WHOSE CHOICE? / Second in a four-part series
Published Monday, December 13, 1999
David Brennan’s White Hat Management changes the way business, politics and school vouchers mix
By Doug Oplinger and Dennis J. Willard
Beacon Journal staff writers
Nearly a decade ago a car pulled up to the White House and a tall man with a white cowboy hat climbed out. The man was from middle America -- Akron, Ohio -- but he had friends in high places.
He was there to party with President George Bush and other members of the elite $100,000 club of big campaign contributors.
The man was David Brennan.
Over the next 10 years, his friends would help him carve millions of dollars from public schools to start an education business called White Hat Management.
Today, Brennan's company enrolls 3,267 Ohio schoolchildren, making White Hat larger than three-fourths of the public school districts in the state. By next year, he may be one of the biggest for-profit school operators in the nation, reaching into several states.
In Ohio, his company schools are fully funded by state revenues and property taxes taken from local schools but are devoid of any direct voter or taxpayer control.
Documents obtained by the Akron Beacon Journal show that state officials often delivered new laws and policies that aided Brennan in the building of his chain of schools. Some of those officials bent rules -- or rewrote the rules -- to his benefit.
In at least one case, their actions violated the Ohio Constitution.
Brennan has been the most consistent education-reform voice in Ohio, pushing for privatization of schools. Meanwhile, public education flounders in financial inadequacies so extreme that the entire system has been declared unconstitutional and its buildings called the worst in the nation.
At the heart of this are the education of 2 million school-age Ohio children and democracy. Polls show that Ohioans believe educating children is the most important issue.
In a democracy, the common people have an equal say in the operation of their government. The people, together, make the choices.
This is about Brennan's choice.
In 1990, Brennan was a wealthy entrepreneur, politically influential and opinionated. He had made millions with two Akron partners buying and selling manufacturing companies, slashing operating costs and turning profits.
Brennan had complained that many workers did not have the basic literacy needed to operate modern factories. He opened learning centers in some of the factories.
In 1990, Brennan declared he would lead a crusade to reform education. While he didn't talk about profiting, his company could take in millions.
Brennan declined to be interviewed by the Akron Beacon Journal. However, documents in the George Voinovich archives at Ohio University and other public records shed light on his efforts to influence government.
Brennan's wealth and ability to raise money for the GOP gave him opportunities to strike deals from the Statehouse to the White House during the entire decade.
He contributed nearly $1 million to mostly conservative Republicans.
It was a small investment over 10 years, however, considering this school year his company will have revenues of $16.5 million in Ohio alone, is expected to more than double the number of schools here next year, and may expand to several other states.
"This is a political, not education fight," Brennan said in a recent interview with the Associated Press. "I can't get anything if the governor doesn't back me."
Perhaps the symbolic beginning was in September 1990, when President Bush came to Brennan's Akron home for a fund-raiser. Voinovich, who was hoping to be elected governor in about six weeks, joined them.
Hundreds of thousands of dollars rolled into Republican campaign funds that day in Akron, thanks to Brennan. And he personally gave the 1990 Voinovich campaign $89,000 and gained membership in Bush's "$100,000 Club" of big GOP contributors.
Several weeks after Bush returned to the White House, his staff announced that the next national budget would include $500 million for school vouchers.
More important, Brennan at some point struck a private agreement with Voinovich: Brennan would chair a commission whosejob would be to create a voucher program in Ohio, records show. Vouchers allow parents to send their children to the school of their choice at taxpayer expense.
Recently, however, Voinovich distanced himself from any deal. Spokesman Mike Dawson said Voinovich "doesn't remember when and if any agreement was made" with Brennan.
When Voinovich finally told the public about the school-choice study commission in early 1992, prominent state and national leaders advised him against it.
"We have some concerns that the agenda is, to a large degree, already in place, and the conclusions preordained," Robert Wehling, a vice president at Procter & Gamble in Cincinnati, wrote to Voinovich. Wehling and P&G had a national reputation for substantially improving public education, particularly in Cincinnati.
Wehling warned the governor that "handling vouchers on their own could lead to unnecessary divisiveness."
Dawson said Brennan was a good choicebecause he was a "prominent businessman who was interested in education issues. He served on the task force and ended up doing some voucher schools and some charter schools."
State Sen. Leigh Herington, D-Ravenna, however, said it appeared that from the beginning the only intent was to give Brennan what he wanted.
"I think Voinovich turned this issue over to Brennan at the beginning and it set the tone for years," Herington said.
Brennan's first effort was derailed, though, by unforeseen circumstances.
In 1992, Congress killed Bush's voucher proposal and Bush lost his bid for re-election. Voucher legislation in Ohio died in the House, which was controlled by Democrats. And the Republican Party's effort to take control of the Ohio House failed.
Brennan then made it a personal mission to raise the money needed to give Republicans control of the state legislature in 1994. He worked the state's biggest donors, playing a key role in raising $1 million for campaigns, and donated $73,000 of his own money.
Encouraged by his fund-raising success, Brennan offered his ideas on how to implement vouchers in Cleveland: A state takeover of the public schools.
He sent a note to Sam Miller, an executive at Forest City Enterprises and close friend of Cleveland Mayor Michael White, telling him after the Republican victory that "it is clear that the time is right to make this happen. The legislature is prepared to give a sympathetic ear, Governor Voinovich is supportive, the situation in Cleveland is desperate, and all that it needs is Mike White's impetus to make the program happen."
To say Voinovich was "supportive" was an understatement.
Voinovich was so willing to help Brennan that he performed a maneuver later found to be unconstitutional by the Ohio Supreme Court. He sandwiched the voucher program into the state budget.
By using the budget bill as the vehicle, he was able to buy votes by inserting pork projects. Vouchers were a shoo-in, though when considered separately in previous years they had gone nowhere.
That packaging, the Ohio Supreme Court said in 1999, violated the Ohio Constitution's provision that legislation should be for one subject only.
Still, it took four years for the legal challenge to make its way through the courts. By then, Brennan had gotten into and out of the voucher school business.
Outside of the governor, no other statewide elected officials have done more for Brennan than Attorney General Montgomery and Secretary of State Blackwell.
Blackwell has received more direct campaign support from Brennan than even Gov. Bob Taft. The former Cincinnati mayor now enforces campaign finance law and runs elections.
But as state treasurer until earlier this year, it was his frequent writings about vouchers and appearances at public hearings that were helpful to Brennan.
Montgomery, the state's chief law enforcement official, has kept a low profile. But she allowed her former chief trial lawyer, Solicitor Jeffrey Sutton, to consult with Brennan on the Cleveland voucher court case. Sutton oversaw the voucher case and the state's defense of public school funding.
Records show that one of the key strategy meetings was at the Hyatt on Capitol Square in June 1997 after the 10th Circuit Court of Appeals declared the voucher program unconstitutional. At that meeting, Sutton and Brennan discussed whether the voucher program should be rewritten as it headed to the Supreme Court.
Joining them in the meeting was religious broadcaster and lobbyist David Zanotti, Voinovich aide Tom Needles and then-state Rep. Michael Fox, R-Hamilton, who sponsored much of the voucher legislation.
There were other contacts with Sutton, according to records:
+ In January 1997, Brennan wrote to Sutton, Fox, Needles and then-state Rep. William Batchelder, R-Medina, that he wanted the Education Department stripped of any voucher program oversight.
+ In the spring of that same year, the governor's chief counsel, Maria Armstrong, said she had several meetings with Sutton, Brennan and Catholic Conference attorney David Young to plan the appeal of the voucher case to the Supreme Court.
The most important thing the attorney general did for Brennan, however, was to offer an unofficial ruling in mid-1998 that allowed him to move headlong into the lucrative charter school business.
Brennan and his daughter, Nancy, had started Interfaith Elementary, an independent private school in downtown Akron, in 1993. Now, he wanted to convert Interfaith to a charter school.
The switch immediately could increase state aid for the 75-pupil school by $285,000, according to state funding law.
Brennan was handing the state a big problem. The legislature and Voinovich outlawed conversions because if private schools across the state were converted wholesale to charter schools, the state's spending obligation suddenly could jump $1 billion a year.
So, it was written into law that any private school in operation prior to Jan. 1, 1997, could not be converted.
Attorneys at the Department of Education asked Montgomery for a legal opinion on whether he could make the switch. Brennan argued that this was not a conversion because Interfaith was closing, the board of directors was being dissolved and the operating charter was being returned to the state.
The new school that would move into the building -- Hope University Campus -- would have a new board. But a Brennan-managed company still would be in charge.
Montgomery accepted his argument, but wouldn't go on the record. Instead, the attorney general's office issued an informal opinion that was accepted as law by the state board, which proceeded to grant a charter to the new Hope University Campus.
What wasn't clear publicly, however, was that Brennan also was planning to convert four other schools in Cleveland, among them the two voucher schools.
White Hat submitted the charter applications to the state school board, some under names that were different from their existing names. Unless someone were to match addresses, his plan wouldn't be evident.
With that one approval, Brennan converted four other schools over the next year.
IRS documents for Interfaith and Hope show that there was at least one clear financial overlap in the conversion: Equipment from Interfaith was donated directly to the new Hope charter school.
Who's making rules?
Brennan's range of influence stretched far beyond elected officials and reached into the inner workings of government, especially the voucher program, according to records.
After working hard for five years to carve out a voucher program, he wanted to be actively involved, records show, and he intended to keep the Department of Education out of the program.
Officially, the director of the Cleveland Scholarship and Tutoring Program was Bert Holt, a retired Cleveland public schools administrator chosen by the Ohio Department of Education.
While Holt was supposed to report to the department, phone records and other communications obtained by the Beacon Journal show that she worked closely with Brennan and Needles, the governor's chief aide for education.
The other key state employee was Francis Rogers, a department researcher in Columbus who was responsible for designing the voucher application process and a lottery to select the winners.
Rogers wrote to his boss that something appeared to have gone wrong in Cleveland during the first lottery. He said it appeared that poor children whosenames had been selected in the lottery may have been passed over for higher-income children.
He was surprised to hear about memos from Brennan to the governor's office suggesting how the lottery should be run and that he should be guaranteed access to children who were not in poverty.
In one correspondence, Brennan said his new nonprofit organization, Hope for Cleveland's Children, "should be given a printout of the scholarships (recipients) chosen so that we can assist people who will be calling in asking questions . . . "
It was an interesting request, Rogers said recently, considering Brennan was planning to open schools exclusively for voucher students. The names of lottery winners would make it easy for him to recruit customers.
Brennan also made it clear he did not want his schools to be stuck with nothing but poor children.
"The worst result I can imagine is that the new schools would be staffed completely with low-income students," he told Needles in writing. "The mixture of low-income and higher-income students is essential to the success of new schools."
Brennan got his way.
A few months into the first school year, then-Ohio school Superintendent John Goff changed the rules to allow families earning twice the rate of poverty -- as much as $22,000 in a single-parent family with one child -- to be eligible.
Advocate or lobbyist?
In striking deals, some of Brennan's actions raise questions.
For example, in January 1996, Brennan told Voinovich that his umbrella nonprofit voucher organization, Hope for Cleveland's Children, was representing all of the private schools in dealings with the voucher office and the Department of Education.
State law says that if anyone is paid to influence government policy or legislation, he or she must register as a lobbyist. Any financial transactions or gifts to state employees or lawmakers would have to be reported.
Susan Brown, attorney for the Joint Legislative Ethics Commission, said "everyone has a right to represent themselves," but the minute they are compensated specifically to have that contact, they become lobbyists.
"You have to trace the money back to determine whether he had to be registered," she said. "It makes no difference whether they are shielded by a nonprofit corporation."
It is unclear, however, whether Brennan received compensation from his companies for influencing state government.
Brown would not comment on Brennan specifically. State Sen. Herington, however, said a significant issue is at hand.
"If he can make the kind of money he has made and be constantly talking to the legislature and state government, he's a lobbyist," said Herington. "I have to question the quality of the law" if he is not.
Other contacts with state officials can be found throughout the Voinovich archives.
In 1997, Brennan met with Superintendent Goff, Voinovich aide Needles and Rep. Fox to talk about the voucher program. Brennan came away from the meeting unhappy and wanted action, Needles said in a memo to Voinovich.
Brennan wanted Goff and the department removed from any role in the voucher program, Needles said. So Rep. Batchelder, who had been a supporter of Brennan's voucher program, prepared legislation to fulfill Brennan's wishes.
Brennan even suggested some of his own language for the new law: In an 11-page memo to legislators and Voinovich staffers, he laid out his plans for a takeover of the voucher program by a contractor, or manager.
Though he continued to push for the takeover, his suggestions ultimately died.
When Voinovich and the legislature decided in 1993 to force private schools to begin administering state proficiency tests, Brennan warned the governor not to go too far.
Brennan said proficiency tests were good for marketing purposes -- to try to prove that his schools were better than others. But he said the tests should not be an invitation for the Department of Education to stick its nose into his business and suggest how to help the kids who failed the test.
"We would like to have our proposed scholarship (voucher) legislation state specifically that the taking of the proficiency examination by private schools is solely for the purpose of publicizing the end test results so that parents can make a comparison between a given private school and any other school," he said in a letter to the governor.
When kids fail the tests, "We do not want to require the private schools to follow the remedial steps demanded by the Department of Education," he added.
He didn't want to provide tutors, as the department suggested, but instead planned to sit kids at computers until they were able to master the tests.
As a Republican victory appeared imminent in 1994, Brennan proceeded to lay out his plans to Voinovich and Fox in a memo detailing his plans for teachers.
"It should be emphasized that the teachers are to work a 40-hour week, 50 weeks per year," Brennan said. "This is not going to be a part-time job. This is a full-time job for the teachers."
With the help of Voinovich aide Needles, Brennan complicated the state's evaluation of the voucher program and trumpeted a separate assessment by a pro-voucher researcher from Harvard, according to records.
They latched onto Paul Peterson, a controversial political science professor whom Education Week magazine recently profiled under the headline "Researcher at Center of Storm Over Vouchers." Wherever there was controversy over school choicestatistics, "Mr. Peterson is usually at the heart of it," the magazine said.
Peterson's analysis showed that vouchers were a tremendous success -- even though Peterson only studied the children in Brennan's two schools, thus omitting 80 percent of the participants.
Television news jumped on this one, with one commentator saying the Harvard report should erase all doubt about voucher effectiveness.
An official state study, however, would offer a different conclusion. And, later, even Peterson would raise questions about the quality of Brennan's schools.
It didn't help that Brennan initially refused to participate in the official state study by Indiana University, saying he already tested his kids enough.
"For the life of me, I don't understand why this testing discussion keeps insisting that Indiana (University) did it right and we did it wrong," Brennan said in a letter to Needles. "It looks as though the DOE got what they wanted, which is a report not worthy of the name that is able to debunk the substantial improvement of voucher students vs. public school students in the 3rd grade."
As for his refusal to participate in a state-ordered study, a state spokeswoman said this month that the state wanted him to participate but had no authority to order his involvement.
In the first year, Indiana University said there was no conclusive evidence that voucher students were doing better. The second-year study, which tested Brennan's children, concluded that they "performed significantly less well in all areas than scholarship (voucher) students in older private schools or their public school peers."
Even Peterson, in a second study, found parental involvement in Brennan's schools was not as good as the other private schools -- or the public schools.
Nonetheless, freshman Sen. Voinovich stood on the Senate floor in July to make a speech that honored Brennan and his schools.
"Mr. President, today I rise to recognize the achievements of the Cleveland Scholarship and Tutoring Program," Voinovich began. "Two separate studies by Harvard University . . . " showed the Hope schools were a success, he said.
The data "confirmed the Cleveland Scholarship Program meets the one true test of any taxpayer-supported program -- it works."
Voinovich didn't mention that the official state study offered a very different conclusion.
The charter epiphany
Publicly, Brennan is the champion of the Cleveland voucher experiment that now is destined to be a landmark U.S. Supreme Court case.
But he decided to abandon vouchers more than a year ago, leaving them to the politicians, lawyers and judges to resolve their future. Instead, he has turned his attention to charter schools, which may have allowed him to focus on an important principle: making money.
Again, Brennan's company has proposed contracts with the state that would exempt his schools from many of the regulations that apply to other charter schools.
In a matter of three years, he will go from three to more than 30 company schools, and he has done it privately. In contrast, it has taken Chris Whittle -- operator of Edison schools, the largest charter school chain in the nation -- nine years and a public stock offering to have 77 schools.
Why did Brennan give up on vouchers?
In his two Cleveland Hope schools, he was receiving more state aid per pupil than 85 percent of the public school children in Ohio. But it wasn't enough to turn a profit.
Only nine weeks into the voucher program, Brennan began to lobby for a 44 percent increase -- or $1,100 -- in the value of vouchers. Brennan told the governor in writing that he was subsidizing his two voucher schools out of his own pocket. Some of that money came out of the Brennan Family Foundation, IRS records show.
In January 1998, Brennan wrote to Needles of the governor's office and two new confidants -- state school board members Charles Byrne and Joseph Roman -- telling them that if the state didn't raise the value of vouchers to an amount similar to charter-school funding, he was switching.
"I have indicated to you that the temptation to convert the operations at HOPE Central Academy and HOPE Tremont Academy is almost irresistible because of the higher funding from the community schools," he told them.
In a recent interview with the Associated Press, Brennan gave a different reason. He said opponents of school choicemade vouchers "a dirty word. Charters are a compromise to vouchers."
But the numbers are revealing. By switching, he increased his state aid per pupil from about $3,000 in the voucher schools and $600 at Interfaith to at least $4,400 and possibly as high as $6,000.
"The covers were pulled off the scam Brennan was trying to put forward when he jumped quickly from vouchers to charters," said state Rep. C.J. Prentiss, D-Cleveland. "That was really revealing to his quote-unquote giving poor children a chance."
Brennan made it clear to Needles, Byrne and Roman that he would do as he wished, and he would make the rules for his new schools to conform to his own ideas of education. He would test children before admitting them, and he wanted the State Board of Education deciding whether he could open schools, not the bureaucrats at the Department of Education, he said.
As Voinovich wrapped up his administration as governor last year, Brennan continued writing to Needles and another aide, Alan Endicott, that he wanted a law that would allow him to begin accepting children from across school boundaries.
It didn't happen last year, but when Gov. Bob Taft unveiled his first budget in March, there it was: language permitting Brennan's request. The Taft administration also included other provisions that Brennan had discussed with Voinovich aides.
He continues to have access in high places. New state school Superintendent Susan Tave Zelman said Brennan has visited her in her Columbus office.
Brennan's White Hat contracts are unique among the state's charter schools. But they also prompted state Education Department staffers to question his plans to configure elementary schools with two or three classes per grade level in kindergarten through third but drop back to only one class for each grade from fourth through eighth.
The reduction in the number of classes occurs just as children are preparing to take the fourth-grade reading test, which about half of Ohio's schoolchildren fail in the first attempt. There is no indication in the contracts how Brennan plans to reduce his enrollment as children leave the third grade.
"This school configuration is inconsistent with commitments made by the school's developers in that they agreed to a consistent number of classes per grade level as part of the preliminary agreement," a department staffer said after reviewing a proposed White Hat company school.
Department of Education spokeswoman Patricia Grey said, "He does have fewer classes for fourth grade -- there isn't any reason he can't do that."
Brennan also attempted to exempt his schools from providing fiscal reports to EMIS -- the state's education computer system that is used to track enrollment, teacher certification and a number of other key areas related to a school's operations and the way public dollars are spent.
But the Department of Education wouldn't allow it.
Brennan's company now is advertising in newspaper classifieds for teachers with no certification and no college degrees. Those teachers could be placed in any of the company's schools around the state, a White Hat Management recruiter said.
Although Brennan declined to be interviewed by the Beacon Journal, he recently told an Associated Press reporter, "The direction my life took is very satisfying. I never planned it this way, but I'm pleased it went this way. This is my proudest moment."
Doug Oplinger can be reached at email@example.com