Pro-charter school group hit with record campaign finance fine

STATE HOUSE NEWS SERVICE

THE PROMINENT NEW YORK education group that financed the bulk of last year’s failed ballot campaign to expand charter schools in Massachusetts has agreed to pay the largest fine in state campaign finance history to resolve questions over whether it participated in a scheme to conceal the identities of well-heeled donors.

Families for Excellent Schools – Advocacy, a non-profit that contributed more than $15 million to the Question 2 ballot initiative in 2016, will pay $426,466 as part of a settlement reached with the Office of Campaign and Political Finance.

State campaign finance regulators contend that Families for Excellent Schools – Advocacy, or FESA, served a pass-through for donors, including two Baker administration officials, to contribute money to the Massachusetts ballot initiative without disclosing their names or the size of their contributions.

“Massachusetts voters deserve to know the identity of all those who attempt to influence them before Election Day,” OCPF Director Michael Sullivan said. “Complete and accurate disclosure of campaign activity is the goal of OCPF and the cornerstone of the campaign finance law.”

Board of Education chairman Paul Sagan and Secretary of Technology Services and Security Mark Nunnelly, a former Bain Capital executive who previously led the Department of Revenue under Baker, were two of the FESA donors newly disclosed on Monday as part of the settlement.

“I’m glad they did the investigation and I’m glad that the matter has been settled,” Baker told reporters on Monday afternoon. The governor said both Sagan and Nunnelly “complied with all state laws with respect to this.”

“It’s up to the group to make the decision with respect to when they publicly list their donors and OCFP did an investigation and concluded that they violated the law and fined them appropriately for that, but that’s on the group,” the governor continued.

Voters last November soundly rejected the charter school expansion question, which was pushed aggressively by Gov. Baker. Throughout the campaign, opponents howled about the large sums of “dark money” that were pouring into Massachusetts to finance the pro-charter effort. Great Schools Massachusetts, the primary group behind the ballot initiative, reported $21.7 million in contributions during the last campaign cycle, the majority of which, or $15,349,500, came from FESA.

OCPF concluded after its investigation that Families for Excellent Schools – Advocacy solicited contributions to finance the Massachusetts campaign and passed those donations on to Great Schools Massachusetts “in a manner intended to disguise the true source of the money.”

The group, according to OCPF, should have registered as a ballot campaign committee, but instead remained listed as a non-profit social welfare organization that was not required to disclose the source of its funding.

“Though we believe we complied with all laws and regulations during the campaign, we worked closely with OCPF to resolve this matter so we could move forward with our mission of working alongside families desperate for better schools,” Jeremiah Kittredge, CEO of Families for Excellent Schools, said in a statement.

In the settlement, Families for Excellent Schools said it relied on advice of outside counsel from Washington, D.C. to comply with Massachusetts campaign finance laws, and believed that it could raise funds for political purposes as long as it did not indicate to donors that the money would be spent for a specific election.

To make its case, regulators leaned on the fact that the source of funding for Families for Excellent Schools – Advocacy transitioned between July and November from standard transfers from its parent organization, Families for Excellent Schools, to individual donations.

After the election, FESA’s activities were once again being financed by FES.

In addition to the fine, FESA agreed to dissolve itself as a social welfare non-profit with the Internal Revenue Source, and the umbrella group Families for Excellent Schools agreed not to fundraise or solicit in Massachusetts or engage in any election activity for four years.

Some of the donations to FESA included $2 million from Amos Hostetter, the Boston founder of Continental Cablevision, $3.3 million from Boston hedge fund billionaire Seth Klarman and $25,000 from the financier behind the founding of Home Depot Kenneth Langone.

Sagan, the governor’s handpicked chair of the Board of Education, caused a stir last summer when it was disclosed that he donated $100,000 to the Campaign for Fair Access to Quality Public Schools, but around the same time he gave another $500,000 to FESA that was not publicly disclosed.

At the time, Baker called the Sagan controversy over this $100,000 contribution a “nothing burger,” but he could not recall on Monday whether he knew Sagan had given another $500,000 to Families for Excellent Schools – Advocacy.

“I’m going to have to get back to you on that one because I don’t know off the top of my head the answer to that,” Baker said.

Sagan filed a disclosure with the Ethics Commission on September 2, a month after making the donations to FESA, that “as a private citizen, I have contributed personal funds to educational and political organizations, including organizations that are advocating a position on Question 2 on the November 8, 2016 state ballot.”

Had it been approved by voters, the state Board of Education would have been authorized to license up to 12 new charter schools each year.

Sagan, in his disclosure, indicated that no matters related to charter schools or the charter cap were on his board’s agenda for the September meeting and that he had told FESA it could not use his title and that he would not participate in any fundraising activities.

Nunnelly was not directly involved in state education policy at the time he made a contribution to FESA, and the Baker administration said his donation was made in compliance with state ethics and campaign finance laws.

“A quality education is essential to developing a skilled workforce for the future. For 25 years, my wife and I have been dedicated supporters of Massachusetts public schools and all they do to maintain our position as the national leader in public education,” Nunnelly said in a statement.

Baker brushed aside questions about whether the OCPF investigation raised questions in his mind over whether Sagan and Nunnelly donated to FESA in order to conceal their involvement in the ballot campaign.

“Well, Sagan was already on the record as a supporter of charter schools and so is Nunnelly, so am I. It’s not a secret that any of us were supporters of charter schools,” Baker said.

The Massachusetts Democrat Party on Monday evening called on Sagan and Nunnelly to resign in light of the OCPF investigation’s conclusions.