When last we
spoke, I was telling you
about Joe Allbaugh's new company New Bridge Strategies, currently shaking the Iraqi contracts money tree and building a bridge to the Gilded Age.
But cronyism, like charity, starts at home. So let's get to it.
A little more than a year ago, I told you about Edison schools, the brain child of entrepreneur Chris Whittle. The company's mission was to get contracts to run public schools on a for-profit basis and to do it better and more cheaply. The company was the toast of the Republican establishment and got tens of millions of dollars of start-up capital back in the go-go 90s.
The only hitch was that it ended up producing poor performance and for more money. Other than that it worked great.
When we last noted Edison in June 2002, Whittle was hollowing out the company to cover personal debts by having the company loan him about $9 million to buy stock in itself. That's not all that uncommon. The only problem was that Whittle had collateralized the loan with the stocks themselves. And by then Edison's stock, which had traded as high as $23 a share in the glory days of 2001, was chugging along at 85 cents a pop.
In other words, the $9 million was gone and so was the collateral. And this supposedly public company was making no effort to get its money back --- because it was controlled by Whittle. For more details on these innovative shenanigans, see TPM's June 27th, 2002 post on the matter.
In any case, in the last year Edison has bumbled along from failure to failure and the stock has spent most of the year trading a bit over a buck a share.
Things looked awfully bad until last week when Florida's state employee pension fund announced it was buying up all of Edison's stock and taking the company private --- for a cool $174 million. That's got to be the shrewdest investment the fund has made since it bought millions of shares of Enron just as the company entered its death spiral --- including 1.3 million shares just two weeks before the company declared bankruptcy.
As the St. Pete Times aptly noted yesterday, this gives "Florida the distinction of being essentially the sole owner of the nation's largest and perhaps most financially imperiled school management business."
The three member board of trustees of the fund is chaired by Florida Governor Jeb Bush, a big supporter of privatized schools and a big supporter of Edison.
So, you start a company to privatize education and take on the teachers unions. Your company fails miserably both in terms of the market and academic success. Then after you've hollowed the company out to cover your other bad debts friendly pols come along to bail you out with a couple hundred million from the teachers' (and other public employees') pension fund. I love symmetry.