The Leona Group LLC

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The Leona Group LLC


4660 South Hagadorn Road, Suite 500
East Lansing, Michigan 48823
U.S.A.
Telephone: (517) 333-9030
Fax: (517) 333-4559
Web site: http://www.leonagroup.com

Private Company
Incorporated: 1996
Employees: 1,600
Sales: $55.7 million (2005 est.)
NAIC: 611110 Elementary and Secondary Schools

The Leona Group LLC manages more than four dozen charter schools in Arizona, Michigan, Ohio, Indiana, Florida, and Louisiana. The firm provides management and staffing services for a fee of about 10 percent of each school's total budget, which is derived from state education funding and grants. The individual schools' charters are generally held by local school boards, with oversight performed by area school districts or colleges. Leona schools are primarily located in urban areas and feature educational offerings tailored to fit each community.

BEGINNINGS

The Leona Group was founded in 1996 by billionaire real estate developer A. Alfred Taubman and former public schools superintendent William Coats to manage kindergarten through 12th grade (K12) schools in Michigan. Two years earlier a Taubman-led group, Michigan Partnership for New Education, had helped win passage of legislation that sanctioned the formation of up to 150 so-called charter schools, which could receive state funding equivalent to that of public schools, so long as they were open to all. The charter school movement had arisen out of the belief in some quarters that the public schools were doing an inadequate job, and Leona would focus on urban areas where they often had the most difficulties.

As with similar laws passed in other states, charter schools in Michigan would be run by a school board, which could then contract with a management firm like Leona for professional services. The company would secure a building if needed, and also handled recruitment, hiring, payroll, public relations, and other tasks, taking as its fee 10 percent of the school's annual budget. Charter schools received about $6,000 per pupil per year in state tax funds, as well as getting money from federal or foundation grants.

Management companies like Leona were popular with charter boards because such firms could lend them funds to get classes started as well as saving money by making teachers their direct employees, thus avoiding the need to pay into the Michigan state teachers' pension fund. They also had more hiring latitude than unionized public schools, with the best teachers given performance-based incentives and poor ones subject to possible dismissal.

Charters were hampered by their typically small size and tight funding, however, and as a result offered bare-bones facilities, relatively few course options, no extracurricular activities, minimal transportation and food service, and limited assistance for special education students. Average salaries also fell below those of public schools, and most teachers in the firm's employ were recent college graduates. The schools hoped to make up for these shortcomings with better discipline, concentrations in specific subject areas, and greater parental input.

In the fall of 1996 Leona's first school, the Cesar Chavez Academy, opened in an inner city neighborhood of Detroit. It was housed in the former St. Gabriel parish school, which had been rented for $220,000 per year. With support from parents, and the efforts of school leader Abelardo Batista (the firm eschewed the use of the term "principal"), the school was able to curb problems with gang members and generate a surplus of $150,000 in its first year, which was used to buy playground equipment and pay performance bonuses to teachers.

The high expectations of school boards and parents, and the newness of the charter system, sometimes led to problems. The Walter French Academy of Business and Technology, which opened in Lansing a month after most public schools, on September 23, 1996, initially claimed enrollment of 611. The state found only 333 on the official pupil counting day of September 27, however, and threatened to cut the school's budget by nearly $1.6 million based on the $5,808 per pupil that was paid. A few months later a compromise was reached to use a figure between the two claimed totals.

OPENING OF THE FIRST ARIZONA SCHOOLS IN 1997

During the 199697 educational year Leona also opened or took over management of several other schools, with the total reaching seven by the spring of 1997. Michigan's charter law was more restrictive than in some other states, and the firm soon turned its attention to charter-friendly Arizona, where five schools were opened that September, including a small high school in Phoenix for recovering drug addicts. The Michigan-based company continued to expand in its home state as well, and by year's end was managing 11 schools there.

More schools sought its services in 1998, including the Livingston Technical Academy in Howell, Michigan, and the William C. Abney Academy in Grand Rapids, Michigan, which hired Leona that October after classes had begun. Additional schools were opened in the fall of 1999, with four added in Detroit alone, bringing the total to 22 in Michigan and 13 in Arizona, with enrollment of some 10,000 students. The firm had annual revenues of $55 million and was operating in the black.

As charter schools became commonplace, management companies like Leona began to draw increasing media scrutiny. When a group of Michigan newspapers requested information about the firm's teacher salaries and copies of their personnel files, which public schools were legally required to furnish, the company refused to hand them over. In 1999 a consultant to the Michigan Education Association filed suit against the firm to get this information, and a judge soon ruled that Leona must disclose it. The company appealed, arguing that it, as a private firm, employed the teachers, not the schools' boards, but it later made more information available, while continuing to seek a low profile with the media.

In 2000 the Leona-managed West Michigan Academy of Environmental Science in Walker, Michigan, which was struggling with $1.5 million in debt, was threatened with revocation of its charter by Central Michigan University (CMU). The school's board also was locked in a dispute with Leona, although almost all of its staff members supported retaining the management company's services. In the summer CMU agreed to extend the charter for a year, but the school board dropped Leona in favor of a competitor. When the board delayed giving the firm money to cover teacher salaries, most of the staff quit. Leona subsequently filed suit to recover $229,000 in unpaid management fees, also instituting a separate lawsuit against school consultant Sidney Faucette, whose Choice Schools Associates had taken over its management. An out-of-court settlement was reached a year later in which the board agreed to pay Leona $200,000 if the suit against Faucette was dropped.

COMPANY PERSPECTIVES


The Leona Group's mission is to promote choice and competition in public education for all students, including those with special needs, and to help them pursue their individual academic goals.

The Livingston Technical Academy in Howell also canceled its contract with the firm, but Leona attributed such problems to difficulties in dealing with the individual schools' boards, noting that it had been able to work successfully with other struggling schools in the past. William Coats continued to head the company, though A. Alfred Taubman had recently ended his involvement.

EXPANSION TO OHIO AND INDIANA IN 200102

The company was seeking to expand outside Michigan and Arizona, and submitted proposals to run some of the worst-performing public schools in New York City, as well as for new charter schools in other locations. In the fall of 2001 Leona opened the K7 Eagle Academy in Toledo, Ohio, its first school in that state, and in early 2002 won approval to open the K5 Timothy L. Johnson Academy in Fort Wayne, Indiana, where CEO William Coats had once been public school superintendent. The latter school, whose board of directors included several local ministers, secured a $150,000 federal grant to help it open in September. It was quickly beset with problems when the school leader and three of the 11 teachers quit after classes began, and the firm dispatched company vice-president Steve Bollier to run it on a semipermanent basis.

The Johnson Academy also found itself in a battle with several local public school districts that accused it of falsifying enrollment numbers to boost funding. After a review by the state Department of Education, the school was ordered to refund $57,000. Some students had left soon after classes began, causing the discrepancy. Public schools often took an adversarial stance when it came to charters, as they feared that shifting students and funds to them would result in cutbacks to their own offerings.

New openings in the fall of 2002 included three elementary schools in Toledo and an accelerated high school in Tucson, Arizona. In early 2003 the Cesar Chavez Academy in Detroit sold $9.9 million in bonds to fund the construction of a high school to supplement its K8th grade offerings, and it opened in the spring of 2004 with capacity for 340 students. Leona managed 40 schools in four states, making it one of the five largest charter companies in the United States.

Expansion continued in 2004 and 2005, with Fort Wayne, Indiana, and Grand Rapids, Michigan, schools moving into new facilities and others opening in Arizona, Michigan, and Ohio. The federal "No Child Left Behind Act" set performance criteria for schools, and although the majority of Leona's met the standards, there were exceptions, including most of the ones in Ohio and Indiana. These were improving, according to the company, which attributed the problems in part to the impoverished areas in which the students lived.

In early 2006 Leona's contract with the Tri-Valley Academy of Arts & Academics in Muskegon, Michigan, was canceled by the school board after it scored poorly in a state evaluation. Later that year a federal court ruled that for-profit Arizona charter schools could not receive federal funding, which accounted for up to 10 percent of each school's revenues.

In the fall of 2006 Leona opened two schools in New Orleans, where the devastation of Hurricane Katrina had given charters an opportunity, while it also took over management of the Athenian Academy of Pasco, Florida. The firm had contracts to manage 21 schools in Michigan (including one for 12- to 18-year-olds in a detention facility), 19 in Arizona, 7 in Ohio, and 2 in Indiana. In several cases an elementary and a middle or high school were operated together by the same school leader.

KEY DATES


1996:
The Leona Group is founded in Michigan by A. Alfred Taubman and William Coats.
1997:
The company begins opening schools in Arizona.
2001:
The first school in Ohio opens.
2002:
The first school in Indiana opens.
2006:
Schools are added in Florida and Louisiana.

In ten years of managing charter schools, The Leona Group L.L.C. had grown into one of the largest firms of its type in the United States. The still-young field of for-profit public school management offered further opportunities for growth, but the firm also faced continuing challenges from lawmakers, school boards, and its competitors.

Frank Uhle

PRINCIPAL SUBSIDIARIES

The Leona Group Michigan LLC; The Leona Group Arizona LLC.

PRINCIPAL COMPETITORS

Mosaica Education, Inc.; Edison Schools, Inc.; Imagine Schools; National Heritage Academies, Inc.; White Hat Management; Choice Schools Associates.

FURTHER READING

Begin, Sherri, "Charting Growth," Crain's Detroit Business, February 14, 2005, p. 3.

Borja, Rhea R., "U.S. Circuit Court Bars Ariz. For-Profit Charters from Federal Payments," Education Week, October 4, 2006, p. 18.

"Enrollment Dispute Could Cost Charter School Funds," Grand Rapids Press, April 21, 1997, p. B3.

Gruss, Mike, "Charter Leader Resigns," Journal Gazette (Fort Wayne, Ind.), September 7, 2002, p. A1.

Mattem, Hal, "Charter Operator Moves to Phoenix," Arizona Republic, October 18, 2000, p. D4.

Murray, Dave, "Environmental Science Charter Settles Contract Dispute with Former Manager," Grand Rapids Press, November 29, 2001, p. B3.

Pepper, Jon, "Taubman Quietly Finances Push for Quality Education," Detroit News, April 25, 1999, p. C1.

Schulz, Karen, "Court to Decide if Charter Teacher Information Is Private," Grand Rapids Press, April 5, 2000, p. B4.

Schulz, Karen, and Ed Golder, "Unlocking School Records," Grand Rapids Press, March 26, 2000, p. A1.

Serwatch, Joseph, "Charter School Enlivens Old Neighborhood," Crain's Detroit Business, January 19, 1998, p. 3.

Stockman, Krista J., "After 1st Year, Johnson Academy Still Finding Niche," Journal Gazette (Fort Wayne, Ind.), June 15, 2003, p. 1C.

, "Charter Schools Silencing Critics," Journal Gazette (Fort Wayne, Ind.), June 13, 2004, p. 1C.

, "Success Is Incomplete for Charter School Firm," Journal Gazette (Fort Wayne, Ind.), March 5, 2006, p. A1.

Williams, Teresa Taylor, "Low Test Scores Threaten 2 Charters," Grand Rapids Press, July 13, 2006, p. 2.

, "Muskegon Charter Fires Manager," Grand Rapids Press, March 10, 2006, p. B6.

Wilson, Rick, and Roland Wilkerson, "Vision Test," Grand Rapids Press, March 14, 1999, p. D4.

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