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cerf+investigation0001

cerf+investigation0001

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Published by leoniehaimson
Special Investigator's report on Chris Cerf, showing conflict of interest violations
Special Investigator's report on Chris Cerf, showing conflict of interest violations

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Published by: leoniehaimson on Feb 11, 2012
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11/12/2013

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--------\
CITYOFNE\^.|YORK
TneSpecteuCoMMlssloNERorlNvEsT{G'ATtoN
'FonrueNrwYonrCtrvScHooLDtsrntcr
E}OMAIDENLANE'AOTHFLOORNEWYORK'NEWYORK IOO3A
RICHARDJ.CONDONsPECI&coMMlSSlONER
TELEPHONE:(e_le)lo-1400FAX:(alalslo-1s50www.NYC5Cl.ORG
August2,2007
Hon.JoelI. KleinChancellorNewYorkCityPublicSchoolsDepartmentofEducation52ChambersStreet,Room314NewYork,NY10007
Re:DearChancellorlein:Aninvestigationonductedy thisofficehasoundhat ChristopherCerf,DeputyChancelloror Organizationaltrategy,urnanCapital,andExternalAffairsoftheDepartmentfEducation"DOE"),solicitedharitableontributionsiomexecutivesfEdisonSchools,LC("Edison"), DOEvendor,andLiberfyPartners,L.P.'LibertY'), aprivatenvestrnentirm whichs themajorityownerofEdison.As a result,Cerf securedapledgeora$60,000onationromoneoftheexecutives,he chairmannd chiefeiecutiveofficerof Liberty.The equestedontribirtionwouldhavebenefitedacharitableoundationfwhichCerf s a memberofthe boardofdirectors.Accordingo
Cerf, althoughthechairmanagreedo the$60,000donation,hedid nolpayit; Cerfwithdrewhiirequestafterhe was askedalout itduringthe coursegli$gJg:"."11i9-ation,
ffi
ChristopherCerfSCI CaseNo.2007-0672
We Lavefurlireidetennined hat
Cerf,whoheidstockn Edison,elilOuj$gl$e
ffi,ririiliililestigatio;mo-determinedthattheTEAMAcademyinNdwark,N.J.,or,whichCerfsen/esn heboardofdirectors,oesotdobusinessiththeDOE,altirought is sponsoredy the samenatiorralrgatizationa-trjg$nolilorsthree
DOEchaserschools.Finallv, we determinedhatCerfwhichhe-H6iiittedathebegiruringof
stocknFebruary007,
 
Hon,J.LKlein
August 2,2.007
his DOEemploymentontainedsome naccuraciesndomissionsquestionedboutiremby inrrestigatorsndallowedo aThisr:vestigationasinitiatedby the officeofthe SpecialCommissionerofInvestigation"SCI") after mediareportsappearednFebruary 007 statinghatCerfhaddivestedirnselfofEdison stockonthe day beforeaDOEpalents'groupplannedo askhirn abcuthisieso thecompany.lSCI investigatorsilterviewedCerfand#lwitnessesffiliatedwiththeDOE,Edison, undffitil;-andexaminednumeroubdocumentsbtainedrom thoseentities.Inthe courseof the investigation,thisofficediscoveredhecharitablesolicitationsdescribedabo-v.q,.and.ome mediaaccounts whichconflictedwiththeresponsesonCerf s
We
also exarninedwhetherherewere anybusinessies between heDOE andtheTEAMAcademy,whereCerfs amemberofthe boardof directors.-*-B'gactf thesematters sdescribedelow,Cerf's EdisontockCe{anafiorney,wasappointed tohisDeputyChancellorpositioninDecember2AA6.FromMay1997untilApril2005, hewasemployedy Edison nvarious executivepositions,ncludinggeneralcounsel and,ultimately,presidentand chiefoperatingofficer.Edison stheparentcompany of Newton Leamingwhich(alongwith otherfirms)providesSupplementalducationalServices"SES')toDOEstudentsundertheFederalNoChildtift AenindAct.3 InzA03,Edison, which hadbepna iorporation whoseshareswerepubliclytraded,wasessentiallyacquiredbyLibg$y,aprivateequity investmentfirm. Edisonwasconvertedromapubliclytradedcompanyoonewhosestock wasprivatelyheld. Afterthe conversion, Liberty held approximately95percentofthe equityin Edison,andmost oftherernainderwasowned byChrisWhittle,Edison'sfounderandchiefexecutivefficer.aCerfwasamongireEdisonexecutiveswhowasgrantedEdisonstockand stockoptionswhentwasapublicly-tradedcompany.He andotherEdison shareholdersforfeitedthepublicly-tradedstockandoptionsunderhe ermsofLiberty'spurchaseofthecompany.nretum,LiberfygaveCerfandotherEdisonexecutives haresn thenewlyformedprivately-heldEdison.LibertygrantedCerf20,000sharcsofClassBcoulmonstockn Edison,Underthe termsof Liberty'spurchasef Edison,Cerf forfeited14,000haresf theEdisonstock whenhe resignedromhe companyn2005.sCerf
lnslt'ucliyeMotnenl,
irnesed.),eb.10, 007,
'rhFsFffiGffi
aciidemicelpo studentsI dayandisfundedby theTitleIallocationhathe DOE recsivesrom tlre ederalgovernment.disonandall SESproviderscertifiedbytheNewYorkStateEducationDepartnrentmayserviceOEstudents.AlthoughtheDOEdoesnotselectESpr.oviders,tpays hem andmonitorsheirperformance.'SeeN.Schwartz,heNineLiyesof ChrisWhittle,Fortune,Oct.27,Z0A3.'Cerfcontinuedsa memberfEdison'sboardof directorsntil2006.
-2-
'SeeE.Gootman,chools fficialDeflectsQueryAboutS/oclrs,ewYorkTimes,Feb.9,2AA7;n
 
Hon.J.I.Klein
August2,2007
retainedheremainipg6,000sharesfstockaftereavingEdison.The stock wasnotirujuUfonanypubliJexchange,ndhustwas'difficultto ascribe a nonetaryvalueoitatanyparticularime'Bysubpoena,SCIobtaineddocumentsroniEdisonand Libertypertaining othestockntteprivut"ly-heldcompany.Accordingo Edison'soperatingagreementandifirnrutionprovicledo SCIby Edison'scounsel,eforeCerfcouldredeemhisEdisonshares,iber.tywouldhaveto sellthecompanytaprofit-The aftorneyalsoassertedhatCerfsClass6shareswereworthless.Heexplainedhatin theevent hatEdisonwassold,hecompany'scr.editorsndseveralategoriesf ClassA shareholderswouldreceivereferentialpaymentbeforeCerfsClassBsharesor-rlde redeerned'6'under
December0A6,
fromCerf thathisstock
6OnDecember2,2006,visedCerfbYe-mail hathis000ClassB shares
a-J-

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