Now the future of the school, and its nearly 600 students, is in limbo, even after parents on their own raised several million dollars to keep it open until June.
Now the future of the school, and its nearly 600 students, is in limbo, even after parents on their own raised several million dollars to keep it open until June.
The board members have impressive resumes and Ivy League MBAs, so I don’t know what potential scenario is more damning: That they didn’t know what they were doing, they were asleep at the wheel, or they were in on it.
Let’s pause and call these board members out, because you won’t find their names anywhere on Croft’s website: They are Jack Remondi, former chief executive of student loan behemoth Sallie Mae and its spin off Navient; Robert Lytle, a partner at Grant Thornton Stax with expertise in private equity and education; Rishi Shukla, a serial entrepreneur and cofounder of the Downtown Boston Neighborhood Association, and Michael Goldstein, founder of Match Education, a celebrated Boston charter school.
Some of you might wonder why anyone other than the students, parents, and teachers of the Croft school should care what happened. It’s a cautionary tale of parents only wanting the best for their children and investors all too eager to capitalize on that.
Croft isn’t your typical private school. It’s for-profit, fast-growing, with the vibe of an idealistic startup out to change the world. The board members are also all investors, and none of them had children at the school. Many parents only learned the school was for-profit after Given’s alleged misconduct.
Whether profit or nonprofit, board members are supposed to act as stewards of an organization. They offer guidance to the chief executive, shape strategic vision, and perhaps above all safeguard the organization’s financial health.
“This should be a wake-up call,” said Barbara Anthony, former state undersecretary of consumer affairs and business regulation. “Was there malfeasance? Was there nonfeasance? ... There was a lot of money that went through this and very few people controlling it.”
Parents, in particular, feel aggrieved having been told by Given just last September the school was thriving as he sold them “Croft bonds” to raise millions of dollars to fuel its expansion. Some parents now fear those bonds are likely worthless, and that the school might not be around this fall, leaving many families scrambling where to enroll their children.
For those who have sat on both corporate and nonprofit boards, the red flags are glaring. The all-male board seemed particularly cozy, with just four members and backgrounds mainly in education and investment. Many parents say they never met the board members, and up until last month they didn’t know their names.
One question that’s top of mind for Pam Reeve — who has served on two dozen public, private, and quasi-governmental boards — is whether the Croft board hired an independent firm to conduct an annual financial audit. Without one, the board left itself vulnerable to someone hiding information and cooking the books.
“It is really, really hard for the board to interrogate that,” Reeve said. “That’s why you need the audits.”
Turns out, the board, by its own admission, did not believe in audits.
“As is common with private start-up companies, Croft was not required to undergo a financial audit by its equity investors or its commercial lender,” according to a statement from the board.
Instead, the board thought it was enough for the school’s books to be managed by an independent accounting firm, the name of which they’ve declined to share.
All of which leads me to question whether these four board members were truly independent fiduciaries working in the school’s best interests, or if they were more like investors looking for a lucrative exit strategy, hoping to grow and then sell a school that has been popular among progressive, white collar families willing to pay the more than $35,000-a-year tuition.
The board acknowledges that members are both “unpaid” directors and equity investors who have yet to receive “a dividend, distribution, or return of capital from Croft, and they have never sold any of their equity in the company.”
As the scandal has unfolded, board members have been quick to paint themselves as good actors trying to make things right. After learning on March 6 about Given’s financial shenanigans, they suspended him without pay. The board has since brought in a restructuring team, launched an independent investigation, and engaged potential buyers to keep the school open.
But for many parents and observers, it can be hard to absolve the board of blame here. Remondi ran a publicly traded company, Lytle works at Grant Thornton Stax, a top accounting and consulting firm. Shukla, with his Harvard MBA, fashions himself as an experienced investor, while Goldstein, with his Harvard Kennedy School masters, is an education pioneer.
They’re sophisticated people who should know what they’re doing.
Yet, ultimately, they failed a basic duty of financial oversight — one that now threatens the education of close to 600 students.
“They should have known,” said Linda Rossetti, a Boston-area entrepreneur who has served on boards. “It’s their job.”
Shirley Leung is a Business columnist. She can be reached at shirley.leung@globe.com.
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