The United Neighborhood Organization — once the city’s most powerful Hispanic community group — is “on the brink of insolvency,” threatening the future of six schools serving 4,000 Chicago students, the group’s chief executive officer says.
In a letter Thursday to the UNO board obtained by the Chicago Sun-Times, CEO Rick Cerda wrote, “We may have no option left than to file for bankruptcy.”
Cerda wrote that a bankruptcy filing by the not-for-profit organization would have a “domino effect” on six taxpayer-funded, privately run charter schools now operating in buildings owned by UNO.
“Once we file for bankruptcy, the school buildings will no longer be in UNO’s control and instead will be in the hands of the bankruptcy trustee and UNO’s creditors,” Cerda wrote. “This means that the school buildings will ultimately be sold as part of this procedure.”
The letter is the latest development in a long-running dispute between the community group and the charter schools network it founded in 1998 and managed until four months ago.
UNO CEO Rick Cerda
According to Cerda, the UNO Network of Charter Schools — which gets about $80 million a year in operating funds from the Chicago Board of Education — owes the his group more than $4 million in management fees and rent for school buildings that UNO owns.
Until June, UNO had a deal with the charter network that paid it about $8 million a year to run the schools. But when the management contract between the charter network and the community group expired, schools chief Richard Rodriguez said the charter board would go ahead and run the schools on its own without UNO.
In a statement Thursday afternoon, charter network officials said the “schools will remain open, regardless of UNO’s financial status” because they hold 30-year leases.
Charter school officials also said they are trying to buy the school buildings — which were constructed largely with state taxpayer dollars but belong to UNO.
The community organization and its charter network formed separate boards in 2013 after a series of Sun-Times reports revealed UNO paid millions of dollars from a state school-construction grant to companies owned by brothers of the organization’s then-No. 2 executive, Miguel d’Escoto.
Juan Rangel, the clout-heavy leader of UNO and the charter network, resigned in December 2013. Cerda replaced Rangel as the community group’s chief executive, and Rodriguez became head of the charter network.
Conflicts between the two groups became public earlier this year.
Jesse Ruiz, then the acting chief executive officer for the Chicago Public School, brokered a truce in June, with the charter network agreeing to pay more than $1.6 million in disputed fees to UNO.
Now, it appears that money has run out.
Asked for new CPS CEO Forrest Claypool’s position on the dispute, school district spokeswoman Emily Bittner said, “We will continue to work with these groups, which have a long history together, and ensure the children’s education won’t be interrupted.”
The biggest bone of contention in the power struggle: the four schools buildings owned by UNO.
In a letter last week, the community group’s lawyer Michael Forde told the charter network’s attorney, “UNO will have to close its doors in a matter of days,” primarily because of unpaid rent.
Forde also raised the possibility the schools could get evicted.
Michael Forde. Rich Hein/Sun-Times file photo
“Because of [the charter network’s] breach of those leases, UNO may be legally obligated to terminate those leases,” Forde said in the Oct. 26 letter obtained by the Sun-Times.
The buildings house Roberto Clemente charter in Galewood, the Soccer Academy elementary and high schools in Gage Park and three schools at the Veterans Memorial campus in Archer Heights.
More than $80 million from the state was used to build those schools under 2009 legislation sponsored by House Speaker Michael Madigan, D-Chicago.
Then-Gov. Pat Quinn’s administration froze the grant two years ago, amid a U.S. Securities and Exchange Commission probe prompted by the Sun-Times reports on UNO’s deals with d’Escoto’s brothers.
In addition to the Springfield grant, UNO borrowed roughly $70 million in recent years through bond offerings and a bank loan that’s due to MB Financial, according to the group’s financial reports.
The funding the charter network receives from CPS and passes on to UNO has been crucial to the community group, which had relied on the schools for 90 percent of its revenue.
In a civil case announced and settled in June 2014, the SEC accused UNO of defrauding bond investors by “making materially misleading statements” about the construction contracts.
At the peak of its power, UNO cultivated ties with then-Mayor Richard M. Daley, Mayor Rahm Emanuel and Ald. Edward Burke (14th), as well as Madigan, Quinn and many of Chicago’s most influential Latino politicians.
Rangel — who co-chaired Emanuel’s 2011 mayoral campaign — helped raise political funds for Madigan and other key allies. UNO employees did campaign work for candidates during what Rangel said was their free time.
That clout translated into money for UNO as it developed the charter school network. The 2009 state grant is believed to be the largest government subsidy for charters in the country.
In all, the UNO Charter School Network has CPS approval and funding for 16 schools with a total of nearly 8,000 students this year.
Contributing: Lauren FitzPatrick