This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.
Update (1/31/19): This article has been updated to include further information on Urban America, the private equity firm that is working with People for People to redevelop the area near Broad and Farimount Avenues.
The proposed founders of Frederick Douglass Charter High School have close ties to the Rev. Herbert Lusk and the parent organization that runs People for People Charter School in North Philadelphia.
But at hearings last week, they went out of their way to minimize those ties, to the point where the hearing officer and members of the District’s charter office repeatedly asked why.
The hearing revealed a web of entanglements with organizations founded or run by Lusk, a minister who played for the Eagles in the 1970s and was once an adviser to President George W. Bush. In 2014, Lusk was forced by the District to step down as CEO of People for People Charter, a K-12 school with 540 students, due to the circular leases and contracts that he established with other nonprofits that he controls, often signing both sides of the contracts and leases. Those contracts have remained in place.
School board member Wayne Walker is on the board of the school’s parent nonprofit, People for People Inc.
Pri Seebadri, CEO of People for People Charter School, insisted that the new school would be completely separate from the existing one, although they would be located within a few blocks of one another and would share a landlord and management company.
“There will be no overlap [of board members] and no conflicts of interest at all,” Seebadri said.
People for People Inc. is the existing charter school’s landlord. Lusk’s church, Greater Exodus Baptist Church, also rents space to People for People Charter School. The church would give the proposed Douglass charter school a $100,000 grant and a security guard. And Lusk’s two daughters work for the school, according to its latest tax filing. One of them also holds a position at People for People Inc., running its daycare center.
The only school that Lusk is still in charge of is a private religious school in Chester called Frederick Douglass Christian School, according to Seebadri.
Lusk is a member of the founding coalition of the proposed Frederick Douglass Charter High School (not to be confused with the existing Frederick Douglass Charter Elementary School run by Mastery). The new high school would occupy two locations blocks away from the existing school, both of which are owned by Lusk’s organizations.
Seebadri, who replaced Lusk as CEO of People for People Charter School, played a central role in organizing the founding coalition and answered questions in the hearing on behalf of Frederick Douglass Charter High School.
In a prolonged exchange, the school board’s hearing officer, Allison Petersen, focused intently on Seebadri.
“You are here, and were here at the first hearing, as a representative of the applicant. But you’re telling us if the charter is granted, you will be hands-off?” Petersen asked.
“Yes,” Seebadri said. Repeatedly, he insisted that the new school would remain independent of the existing school.
The school plans to award contracts to a host of companies that have financial relationships with People for People, including the Greater Exodus Baptist Church. Of the four members of the founding coalition who spoke at a hearing on the application, each one was an employee or contractor of People for People or a member of Lusk’s church.
People for People Charter School was founded in 2001, and its charter was most recently renewed in 2015 for a five-year term. Its 2016 evaluation shows that it has struggling academics, food-safety violations, fire-code violations and a 22 percent out-of-school suspension rate. This record might make it difficult to get school board approval for an enrollment increase.
By the end of the hearing, both board-member overlap and potential conflicts of interest between the existing school and the proposed new one were called into question.
Conflicts of interest
One of the new school’s proposed board members, Anita Gregory, also serves as a program director at Greater Exodus Baptist Church, where she speaks regularly and directs the Women’s Ministry, although those are volunteer positions.
Michelle Martin, executive administrator of Greater Exodus Baptist Church, was also listed as a prospective board member of Frederick Douglass Charter School. Seebadri promptly conceded that “she’s the CEO of Greater Exodus and they are potentially the landlord, so she should recuse.”
Another proposed board member, Judy Williams, worked for People for People, first as a consultant and then as the managing director from 1993 to 2007.
Proposed board member Robert Farmer has a financial conflict of interest that was only disclosed accidentally. Seebadri pointed out that they “inadvertently” included a memorandum of understanding (MOU) with another company, Urban America, which he described as a “real estate holding entity” that was connected to the church, the existing charter school, and the proposed charter school. He described Farmer as the head of that company. So, he would also have to recuse himself from the new school’s board.
Urban America is headquartered in Miami. The company is a private equity fund that had $120 million in the year 2000, and has aqquired a portfolio woth $325 million today, according to its website. Urban America also recieves grants from the federal Department of Housing and Urban Development and the federal New Market Tax Credit. It invests in “low-to-moderate income” urban neighborhoods and seeks to create “live, work and play master planned communities.”
Seebadri said the MOU did not include any property that the new school would use.
But the MOU would affect the debt on those properties.
The MOU states that People for People Inc. and its Community Development Corp. will work with Urban American as a “co-development partner” on a real estate portfolio in the immediate area around the schools. The three groups plan to “recapitalize” the mortgage that People for People has on several properties, including the current and proposed charter schools. It’s part of the MOU’s broader project to acquire properties around Broad and Fairmount for development.
The group seeks to use federal New Market Tax Credits for development, though these are supposed to be used in “low-income” communities while Broad and Fairmount is a fairly affluent area. The MOU also mentions “alliances” with banks including Chase and US Bank.
Ultimately, the new board members would be appointed by the law firm that incorporates the charter school as a nonprofit: Latsha Davis & McKenna. That firm also serves as counsel to the current charter and the business service contractor shared by both schools.
The new ‘distinct vision’
From the outset, the hearing officer and members of the Charter Schools Office sought clarity on why the applicants were insistent that the charter schools were separate.
Seebadri said Frederick Douglass would have a “meaningfully distinct vision from People for People.”
The new school would be a “trauma sensitive, early college urban high school,” according to the application. Students’ mental health needs would be screened through a text-messaging mental health service and addressed by a social worker. If the administration decides they are prepared, some students would be able to take college-level courses with teachers credentialed as adjunct professors by Eastern University. Much of the school’s curriculum would focus on “entrepreneurship, business, and financial literacy skills.”
“Through the establishment of a positive school environment, we seek to educate the whole child – intellectually, physically, and morally – in a model that values rigorous academics, emphasizes wellness, and develops students’ character,” the application reads.
The school’s mission, broadly stated, is to “break the cycle of intergenerational poverty through educational attainment,” grounded in the school’s theme of “Entrepreneurship in a Global 21st Century.”
The Charter Schools Office pushed back, saying the application lacked rigorous evidence of how it would “effectively serve” some of the most vulnerable student demographics.
Enrollment between schools
Frederick Douglass Charter High School would open in the fall of 2019. It would start with 250 students in grades 9 and 10 and expand to its maximum of 500 students in Year 2 — a rapid expansion. But the application only contained 47 intent-to-enroll forms indicating that a child would attend the school if it opened in the fall. Most were filled out by students at People for People Charter School. Even those forms were questioned, because most of them were filled out by students themselves and did not contain parent signatures.
Michelle Tatum, an employee of People for People who assisted in compiling the application, said parents at People for People and “several” other schools they visited were “having the children complete the forms themselves, because they were like: If you want to go to this school then you’re gonna complete the form yourself.”
Petersen, the hearing officer, pointed out that “at least half” the students who filled out intent-to-enroll forms were students at People for People. Other forms left the student’s school blank. Petersen wanted to know what other schools were visited.
Tatum could not remember all the schools, but said that they were all neighborhood public schools, including Bache-Martin Elementary.
Petersen noted that many of the intent-to-enroll forms came from students at People for People’s high school. She asked Seebadri about the size of the grades at that school. He said there were 25 students in the 9th grade and 50 students in 8th grade.
Petersen asked how many intent-to-enroll letters came from students in People for People’s high school. But Seebadri did not know.
“If you have that many students wanting to vacate and go elsewhere,” Petersen said, “doesn’t that concern you?”
Seebadri said it did concern him. But, as the result of the Philadelphia School Partnership’s newly unveiled charter school enrollment application, People for People has received more than 900 applicants for high school next school year, the year that the new charter school would open.
The school would be located a block away from People for People Charter School in Fairmount and would rent space in 700 N. Broad St., a building also owned by People for People Inc. During the hearing, Seebadri spoke as if the building was actually owned by Greater Exodus Baptist Church, saying “Exodus has given us an indication we can locate there.” The application says that location “was chosen based on extensive community consultation and the engagement of a leading area planning and market study firm.” But the building was purchased by People for People in 1997.
The school would also rent space in 1415 Fairmount Ave., which is owned by the Greater Exodus Baptist Church.
The existing People for People school is full, capped at 540 students with students in grades K-12. Its enrollment has an uneven distribution between grades, with 9th grade being the smallest and 5th grade being the largest at 76 students, according to the most recent charter evaluation from the fall of 2016.
The schools share contractors
People for People requires students to earn 32 credits for graduation, compared to the Philadelphia School District’s 23 credits. Petersen wanted to know what the proposed high school planned to do for students who transferred in from another high school.
Seebadri replied that if those students did not want to attend summer school, they would have access to online courses provided by EdMentum.
Petersen pointed out that there was no line item for that in the budget, and the school’s business services contractor said it was included under a “general extended learning” line item.
“The overall scenario that you just presented is something that, candidly, we haven’t given thought to,” Seebadri conceded.
The schools would also share a medical contractor, Education Plus, which provides a nurse practitioner for a few hours each day.
MindRight, the school’s mental-health text messaging service, perplexed members of the District’s charter office as well as the hearing officer.
“The text-messaging system, the main system for students to receive supports throughout the day, does not appear to be coupled with trained, licensed staff,” said Christina Grant, interim director of the District’s Charter Schools Office. “Many of the proposed programs to be offered did not appear in the budget.”
People for People’s CEO clarified that there would be a social worker at the school, but the proposed school’s budget did not reflect that.
The CEO of MindRight, Ashley Edwards, was there as a member of the founding coalition.
Peng Chao, senior director of the Charter Office, said the office was concerned about “MindRight serving as a vendor, but also a potential member of the founding team.”
Edwards did not respond to that specifically, but she did elaborate on just what MindRight is — a question posed by both the charter office and the hearing officer — and how she got involved. Edwards is a graduate of Stanford’s graduate schools of business and of education. She made Forbes 30 under 30 list for “social entrepreneurs” in 2018 and co-founded MindRight three years ago. The company has contracts at five schools in Newark, Philadelphia, and Washington, D.C. — the Philadelphia school being People for People.
“I believe in the mission,” Edwards said of the school. She also mentioned being a member of Greater Exodus Baptist Church.
“We reach out seven days a week, texting them before and after school to provide emotional support,” Edwards said. “Then we communicate with their social worker.”
The students would be texting with a “remote” team of college graduates with 20 hours of training “including background checks and role-plays.” The team is supervised by “certified mental health physicians.” Coaches regularly track how the students “feel” on a scale of one to 10.
“We’re very clear that we’re not doctors,” Edwards said in response to questions about the qualifications of her team of coaches. “We’re not diagnosing, we’re not providing medical advice, and this is not therapy.”
And HIPAA laws that mandate privacy of medical data “don’t apply to us because we are not a clinical service.” Edwards estimated that MindRight would bill the school $50,000 after it reached full enrollment, depending on how many students choose to use the service.
Arlene Barochin attended the hearing to represent another potential contractor, PhoenixBerri, the education consulting firm that she co-founded. She’s also employed as a director at The New Teacher Project (TNTP) and holds that organization’s fellowship for school system leaders — both offshoots of Teach for America.
Barochin said her company does not provide services to other schools in Philadelphia, but she has worked in them herself. She worked for Mastery Charter Schools and as the academic coordinator for People for People. While living in Philadelphia, she was a member of Greater Exodus Baptist Church.
Building buildings
When the original charter school acquired and renovated its building, it entered into a circular leasing arrangement with a middleman.
After Lusk purchased the original building on behalf of the charter school, he gave the building to People for People Inc., one of his other nonprofits. But it did not directly lease the building back to the charter school. Instead, People for People Inc. leased the building to Omnivest, a company that Lusk contracted to outsource the school’s business services. Then, Omnivest sublet most of the building back to the charter school.
So the charter school paid rent to Omnivest, which in turn paid rent to People for People, which used it pay the debt service on the loans that the school used to buy the building. But in 2010, the City Controller’s Office reported that Internal Revenue Service documents for the school and the parent nonprofit had “differences” in the amount of rent paid by the school and the amount that the parent nonprofit ultimately spent – the appearance of a profit made by either Omnivest or People or People Inc., but not for the school.
Omnivest is owned by Benjamin Robin Eglin, who appeared at the hearing to speak on behalf of Frederick Douglass Charter School because Douglass also planned to contract Omnivest for its business services. Eglin assembled the proposed budget. He also owns Mandrel Construction Co., which Lusk contracted to renovate buildings with much of the loan money. Englin was also the chief financial officer of People for People Inc. as recently as 2010, but he has since stepped down.
Omnivest was removed as the middleman, and now People for People Charter School rents from People for People Inc., just as the new school would.
The existing school still appears to pay more in rent than the parent nonprofit actually spends.
In 2016, the school’s IRS filing shows that it paid nearly $1.2 million in “rent and shared services” to People for People Inc. That same year, People for People Inc. spent only $860,000 paying down its mortgage. So on paper it appears the remaining $300,000 was for “shared services.”
But the tax filings of the parent organization show it had just two programs that received income that year: daycare, and “Project Dad – Pathways to Responsible Fatherhood.” Neither program seems to serve students in grade 5-12. Furthermore, Project Dad contends that it’s paid for with a federal grant from the Department of Human Services.
That additional $300,000 is not a management fee. The school already pays a management fee to Omnivest, just as the new school would.
The city controller’s report also took issue with this, stating that “there is no information available as to how the amount of rent for the charter school was established and the rental agreement appears to not be an arm’s-length transaction.”
The new school’s proposed location, 700 N. Broad St., has been part of this web of companies for more than a decade. It’s called the Lusk Building. Currently owned by People for People Inc., like all buildings acquired by that organization, the charter school acts as the “guarantor” on the loan that the parent organization used to acquire the school.
If the parent nonprofit defaults on the loan, the bank would automatically seize the charter school’s incoming tax dollars to make the loan payment. And some of the buildings bought with such loans are not even used by the charter school. For example, 700 N. Broad St. is currently rented by PNC Bank. The loan has also been guaranteed by the charter school’s tax revenue since 2005. Periodically, the loans are consolidated into one remaining mortgage.
“People for People Charter School is obligating future taxpayer funds to pay off loans on facilities owned by entities not controlled by the school,” the city controller’s report summarized. “The charter school had guaranteed mortgages for properties other than those used by the charter school, thereby obligating taxpayer funding provided to the charter school to pay off the associated non-profit debt.”
The controller’s report noted that this all seems to flout federal tax law, which states that nonprofit organizations, also known as 501(c)(3)s, “must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests.”