The Rev. Al Sharpton and Schools Chancellor Joel Klein stunned the education world last June when they joined forces to reform the nation's public schools.
They called their ambitious venture the Education Equality Project, and they vowed in a Washington press conference to lead a campaign to close the decades-old achievement gap between white and black students.
What Klein and Sharpton never revealed is that the National Action Network, Sharpton's organization, immediately received a $500,000 donation for its involvement in the new effort.
The huge infusion of cash - equal to more than a year's payroll for Sharpton's entire organization - was quietly provided by Plainfield Asset Management, a Connecticut-based hedge fund, where former Chancellor Harold Levy is a managing director.
The money came at a critical moment for the National Action Network. Sharpton was then settling a long-running IRS investigation of his organization. As part of that settlement, he agreed in July to pay $1 million in back taxes and penalties both he personally and his organization owed the government.
The $500,000 from the Connecticut firm did not go directly to National Action Network. Levy funneled the cash to another nonprofit, Education Reform Now, which allowed his company to claim the donation as a charitable tax deduction.
The money was then transferred in several payments to Sharpton's group, which does not have tax-deductible status because it is a lobbying organization.
Sharpton and Levy confirmed the contribution.
"The money went mostly to pay for Charlie King's salary [National Action Network's outgoing director] and for promoting the new initiative with Klein," Sharpton said.
"Our goal was to increase public awareness of the problems of high poverty schools, particularly in the context of the presidential race," Levy said.
"The collaboration between Rev. Sharpton and Chancellor Klein is a novel alliance that we thought might help raise the visibility of the issue."
The odd pairing will be on display this week at the annual convention of the National Action Network, where Mayor Bloomberg, Klein, U.S. Education Secretary Arne Duncan, former House Speaker Newt Gingrich and several mayors are expected to speak.
Levy says his firm came up with the idea to make the contribution, and neither Klein nor Bloomberg asked him to aid Sharpton.
At the time, Plainfield Asset Management, a major investor in gaming operations, was pressing city and state officials for approval of two deals worth hundreds of millions of dollars annually.Levy has been registered for the past two years as a lobbyist targeting City Hall to privatize the city's Off-Track Betting operations. Plainfield also provided more than $200 million in backing for Capital Play, one of three bidders on the state's proposed redevelopment of Aqueduct Racetrack. Neither deal has gone through.
Levy rejected any suggestion of a connection between the donation and his business interests.
"Our contribution was not a way of currying favor with anyone," he said.
The nonprofit that served as a pass-through for the money to Sharpton, Education Reform Now, is run by former Daily News reporter Joe Williams, who also directs Democrats for Education Reform, a leading national advocacy group for charter schools.
Williams is also listed as president and treasurer of the Education Equality Project. He declined to discuss how the Levy contribution was handled.
Williams said the EEP's board has not met in the 10 months since Klein and Sharpton announced its formation, and that city Education Department employees have so far made all day-to-day decisions. He referred any questions about the group's finances to Klein and Sharpton.
DOE spokesman David Cantor said the chancellor did not solicit the Levy donation.
"The money was paid to Joe Williams' nonprofit," Cantor said. "At that time, EEP was essentially no more than a name and had no mechanism with which to receive donations."
Since then, Cantor said, Klein has raised more than $1.6 million for EEP, and the group has hired its first full-time staff member.
Sharpton said his alliance with Klein should not be read as blanket support for Bloomberg's education policies.
"I am committed to cutting the achievement gap, but not necessarily to more mayoral control [of city schools]," he said. "I support more charter schools for local church and community groups, but I'm not for privatizing schools and corporate payoffs in education."
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