.Eli’s Experiment

Meet Eli Broad, a SoCal billionaire who uses his cash and connections to groom Oakland school administrators and keep the district under state control.

Vince Matthews needed to rehabilitate his reputation. He had quit his post as an Oakland school principal after just a few months on the job, and a for-profit charter school he ran in San Francisco nearly lost its license after allegations of discrimination. With that kind of résumé, Matthews had little chance of ever fulfilling his dream of becoming a school district superintendent. That is, until he enrolled in the Broad Academy.

Indeed, Matthews was passed over for a midlevel management job with Oakland Unified not long ago due to lack of qualifications. But now he’s pocketing $240,000 a year as the new interim state administrator of the district, one of the largest in California. He follows in the footsteps of two previous Broad graduates — Randy Ward and Kim Statham. And like his predecessors, Matthews now oversees more than one hundred schools and nearly forty thousand children with all the powers of both a superintendent and an elected school board.

The architect behind Matthews’ sudden turnaround appears to have been Eli Broad — pronounced like road — a retired suburban homebuilder and life insurance magnate. With assets valued at $5.8 billion, Broad is the 42nd richest person on the planet, according to the September 19 issue of Forbes. Over the past seven years, he has quietly used his financial muscle to remake himself as an education reformer and political power broker who wields considerable clout with school districts around the state, particularly Oakland Unified.

An ardent charter-school supporter, Broad built his influence through his close ties with state Superintendent of Public Instruction Jack O’Connell, who also happens to be Vince Matthews’ boss. O’Connell, in fact, owes Broad a debt of gratitude. According to campaign finance records on file with the secretary of state, Broad helped O’Connell capture the state superintendent’s office in 2002 by cutting a check for $100,000, which put him among the campaign’s top donors.

The billionaire’s juice with California’s highest ranked educator, in turn, has allowed him to operate what amounts to his own educational experiment behind the scenes in Oakland.

Broad believes the best way to fix troubled urban school districts is to employ the classic American business model in which a powerful chief executive runs roughshod over a weak governing board. Oakland, under state control, has provided the perfect laboratory. Since the state takeover in 2003, Broad has donated $6 million to the Oakland schools, and the district has been led solely by graduates of his leadership training academy. During that period, nine other Broad associates also have held high-level positions in the district.

Public records also show that Broad has helped finance an expensive lobbying campaign to prevent the return of local control to Oakland schools. He has donated more than $350,000 to EdVoice, a Sacramento nonprofit upon whose board he has served. EdVoice has lobbied heavily in recent months against AB45, a bill by Oakland Assemblyman Sandré Swanson that would gradually return powers to the Oakland school board.

Sources familiar with the situation say Broad fears the Oakland school board would replace Matthews with a non-Broad-graduate were it to regain its authority, thereby ending his experiment and possibly jettisoning the reform efforts he financed and helped engineer. “It’s all about protecting his investment,” one knowledgeable source says, who spoke on condition of anonymity because of the power Broad and O’Connell wield in California public education.

Broad’s investment appears safe for now. Governor Arnold Schwarzenegger has until October 14 to either veto or sign AB45 into law, but it would be a major surprise if the bill gets past his desk. Broad, after all, ranks among Schwarzenegger’s top campaign contributors since 2004. He has donated at least $710,000 to the governor and causes dear to his heart.

Broad isn’t necessarily a bad guy. His critics and supporters both think he means well for the city’s schoolchildren and for education in general, but his hefty campaign donations and close ties to some of California’s most powerful men have essentially given his unelected private enterprise power over the Oakland schools. Which raises this question: What happens when his all-powerful CEOs are not up to the job?

Eli Broad has no qualms about using his wealth to stir up controversy and sway political campaigns. He has done it repeatedly in Southern California, where, in the 2000, 2002, and 2004 elections, he tried to defeat school board candidates who did not support his friend Alan Bersin, who was then superintendent of San Diego Unified. Bersin, who also believes in the corporate model as a way to turn around foundering school districts, had partnered with the Broad Center and hired several of its graduates.

Known as a control freak’s control freak, the 74-year-old Broad has no patience for activist school boards. Prior to 2004, he already had spent nearly $5 million on Bersin’s reforms, but by then, parents and teachers were leading a backlash against him. He responded by pumping $65,000 into school board campaigns intended to defeat Bersin detractors. But this time, money was not enough. “I was running hard against him and all these outside folks who had so much influence over our schools,” recalled board member Mitz Lee, who trounced her Broad-backed competition. “People realized that he was trying to buy the election of the board. Then, once I was elected, the first thing we did was not renew his project in San Diego.”

Several months later, Bersin followed Broad out of town to replace another of the billionaire’s friends, Richard Riordan, as Schwarzenegger’s education secretary.

Born in the Bronx and raised in Detroit, Broad seems an unlikely education reformer. He was a self-described “goof-off” in high school, who, in his early twenties, took a $25,000 loan from his father-in-law and cofounded Kaufman and Broad, which built and sold cheap tract homes in Detroit’s burgeoning suburbs. In the early 1960s, he moved his company to Los Angeles — ground zero of suburban sprawl. He later renamed it KB Home and grew it into one of the largest homebuilders in the nation.

KB Home was just the first of two businesses that Broad built into a Fortune 500 powerhouse. In the early 1970s, he bought Sun Life Insurance Company of America, and in less than two decades, transformed it into one of the country’s largest annuity companies. Along the way he renamed it SunAmerica, which he sold to American International Group (better known as AIG) in 1999 for $18 billion.

Before his foray into education, Broad also made a name for himself as a mover and shaker in Los Angeles. His philanthropic ventures have funded the arts and medical research, and earlier this year, he even tried to buy one of the city’s leading institutions, The Los Angeles Times, along with friend and fellow billionaire Ron Burkle.

But public schools may be Broad’s true passion. “K-12 education was a big problem becoming a bigger problem, and not too many people were doing anything about it,” he told the Washington Post in May, explaining why he and his wife Edythe have poured tens of millions of dollars into education reform nationwide, and why he launched his leadership academy.

One of Broad’s hallmarks is recruiting leaders from outside academia to run urban school districts. In 2001, for example, he convinced ex-Colorado Governor Roy Romer to become the superintendent of Los Angeles Unified, even though Romer had zero experience as an educator. Broad’s longtime jogging buddy, then-Los Angeles Mayor Richard Riordan, endorsed the idea, and a year later, Broad helped finance Riordan’s unsuccessful GOP gubernatorial campaign. Riordan now serves on the Broad Academy’s board.

Broad started the Broad Superintendents Academy in 2002. It’s a ten-month program that trains educators, business executives, government officials, and military leaders to become urban school district CEOs. Later, Broad added a residency program, which places midlevel executives in school districts around the nation to give them hands-on training. He also sponsors the annual Broad Prize, a $1 million award to high-performing school districts.

“He puts his money where his mouth is,” said former Oakland City Manager Robert Bobb, who completed the Broad Superintendents Academy in 2005 and is now president of the school board in Washington, DC. “Professionally, it was a great program. It was intellectually stimulating. They brought in the best minds in urban education. It gave all the participants great insight into the profession.”

But Bobb is not a drinker of the Broad Kool-Aid: “Where I disagree with him is at the end of the day, I just don’t think that school boards are the problem in terms of improving student achievement,” he said.

Of course, Bobb has good reason to disagree with Broad. Earlier this year, the billionaire backed a mayoral takeover of DC schools that rendered Bobb and the rest of the school board essentially powerless.

Randy Ward was attending the Broad Superintendents’ Academy in June 2003 when O’Connell tapped him to be the first state administrator of Oakland schools. Ward hadn’t needed the training — he had already been a successful state administrator in Compton, leading that city’s once-bankrupt school district back to financial solvency and out of state control. Plus, the Broad academy isn’t exactly rigorous. During its ten-month program, attendees meet only five times over four long weekends. But in 2003, the Broad name carried plenty of cachet, and Ward knew the academy would help him network.

Ward eventually became a poster boy for the Broad program. He led Oakland schools through three productive years, helping fix the district’s finances, closing the shameful funding gap between hills and flatlands schools, and implementing academic reforms begun by former Superintendent Dennis Chaconas. In the 2004 and 2005 school years, Oakland posted the highest test score gains of any large school district in California.

But Ward’s tenure also was marred by controversy, and his sometimes-caustic style engendered resentment. He also turned out to be far too independent for his boss, O’Connell. Despite lobbying efforts by Broad, O’Connell refused to extend Ward’s contract in the spring of 2006 (see “The Plot to Oust Randy Ward,” Feature, 8/16/06). A few months later, Ward became superintendent of San Diego County Schools, a separate entity from San Diego Unified, the district formerly run by Bersin.

Ward speaks well of Broad and the academy, but he acknowledges that the one-size-fits-all paradigm of an omnipotent chief executive and a pliant school board does not always square with reality. “The challenge,” he said, “is matching the needs, wants, and desires of an urban school district community with individual candidates.” In other words, it matters a great deal who’s in charge. Ward’s successors in Oakland may be perfect examples of what can happen when that challenge fails.

His immediate replacement was Kim Statham, one of his former classmates at the Broad academy. Ward remembered being impressed with Statham; at the time, she was a rising star in suburban Maryland schools. And later, when she ran into trouble, he quickly hired her.

Back in Maryland, Statham had been tarred by a grade-changing scandal in which teachers accused her of using her position to get her daughter’s report card altered. She was demoted in early 2005, but after she contended that she did not demand the grade change and was merely acting as a parent, the Howard County school board exonerated her. The incident, however, left deep scars in the racially divided community. In the summer of 2005, someone burned a twelve-foot-long cross into her front lawn. Statham, who is black, immediately resigned and came to Oakland.

But even after taking over for Ward in August 2006, Statham never fully committed herself to the East Bay. Her husband and daughters remained in Maryland, and she often flew home for long weekends. She also appeared resentful of Ward’s other top deputies, firing two of them — Katrina Scott-George, who had been one of the architects of the district’s academic reforms, and Javetta Robinson, the district’s chief financial officer, who also had worked for Ward in Compton.

Statham never explained why she fired Robinson and Scott-George, but both had previously turned down invitations to apply to the Broad Superintendents Academy. Sources also said Statham often clashed with the two women. Ward liked surrounding himself with people who openly questioned his decisions and each other’s.

Whatever the reasons for the firings, the district suffered during Statham’s short tenure. Test score gains plummeted in 2006-07, and last month the Express revealed that the district has shortchanged its students out of more than $40 million worth of education this year under Statham’s watch (“Oakland Schools’ Cash Stash,” Full Disclosure, 9/1). Public records show that the district failed to spend all the money allotted it last year by the state and federal governments, and ended the academic year with a surplus of nearly $44 million in five key accounts.

Several knowledgeable sources believe Statham took her eye off the finances and was already thinking last spring about leaving Oakland. If true, that may explain why she overruled Robinson’s objections and in May created a new high-paying position — chief of staff — for which she hired Vince Matthews, a 2006 graduate of the Broad Academy.

Indeed, several district insiders were stunned by the seemingly smooth transition by which Matthews took over from Statham last month after she announced she would be taking a job in DC. One hint that Matthews may have been tapped to replace Statham well before her departure appeared in a packet distributed to parents at Back to School Night last month. Inside was a letter from Matthews, who identified himself as “interim state administrator” even though Statham had not yet left the school district. The letter was dated August — weeks before Statham announced her resignation.

Vince Matthews’ history with the Oakland schools actually began well before the state takeover. In July 2001, then-Superintendent Dennis Chaconas hired him as principal of Dewey Alternative High School. Dewey serves some of the poorest and most troubled teenagers in the city — in other words, the kids most in need of a good education.

But Matthews quit Dewey shortly after the school year began, abandoning his students and leaving Chaconas without a replacement. “I was really disappointed that he did not want to work in a school full of kids that needed a lot of support and help,” Chaconas said. “I tried to talk him out of it. I liked him. I thought he had potential. It was sad for the kids.”

In an interview last week, Matthews twice insisted he has “never walked away from a challenge.” But he admitted that he quit Dewey after less than four months on the job. He said he was being micromanaged at the time by one of Chaconas’ deputies. “I thought as a principal I would have a certain level of autonomy,” he said. “I believe that to improve student achievement, principals have to have a certain level of autonomy.”

Matthews also was involved in a controversy over low-performing students in San Francisco. In the 2000-01 school year, he had been the principal of a charter school operated by Edison Schools, the controversial for-profit education company. In the spring of 2001, the San Francisco school board attempted to revoke the school’s charter. The board had uncovered allegations that the Edison school was discriminating against African-American and special-education students.

San Francisco school board member Jill Wynns, who led the fight to revoke Edison’s license, said she could not remember any specific allegations against Matthews. The board’s investigation focused, she said, on the company’s alleged attempts to boost test scores by discouraging black parents from enrolling their kids. “There were claims that they would tell parents: ‘This is not the program for your child. We advise you to go elsewhere,'” she said. Edison also allegedly discouraged parents of kids with special needs from applying because of the extra costs associated with educating those students, she said.

Matthews and other Edison officials adamantly denied the accusations, and claimed the San Francisco school board was biased against the for-profit company. The school stayed open thanks to the state board of education, which assumed oversight of Edison’s license. One of Edison’s supporters, Wynns said, was then-state board president Reed Hastings, another charter-school backer and Broad confidant. “The state board was packed and still is packed with charter-school advocates,” Wynns said.

After Matthews left Dewey, Edison hired him as a vice president. Later, he went back to being a principal at John Muir Middle School in San Leandro, where he had worked in the 1990s. From there, he took a job with NewSchools Venture Fund, a nonprofit cofounded by famed Silicon Valley venture capitalist John Doerr.

NewSchools, a major supporter of charter schools, shares Broad’s vision of using business strategies to solve problems in public education. Doerr, who ranks 271 on the Forbes list, is a good friend of Eli Broad. And Broad and Hastings rank among NewSchools’ biggest donors.

But the NewSchools connection apparently wasn’t enough of a résumé booster for Matthews. Before Ward left Oakland, Matthews interviewed for a midlevel administrator’s job overseeing principals for Oakland Unified. Matthews characterized it as an informal talk and said he never officially applied for the job. Regardless, he wasn’t considered qualified for the position, according to one knowledgeable source.

Matthews’ fortunes changed after he attended Broad’s training program. In the summer of 2006, San Diego Unified offered him a position similar to the Oakland job for which he was deemed unfit.

Less than a year later, however, he was back in Oakland to serve as Statham’s chief of staff. His stay in San Diego was so short that he apparently failed to make much of an impression. “He seemed to be a reasonable person,” said Camille Zombro, president of the San Diego teachers’ union. “But he didn’t follow through on a number of schools that had some real problems.”

When asked why the state superintendent would appoint a man with such a spotty record to run Oakland schools, O’Connell spokeswoman Hilary McLean cited Matthews’ experience as Statham’s chief of staff. “Superintendent O’Connell thought it was important to have consistency, and Vincent Matthews provides that consistency,” she explained.

Both McLean and Matthews also said he was not tapped to replace Statham until after her resignation. Matthews said he wrote the letter to parents after O’Connell appointed him, and that the August date was “without question a typo.”

Finally, McLean strenuously denied that Broad’s campaign contributions in any way compelled the state superintendent to hire graduates of his academy to run the Oakland schools. The academy, she said, is “very highly regarded” in education circles, and O’Connell “is looking for excellence in educational leadership.”

Statham’s resignation has only rekindled enthusiasm to end state control of the district — a campaign that has been a local cause célèbre for more than a year. Ron Dellums ran for mayor in 2006 on a platform that included the return of schools to local control, as did Dellums’ former congressional aide Sandré Swanson during his successful state Assembly campaign. Even a majority of the Oakland City Council, which remained largely silent when the state took over the district reins four-plus years ago, now wants the school board’s powers restored. “When I was on the campaign trail last year, parents told me that their decision to stay or leave Oakland depended on how competently the schools were being run,” Swanson said. “It was real clear to me that this was among the top issues in Oakland, along with crime.”

Upon taking office last December, Swanson kept his promise to voters and made local control the subject of his first piece of legislation. The original language of his bill, AB45, would have required the immediate return of all responsibilities to the Oakland school board, except for financial management. But after talking with his legislative colleagues, Swanson decided it wouldn’t pass unless he watered it down.

The result is a measured piece of legislation that would gradually return power to the board over the next few years. A key provision lets the state’s Fiscal Crisis and Management Assistance Team (FCMAT) decide on the timing of the transition. The bills’ supporters believe this would hasten matters because FCMAT (pronounced “fick-mat”) was recommending two years ago that the state begin to transfer oversight back to the district.

O’Connell repeatedly ignored that advice, and it wasn’t until a few months ago, after it become clear that AB45 would pass both houses of the Legislature, that he returned the powers of governance and community relations to the school board. “I think that happened because the bill was making its way through the Assembly,” Swanson said.

State Senate President pro tem Don Perata, the most powerful Democrat in state politics, also signed onto the revised bill and helped carry it through the Senate. AB45 passed both houses on mostly party lines, and was sent to the governor in early September. Apart from O’Connell, the state Department of Finance, and the Republican legislators who voted against the bill, the only recorded opposition, came courtesy of a little-known organization backed by a Los Angeles billionaire and a few of his close friends.

Jack O’Connell would seem to have a conflict in this matter. After all, it was the men opposing Swanson’s bill who put him in office.

When O’Connell ran for the state superintendent’s seat in 2002, he was a little-known state senator from Carpinteria, a town just south of Santa Barbara. But he had plenty of money to run on, thanks largely to three wealthy donors: Eli Broad, John Doerr, and Reed Hastings.

Actually, Broad’s $100,000 donation to O’Connell’s campaign that year only put him among the top five contributors. Venture capitalist Doerr took the No. 2 slot with $205,000 in contributions, and Hastings, the founder of Netflix, led the pack with two checks totaling $250,000. O’Connell and Hastings have been close friends for years. O’Connell nearly went berserk in 2005 when Senator Perata, at the request of the state teachers’ union, blocked Hastings’ reappointment to the state board of education.

But Broad, Doerr, and Hastings share more in common than their support of O’Connell, charter schools, and business as a model for public education. They also served together for several years on the board of directors of EdVoice, according to copies of the Sacramento nonprofit’s annual tax returns from 2003 through 2005 (2006 returns are not yet public).

EdVoice helps fund charter schools and advocates for education reform, but the group also has political and lobbying arms that have been very active in recent years. According to campaign finance disclosures, the nonprofit has formed two major political committees since 2002 — an independent expenditure committee and a political action committee, which have raised a total of $2.36 million.

The committees support various education causes, but spend most of their money backing political candidates throughout California. Among them was Oakland City Attorney John Russo, who ran against Swanson, for state Assembly last year. Just before the June 6 primary, one of the EdVoice committees spent $47,855 on Russo’s behalf. But it wasn’t enough. Swanson beat Russo by eight percentage points.

This year, EdVoice’s lobbying arm has been busy fighting Swanson’s bill. The state assemblyman recalled how he and his staff asked EdVoice officials why they were lobbying against AB45, and why a Sacramento nonprofit was so interested in Oakland schools. “They admitted to us that a board member had requested that they oppose the bill,” Swanson said.

The officials did not say whether that board member was Broad, Swanson added. But campaign finance records show that Broad has donated at least $353,900 to the two EdVoice committees since 2002, including two contributions this past April, totaling $100,000.

State law does not require EdVoice to reveal how much it has spent lobbying against the return of local control to Oakland schools. And EdVoice executive director Christopher Cabaldon, mayor of West Sacramento and a former official with the Oakland-based charter school group Aspire, did not return phone calls seeking comment. But the organization reported to the secretary of state that in just three months, from April 1 to June 30 (the last required reporting date), it spent nearly $114,000 on lobbying, including the fight against AB45. Swanson said EdVoice also wrote to the governor, imploring him to veto the bill.

Eli Broad did not want to answer questions for this story, so his true intentions for Oakland schools remain a mystery. O’Connell, meanwhile, has yet to lift the “interim” from Matthews’ job title, saying he wants to finish “a national search” for Statham’s replacement. It also would make no sense to appoint a permanent state administrator if Schwarzenegger were to sign Swanson’s bill into law.

But if the governor vetoes AB45 as expected, then Matthews likely has the inside track. After all, O’Connell conducted a national search last year after Ward left, before finally settling on Statham as Ward’s successor. Matthews said if he is made permanent, he plans to “maintain our uncompromising goal to increase our academic rigor, and continue to increase the quality of schools.”

Oakland parents are accustomed to such pabulum. The key question is whether the relatively inexperienced Matthews can handle running a large and complex school district, and whether he’s committed to the job, given his track record of bouncing around. As for O’Connell, he’ll be state superintendent through 2010 and there’s no indication he has any plans to pull the plug on Broad’s experiment in Oakland any time soon.

Swanson, meanwhile, tells the Express that he won’t be stopped by a veto, and that he plans to reintroduce his bill every year until the school board gets its power back. “It’s about accountability and democracy,” the assemblyman said. “It’s simply not acceptable that our parents do not have a voice, through their elected school-board members, in their kids’ education. It’s a fundamental disenfranchisement.”


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