The Watchdogs: CPS a profitable investment for Chicago Board of Ed member

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Companies that Chicago Board of Education member Deborah Quazzo has an interest in have seen the business they get from the city’s schools system triple since Mayor Rahm Emanuel appointed her to the board last year, records obtained by the Chicago Sun-Times show.

From 2010 until her June 2013 appointment, the total payout to companies that Quazzo invested in has come to about $930,000, the records show.

RELATED: Editorial — Quazzo should step down from Board

Quazzo’s companies have gotten an additional $2.9 million in Chicago Public Schools business in the year and a half since the millionaire venture capitalist joined the board to fill a vacancy left by Penny Pritzker when President Barack Obama named Pritzker commerce secretary.

In all, five companies in which Quazzo has an ownership stake have been paid more than $3.8 million by CPS for ACT prep or online help with reading, writing and math. One of them stands to collect an additional $1.6 million this year from a district contract.

Quazzo has continued to invest in the companies doing business with CPS since her appointment. She says she sees no conflict of interest between her roles as a steward of the cash-strapped school system and as a private investor.

“It’s my belief I need to invest in companies and philanthropic organizations who improve outcomes for children,” Quazzo says.

She says she hasn’t tried to hide her involvement, though she listed only two of the five companies on her most recent ethics statement, filed April 28.

Quazzo wasn’t required to list the other three, according to CPS spokesman Bill McCaffrey, because those companies’ deals were made with individual schools and not through the district.

“The requirements for these forms are laid out at a state level,” McCaffrey says, “and she has followed these requirements to the best of her knowledge.”

In her ethics statement, which she is required to file as a member of the Board of Education, Quazzo said she gets no salary from the companies that do business with CPS, though she stands to profit if they are sold.

She says she has recused herself from school board votes on contracts with companies in which she has a stake, including a $6 million, two-year deal with one called Think Through Math.

Quazzo says she wasn’t aware that her companies’ business with CPS has tripled since she took office.

“I don’t follow that stuff,” she says. “All I care about is if a product is working well. If a product is making a difference for kids, that is a great thing. I have no idea where products are being used. That is not my job.”

McCaffrey says Quazzo’s companies’ business with CPS has grown because the district is focusing more on technology, and more principals have been choosing the products the companies offer.

In a 2009 speech to a business group, Quazzo spoke of the challenge of making money from education.

“One of the dynamics we need to change is what we see in the venture capital community is a real reticence when the word ‘education’ comes out of your mouth,” Quazzo said then. “Everyone cringes like this because you can’t make money in education.”

On the website for GSV Advisors, Quazzo lists five companies she has invested in that do business with CPS — Academic Approach, Dreambox Learning, MasteryConnect, Think Through Learning and ThinkCERCA and touts her “dozens of personal investments in dynamic education companies, demonstrating her commitment while deepening her expertise and relationships in this important and fast-growing sector.”

Quazzo co-hosts an annual education investment conference in April in Arizona with GSV Capital, which is owned by venture capitalist Michael Moe. Barbara Byrd-Bennett, CPS’ chief executive officer, and Quazzo’s fellow school board members Andrea Zopp and Mahalia Hines are among past speakers at the conferences.

Byrd-Bennett’s airfare and hotel bill were paid for by conference organizers, as were Hines’, according to McCaffrey. Zopp paid her own way, McCaffrey said.

Exactly when Quazzo first invested in the companies isn’t clear. Public records don’t show when she took her initial stakes. She says all predated her board appointment but she didn’t provide any dates.

She has continued to invest in MasteryConnect, ThinkCERCA — a Chicago company founded by a former CPS administrator — and Dreambox Learning since then, according to news releases put out by those companies and by GSV Advisors.

Last year — the district’s 2013-14 budget year — records show CPS paid ThinkCERCA, which offers an online teaching aide, a total of $416,210 to help teachers from at least 84 schools and two school networks try to meet the state’s new Common Core standards. So far this year, the payments total about $493,000.

The school board doesn’t have a contract with ThinkCERCA covering the entire school system. Instead, the company has made deals with individual schools.

A board policy bars the practice of “stringing,” or “dividing or planning any procurement program . . . to avoid competitive procurement processes.”

But McCaffrey says that when principals decide on their own to hire the same company, that doesn’t fall under the ban.

The schools ended up getting rates from ThinkCERCA that varied by as much as 33 percent, invoices show, paying as little as $30 per child and as much $40 for similar services. And some had $1,000 installation fees waived, while others did not.

Quazzo says she had nothing to do with those deals.

“I have nothing to do with procurement of product,” she says. “Typically, a principal is making a purchase decision. . . . This is about improving outcomes for kids, letting great principals make great decisions about things.”

In several instances since Quazzo took office, one of her companies has cut its prices so its bills to CPS fell just below the $25,000 threshold that would require approval by CPS officials. Academic Approach, which offers ACT test-preparation help, gave Corliss High School a 2.21395 percent discount on $25,565 worth of services, cutting its bill to $24,999 — $1 shy of needing central office approval. The company also sent bills just under $25,000 to three other CPS schools.

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