Jesse James, Meet Baker Mitchell

Suppose Jesse James were to return to earth today. Would he pick up where he left off, robbing banks and trains, or would he find a better way to try to make money? Would he give up crime and go straight?

If I were a gambler, I’d bet that Jesse would abandon his native Missouri and move to North Carolina. There’s money to be made there–legally–and not just in tobacco, textiles and hogs.

Jesse James, meet Baker Mitchell.

Of course you’ve heard of the notorious criminal Jesse James {{1}}, but you may not be familiar with Baker Mitchell. He’s a businessman who has figured out a completely legal way to extract millions of dollars from North Carolina in payment for his public {{2}} charter schools.

I read on the internet that Mr. Mitchell is the salt of the earth, a successful entrepreneur from Texas who decided to devote his retirement years to improving the lives of disadvantaged children, when he might have chosen to go fishing and play golf. He’s a “Liberty Leader” who uses “his energy and charitable dollars to change education for the better — to drive education paradigms back to more traditional, classical methods with their proven records of accomplishment and success.” All that must be true because I read it on the internet. {{3}}

So Mr. Mitchell, now 74, moved from Texas to North Carolina and opened some charter schools to help children. He now has four and has been talking about opening more.

And why wouldn’t he? Even though none of his publicly-funded schools is set up to run ‘for profit,’ about $19,000,000 of the $55,000,000 he has received in public funds has gone to his own for-profit businesses, which manage many aspects of the schools. That information, and more, can be found in Marian Wang’s brilliant reporting for Pro Publica.

Here’s a short excerpt:

Every year, millions of public education dollars flow through Mitchell’s chain of four nonprofit charter schools to for-profit companies he controls.

The schools buy or lease nearly everything from companies owned by Mitchell. Their desks. Their computers. The training they provide to teachers. Most of the land and buildings. Unlike with traditional school districts, at Mitchell’s charter schools there’s no competitive bidding. No evidence of haggling over rent or contracts.

The schools have all hired the same for-profit management company to run their day-to-day operations. The company, Roger Bacon Academy, is owned by Mitchell. It functions as the schools’ administrative arm, taking the lead in hiring and firing school staff. It handles most of the bookkeeping. The treasurer of the nonprofit that controls the four schools is also the chief financial officer of Mitchell’s management company. The two organizations even share a bank account.

Pro Publica reports that Roger Bacon Academy rents land, buildings and equipment from Coastal Habitat Conservancy LLC, which Mr. Mitchell also owns. Until last year, he also sat on the charter school Board of Trustees.

Mr. Mitchell seems to have experienced a learning curve. At first he billed his own charter schools for only two line items: ‘Building and equipment rental’ and ‘Management fees,’ for a total of just $2,600,878 in FY2008 and $2,325,881 in FY2009.

But apparently he was learning how the system works. In FY 2010 he added an innocuous sounding line item, “Allocated costs,” for which he billed $739,893, cracking the $3,000,000 barrier.

In FY2011 he added more line items:

Staff development & supervision: $549,626
Back office & support: $169,357
Building rent-classrooms: $965,740
Building rent-administration offices: $82,740, and
Miscellaneous equipment rent: $317,898.

The grand total for FY2011 was $3,712,946.

Jesse James was shot by a member of his own gang; if he were alive today, he might be dying from envy.

Mr. Mitchell broke the $4,000,000 barrier in FY2012, when the same line items totaled $4,137,382.

According to the audited financial statements for FY2013, Mr. Mitchell’s companies received $6,313,924, as follows:

16% management fee: $2,047,873
Administrative support: $2,796,943
Building and equipment rental: $1,474,108

Dig into the audited statements (here and here) and you get some idea of where the $6,313,924 did not go. For example, the schools spent only $16,319 on staff development {{4}}, which works out to less than three-tenths of one percent. They report spending just $28,060 on computers and technology, which is also about three-tenths of one percent.

Are you curious to know where the money comes from? In FY2013 Mr. Mitchell’s schools collected nearly $9,000,000 from North Carolina and the federal government. Local school districts paid Mr. Mitchell’s schools anywhere from $4095 to $1,712,328, depending upon the number of students from that district.

Don’t forget charitable contributions. Mr. Mitchell’s schools report receiving a whopping $93 in donations.

Of course the entire $15,000,000 that has gone to Mr. Mitchell’s companies has not been profit; surely there were legitimate expenses, such as building maintenance, insurance, utilities and so forth. That’s a logical leap, but we have to infer because he does not have to disclose spending. These are public dollars (all but that whopping $93 donation), but the public has no right to know how its money is being spent because the charter schools aren’t actually spending the money; his for-profit businesses are. Non-disclosure is fine with him, as Pro Publica reported.

Mitchell has also expressed frustration with a state law passed this summer that requires charter schools to comply with public records laws. Still, the new law does not apply to charter management companies such as Mitchell’s. (emphasis added) The board of Mitchell’s charter schools has repeatedly tangled with local news outlets that have made public records requests seeking salaries and other financial details from the schools. Last month the StarNews of Wilmington filed a lawsuit against the schools’ nonprofit board, alleging that it has violated the state public records law. (The board chair for Charter Day School, Inc., John Ferrante, did not respond to requests for comment.)

Mitchell himself has taken a hard line against disclosures of financial information concerning his for-profit companies. For private corporations, he wrote on his blog in July, “the need for transparency is superfluous” and is simply a mechanism for the media to “intrude and spin their agenda.

(At this point please go back and reread footnote #3, perhaps the key takeaway from this piece.)

How the great state of North Carolina, once known for its pro-child education policies under the leadership of former Governor James B. Hunt, Jr, became a playground for canny profit-seekers {{5}} is carefully explained in sharp detail by Ted Fiske, the former education editor for the New York Times, and Duke Professor Helen Ladd. Read their piece, and you will understand that I am telling the truth when I say that, while Jesse James was an out-and-out criminal, Mr. Mitchell is operating within the law.

I’m guessing that Jesse James, wherever he now resides, is wishing he could return to earth, renounce his criminal ways, move to North Carolina, and open some charter schools {{6}}.

—-
[[1]]1. “Jesse Woodson James (September 5, 1847 – April 3, 1882) was an American outlaw, gang leader,bank robber, train robber, and murderer from the state of Missouri and the most famous member of the James-Younger Gang. Already a celebrity when he was alive, he became a legendary figure of the Wild West after his death.” This is taken from his Wikipedia entry.[[1]]
[[2]]2. Charter watchers often write about the difference between for-profit charter schools and non-profit charter schools. I am wondering whether this may be a distinction without a difference.[[2]]
[[3]]3. You can find more lavish praise for Mr. Mitchell on the same website, the John William Pope Foundation. [[3]]
[[4]]4. He does keep an eye on his teachers, Marian Wang reports: “Mitchell’s company has managed the schools’ staffs with similar rigor. A strong sense of hierarchy took root as the schools expanded. When a new corporate office was built to house the management company, teachers jokingly began calling it the “White House.” From the “White House,” Mitchell and other top administrators could watch teachers in their classrooms via surveillance cameras installed in every classroom, in every school. During a tour of school grounds with this reporter, Mitchell and the school’s IT director discussed surveillance software called iSpy. “We need to call it something else,” Mitchell offered with a chuckle. “Call it iHelp or something.” Mitchell said the cameras give administrators the ability to observe teachers in action and offer them tips and coaching.”[[4]]
[[5]]5. They can be found in other states, of course. Some citizens in Buffalo, New York, are concerned that Carl Paladino, an elected member of the school board there, has a conflict of interest because of his investments in four charter schools. [[5]]
[[6]]6. Remember that scene in ‘The Graduate’ where an older adult male gives young Dustin Hoffman career advice? “Plastics,” he tells Hoffman, that’s where the money is. If that movie were remade today, the adult would be whispering, “Charter schools.”[[6]]

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8 thoughts on “Jesse James, Meet Baker Mitchell

  1. I would be interested to know what is the performance of the students in these schools and how does it and the costs incurred compare to similar public schools, i.e., what is the ROI? Without that information, it’s difficult to arrive at a conclusion about what Mr. Mitchell is doing and how it compares to the criminality of Jesse James. Many aspects of traditional public schools are for profit (viz., McGraw-Hill and Pearson) and many of these schools are funded at higher rates than most private schools (viz. New Jersey’s Abbot Districts) without actually educating children.

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    • Please note that this is NOT a private school operation. It is a publicly funded – for profit charter school operation. He receives the public school FTE per student. The important question to ask is: What are the requirements to be admitted to this Charter School? Do they require test scores at a certain level? Do they admit handicapped students? Students with learning disabilities? Do they have staff to meet special needs children?

      The public schools and state put the items bought up for bids. This for profit corporation is a no-bid operation. Until required to step down, Mr Mitchell sat on these schools’ governing board.

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  2. I have no quarrel with profit making, but these are public dollars. Don’t taxpayers have the right to an audit?
    Read Marian Wang’s reporting for details about academic performance
    What Mr Mitchell is doing is legal. Should it be?

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  3. Hello John,
    I attended the Wed. UC Berkeley forum you moderated so well. I was a member of the audience who stuck it out and did not run home to watch the Giants! When you mentioned this story, I was pretty amazed. But reading it I realize that we have seen this before, here in Oakland, from a North Carolinian, actually. Ben Chavis looked like a good guy for a while as he brought the American Indian Public Charter School to prominence and high test scores. But it turned out he was also raking off management and rental and maintenance fees, and the district revoked his charter.
    But…I don’t want charters to be painted with such a broad brush, because of these crooks. I totally admire what Aspire, KIPP, and other charters are doing.

    I would also like to introduce you to the residency teacher training program I founded in 2002 and direct—the Bay Area Teacher Training Institute, which shares a university partner with Aspire. We are at http://www.ba-tti.org.

    When you asked the second panel on Wed evening, “Would you like public schools to pay for apprentice teachers in every classroom?” I wanted to shout out, because that is exactly our model. Our credential candidates are paid independent school assistant teachers, a la Shady Hill, but they get good public school experience as well during our program and half of them go on to public school teaching. And 80 % of them are still in the classroom. I would love to tell you more.

    Thank you for your good writing and film making. Siempre en la lucha!

    Bob Houghteling

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    • Bob
      Thanks for sticking it out Wednesday and for your thoughtful observations. I personally feel it’s up to the charter movement to step up to the plate on this and set some clear standards, beginning with financial transparency and a ban on charter operators renting from themselves.
      Perhaps KIPP, Aspire and other well established and reputable CMO’s could take the lead on this?
      I will go visit your website
      John

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    • Please read the Fiske/Ladd paper that I reference in the piece. It’s a hot link so you can go right to it. It’s a shocking story of the political takeover.

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