Education charity to pay millions for misusing funds

The State of New York reached a $7.7 million settlement with Pearson Charitable Foundation over charges of "misuse of charitable assets," according to a statement from the office of State Attorney General Eric Schneiderman. The foundation is a non-profit associated with Pearson (PSO), one of the world's largest education companies and parent of the Financial Times Group and book publisher Penguin Random House.

According to the Attorney General, the foundation used funds "in a manner that benefited Pearson, Inc." in violation of New York law. "The law on this is clear: Non-profit foundations cannot misuse charitable assets to benefit their affiliated for-profit corporations," Attorney General Schneiderman said in the statement.

Starting "no later than 2010," Pearson Charitable Foundation allegedly developed course materials that Pearson, Inc. planned to commercially sell. The materials were designed for the controversial Common Core State Standards that are supposed to set uniform educational expectations at each grade level. In 45 states, the District of Columbia, and all U.S. territories, educational materials will be required to support the standards.

The Attorney General's office charged that Pearson, Inc. heavily funded development through the foundation to "attract foundation support and credibility for its commercial products." The for-profit company reportedly projected that profits could run to tens of millions of dollars.

After the investigation started, the foundation sold the "partially developed courses" to Pearson, Inc. for $15.1 million.

Furthermore, the Attorney General's office also found that Pearson Charitable Foundation jointly sponsored a series of education conferences, held in foreign locations, with an independent organization of school officials. Invited school officials "were from jurisdictions where Pearson actively did business and sought to do business." Pearson, Inc. sales personnel attended these conferences even though no other for-profit education companies sent their employees. The Pearson representatives gained "commercially valuable information ... concerning the interests and potential educational needs of some of the non-U.S. delegates to the summit."

Of the $7.7 million that Pearson Charitable Foundation agreed to pay, $7.5 million will go to the 100Kin10 initiative to "recruit and retain excellent K-12 teachers and support teachers in providing high-quality instruction aligned with the Common Core State Standards." The other $200,000 will pay for the costs of the investigation. In addition, the foundation has agreed to some program and governance reforms.

In a statement on its website, Pearson, Inc. emphasized that it had cooperated with the investigation and that it and the foundation "have always acted with the best intentions and complied with the law." The company then said, "We recognize there were times when the governance of the Foundation and its relationship with Pearson could have been clearer and more transparent."
  • Erik Sherman On Twitter»

    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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