Chris Whittle and Florida are in business together now, and business is already good - for him.
Through one of its investment firms, Liberty Partners of New York, the state employee pension fund put up $174-million on Wednesday to buy out Whittle's sinking for-profit Edison Schools Inc. The company's stock traded for $36.75 a share two years ago, but Edison went private in a deal that paid investors only $1.76 a share. Whittle, on the other hand, did famously. Among his spoils, according to Fortune magazine, were: $4.2-million for his shares, remaining CEO with an increase in pay from $345,000 to more than $600,000, keeping 3.7 percent of the company with an option to sell it back for up to $17-million, more time to pay off $10.4-million in existing loans from Edison and $1.7-million more in loans.
Whittle's payday would be just another corporate outrage except for his benefactors. Liberty works for the state Board of Administration, which oversees the $92-billion pension fund. Because nearly half the pension members are teachers, that puts Florida in the unseemly position of using public teachers' retirement money to bail out a businessman who wants to profit at their expense.
The Edison controversy has at least spurred the state board to rethink the fiscal implications of putting too much money into the future of any one company, but this episode also raises fair questions about the quality of oversight and the sensibilities of those who make the decisions.
What kind of track record does Liberty have with its unusual investments? How is the company held accountable for losses? Why shouldn't the state board include at least one employee who is directly affected by the decisions? Wouldn't such a member at least give the decisions more credibility with the people who are most directly affected?
No one questions that the primary responsibility of a pension board is to provide the highest return on investment, but the goodies that Florida teachers are now handing to Chris Whittle are at least worthy of policy debate. As House Democratic Leader Doug Wiles notes, another publicly traded company on the ropes is ripe for a buyout. That company is Penthouse International, whose bawdy men's magazine is being eclipsed by Internet pornography.
Would the state board, which includes Gov. Jeb Bush, be equally willing to buy out a girlie magazine?
