Edison Flies Staff to Luxury Resort as Some Schools Lack Books
By David Evans
Colorado Springs, Colorado, Oct. 10 (Bloomberg) -- Edison Schools Inc., under fire for failing to supply all the required textbooks and educational materials to schools in Philadelphia and Chester, Pennsylvania, hosted a three-day, $300,000 conference for its employees and school principals this week at a five-star resort in Colorado Springs.
Edison gathered more than 175 staff members at the Broadmoor, a Rocky Mountain hotel with three golf courses, 10 restaurants and a 3,000-bottle wine cellar. At the same time, the Chester district is threatening to fire the company next week because, it says, Edison didn't deliver required computers and books. Teachers' union officials in Philadelphia, Edison's largest district, say some Edison schools are waiting for books and other supplies five weeks into the school season.
``I'm dumbfounded,'' said Thomas Persing, chairman of the Board of Control that runs the Chester schools, when told details of the Colorado conference. ``I have to question their priorities. I'm disappointed that we haven't received the supplies that they're obligated to provide under their contract.''
Edison, the largest private manager of public schools, has recorded losses of more than $300 million since entrepreneur Christopher Whittle founded the company 10 years ago. Its shares plummeted 99 percent this year, closing at 20 cents in Nasdaq Stock Market trading yesterday.
Philadelphia schools Chief Executive Officer Paul Vallas has withheld $4 million in payments from the company, he said, because Edison hasn't provided required financial documents that would protect the city's schools if Edison filed for bankruptcy.
Items on `Backorder'
Edison spokesman Adam Tucker said the company intends to meet its obligations to Philadelphia, where it manages 20 schools. He said Edison hadn't delivered about 20 percent of school supplies because ``there are some items that are backordered.''
Tucker said Edison's nine Chester schools would receive their supplies if the company's negotiations with the district result in Edison getting more money than called for in its contract.
``As soon as our contract is resolved, we'll absolutely make sure the schools have what we're obligated to deliver,'' Tucker said.
The conference, which began Monday and was called ``Navigating Edison Schools Wisely,'' comes at a time when Edison says it's trying to cut spending.
In a luncheon speech Tuesday, Whittle offered a suggestion to save money and make use of student abilities. He told the principals that Edison students could work for one hour each day in school beginning as early as 2004. In a school with 600 pupils, student labor could provide the equivalent of 75 additional full- time staff members, he said.
`A Real Job'
``Every child has a real job in the school every day,'' Whittle said in describing his vision. He said students could teach and run ``big'' parts of school offices and ``huge'' parts of school technology systems.
``We could have less adult staff,'' Whittle said. ``I think it's an important concept for education and for economics that Edison needs to raise to another level.''
Edison's efforts to cut costs include attempting to save money on rent for office space. Last week, the company moved out of leased offices in Philadelphia and tried to move administrators into a public school building. Vallas, Philadelphia Schools' CEO, halted the move, declaring it was unauthorized and illegal. As a result, Edison was left without offices in Philadelphia.
Edison President Chris Cerf stood outside the Broadmoor's Rocky Mountain Ballroom Monday evening, greeting principals as they arrived at a cocktail reception that kicked off the conference. About 100 principals from Philadelphia, Chester, Detroit, Washington, Chicago, San Jose, California, and other cities attended.
A Private Meeting
``Relax, hang out, chill,'' said Cerf, a former associate counsel to President Bill Clinton, with a smile.
Whittle, who arrived at the resort as the party wound down, declined to be interviewed. ``This is a private company meeting,'' he said.
Broadmoor's nightly room rates range from $375 to $3,170, according to its brochure. Edison, based in New York, said it received a discount. Total costs for the trip, including food and travel, will be more than $300,000, Tucker said.
``It's unconscionable that Edison spends big bucks to wine and dine principals when kids don't have the basic school supplies they need,'' said Jerry Jordan, vice president of the Philadelphia Federation of Teachers, which represents 20,000 district employees.
``You can't do your job if you don't have the tools you need,'' Jordan said. Federation officials opposed Edison's effort to manage schools in Philadelphia, saying they feared a for-profit company might cut corners and harm education.
Saving Money
Tucker said Edison saved money by holding training for principals at the Broadmoor. He said the event was moved from the Mirage Hotel and Casino in Las Vegas to use rooms Edison was obligated to rent for a canceled client meeting.
``The only reason we're having it here is because we signed a contract 2 1/2 years ago,'' Tucker said.
Edison shares began tumbling in April, when the company won approval to manage less than half as many schools as it expected in Philadelphia.
In May, the Securities and Exchange Commission concluded Edison didn't provide investors accurate disclosure because 41 percent of reported revenue was money never received. Edison counts money school districts pay for teachers' salaries as revenue; those funds don't go to the company. It settled with the SEC, neither admitting nor denying wrongdoing.
In August, Edison negotiated $40 million in loans from Merrill Lynch & Co. and School Services Inc., a company formed by two former Edison directors. The company said it needed the money to finance the management of 20 Philadelphia schools.
Collateral Problems
Philadelphia is seeking assurances that if Edison fails, the company's assets in the schools won't be withdrawn abruptly. Those assets, including computers and books, are used as collateral for loans. Without assurances from Edison, the city hasn't made $4 million in scheduled payments to the company.
``I'll continue to withhold compensation until they comply with the contract,'' said Vallas, the Philadelphia School District CEO. He said payments also are being withheld because Edison hasn't disclosed current financial information, including an updated financial statement.
``We've always known that we wouldn't get our first payment until the documents were done,'' Tucker said.
Edison faces another challenge in Chester, which is about 30 miles south of Philadelphia. A report on Edison's first year in Chester, written by the district staff in May said, ``Students are not issued textbooks and cannot use textbooks for homework.'' The board said Edison removed computers from classrooms without replacing them for most of the school year.
No Teacher Training
The company failed for a second year to conduct teacher training before schools opened in Chester, said Persing, the control board chairman. It also failed to provide students and teachers with promised computers, and delayed delivery of school supplies, Persing wrote in a Sept. 20 letter to Whittle.
``The school district considers these actions to be a unilateral abandonment by Edison of its management agreement,'' Persing wrote. He said he has given Edison until Tuesday to meet its obligations or be put on notice that the district will seek to terminate the contract.
Tucker ran workshops Tuesday for the Edison principals, called ``Communicate Your Schools' Successes.'' Those seminars were followed by a cocktail hour, an awards ceremony and a party at the hotel's Starz nightclub. |
