recent months.  Private operators already are in place at two Louisiana prisons: Allen Correctional Center at Kinder and Winn Correctional Center near Winnfield. House Concurrent Resolution 30 would require the Department of Public Safety and Corrections to look at privatizing five more — all except the maximum-security Louisiana State Penitentiary at Angola and Elayn Hunt Correctional Center in St. Gabriel. … Louisiana recently concluded a 10-month task force study on how the state could reduce its highest-in-the-world incarceration rate and save money on incarceration. Privatization was not recommended. Nor has it been promoted by Democratic Gov. John Bel Edwards and Republican legislators who are pushing a criminal justice reform package in the current legislative session. … But Louisiana has had budget shortfalls consistently since 2009. To tighten its belt, the state downgraded the Winn and Allen sites from certified prisons to jails in 2016. No other state has made a similar move, essentially an administrative maneuver that lets a state work around prison regulations and save money. …

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Louisiana considering closing 2 prisons in budget cuts
Source: Kevin Litten, New Orleans Times-Picayune, February 19, 2016

The Louisiana Department of Corrections is considering closing closing two privately operated prisons as it tries to cut $14.1 million in spending to help close the state’s $940 million budget shortfall. Winn Correctional Center and Allen Correctional Center, are operated by two separate companies. The two closures would save an estimated $4.6 million. Another option the Department of Corrections is floating — and the one the department most prefers — is to temporarily reduce the rate the state pays the two companies that operate Winn and Allen prisons, for a savings of $2.6 million. … The proposal for the two private operators of the prisons, LaSalle Southwest Corrections and the GEO Group, sets up a difficult ultimatum: Either accept the lower per-prisoner pay rate or face total shutdown. The department currently pays $31.52 per day; the local rate the department wants to pay is $24.39 per day.

Corrections outlines plans for $14.2 million shortfall, including plans to potentially shut down two privately run prisons, reducing sheriffs’ pay for housing state inmates
Source: Bryn Stole, The Advocate, February 19, 2016

The Louisiana Department of Public Safety and Corrections may shutter two privately run prisons and reduce the rates it pays parish sheriffs for housing state inmates as it faces a $14.2 million shortfall for the budget that ends June 30. … Shutting the two facilities would cost about 630 jobs, LeBlanc said, but it will allow the corrections department to save an estimated $2.3 million by shuffling the roughly 3,200 inmates to parish jails. Other savings would be made up by reducing overtime pay and slashing the rates that are paid to local jails.

Trump Administration, Senators Put Fannie, Freddie Overhaul Back in Play

Source: Andrew Ackerman, Wall Street Journal, May 11, 2017
 
The Senate Banking Committee has begun behind-the-scenes work on the issue of how, exactly, to revamp the companies. The senators want to develop a framework to decrease the government’s outsize role backstopping the nation’s $10 trillion mortgage market. On Thursday, the panel will hear testimony from Mel Watt, the director of the Federal Housing Finance Agency, which controls Fannie and Freddie, in the first step of a process that could play out in the coming months.  It remains unclear if policy makers can overcome philosophical differences and hammer out a final deal. Conservative Republicans have called for a private market with no new federal guarantees. Some centrist Republicans and many Democrats have said a federal role is needed to preserve liquid markets for the popular 30-year fixed-rate mortgage that drives home buying. …

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Fannie, Freddie shares dive after U.S. appeals court ruling
Source: Nathan Layne and Svea Herbst-Bayliss, Reuters, February 21, 2017

Shares of Fannie Mae and Freddie Mac tumbled more than 30 percent on Tuesday after a U.S. appeals court shut down efforts by hedge funds and other investors to pursue numerous legal claims accusing the U.S. government of seizing their profits following taxpayer bailouts. By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay the U.S. Treasury an amount equal to their quarterly net worth. … Both stocks are still up by about two-thirds since Donald Trump won the U.S. presidential election on Nov. 8. Investors said part of that rally stemmed from comments that month by then-Treasury Secretary-nominee Steve Mnuchin that both companies should be privatized. Mnuchin, however, said in January he was against such a plan. … Both companies have since become profitable under the conservatorship of the Federal Housing Finance Agency. According to court papers, they have returned roughly $68 billion more to the government than they drew down during the financial crisis. … Analysts said the ruling was consistent with others on FHFA’s guardianship of Fannie and Freddie, making it less likely the Supreme Court would take the case. …

The Time Is Ripe: MBA Introduces GSE Reform Proposal
Source: Patrick Barnard, MortgageOrb, February 1, 2017

With government-sponsored enterprise (GSE) reform highly likely under the new administration, the Mortgage Bankers Association (MBA) is wasting no time and yesterday introduced its own proposal for what should happen to Fannie Mae and Freddie Mac. Similar to previous proposals that have been floated about during the past several years by various groups (including the association), the MBA’s plan calls for the GSEs to be “congressionally re-chartered” – in other words, re-privatized – and, importantly, calls for an “explicit guarantee” on the mortgage-backed securities they issue. The MBA’s plan, as outlined in a soon-to-be-released paper, calls for the establishment of a “new, durable foundation for the secondary mortgage market,” the MBA says in a release. … Consistent with the MBA’s previous recommendation, the paper calls for an “end-state that would encourage multiple guarantors” that “would be organized as privately owned utilities with a regulated rate of return.” …

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Concerns Raised About Health-Care Contractor at Clarke County Jail

Source: Blake Aued, Flagpole, April 26, 2017

At least one commissioner and activists are raising questions about the Clarke County Sheriff’s Office’s choice of a contractor to provide medical care at the county jail. Sheriff Ira Edwards and Chief Jailer Tommy York have recommended Armor Correctional Health Services Inc. for a five-year contract paying nearly $1.7 million next year, rising each year to $2 million in fiscal 2022. The current contractor, CorrectHealth Athens, lasted just one year, and the contract was opened up for bidding, with five companies responding. Athens for Everyone’s Tim Denson expressed concern about Armor in a letter to the Mayor and Commission, citing “questionable deaths” in New York, Milwaukee, Oklahoma and Florida. …

Modeling Fiscal Stress and Contracting Out in Local Government: The Influence of Time, Financial Condition, and the Great Recession

Source: Antonio M. López-Hernández, José L. Zafra-Gómez, Ana M. Plata-Díaz, Emilio J. de la Higuera-Molina, The American Review of Public Administration, April 19, 2017 (Subscription Required)

Abstract: Various studies have analyzed the relationship between fiscal stress and contracting out, but have failed to achieve conclusive results. In this article, we take a broad view of fiscal stress, addressed in terms of financial condition and studied over a lengthy period (2000-2010). The relationship between fiscal stress and contracting out is studied using a dynamic model, based on survival analysis, a methodology that enables us to take into account the effect of time on this relationship. As this study period includes the years of the Great Recession (2008-2010), we also highlight the impact of this event on the fiscal stress–contracting out relation. The results obtained suggest that taking into account the passage of time and conducting a long-term assessment of financial condition enable a more precise understanding of this relation. We also find that the Great Recession reduced the probability of local governments’ contracting out public services.