The Pearson Charitable Foundation, the nonprofit arm of the largest educational publisher Pearson Inc., will pay a $7.7 million fine to settle New York State’s accusations that the foundation had helped develop products for Pearson including course materials and software.
An investigation by New York State Attorney General Eric T. Schneiderman found that the foundation broke New York State by assisting in for-profit ventures. The foundation has agreed to pay fine, writes Javier C. Hernández of The New York Times.
The money will go to 100Kin10, a national effort led by a foundation Carnegie Corp. to train more teachers in high-demand areas, including science, technology, engineering and math.
“The fact is that Pearson is a for-profit corporation, and they are prohibited by law from using charitable funds to promote and develop for-profit products,” Mr. Schneiderman said in a statement. “I’m pleased that this settlement will direct millions of dollars back to where they belong.”
The investigation focused on Pearson’s efforts since 2010 to develop a suite of products around the Common Core, a new set of academic standards that has been adopted by 45 states and the District of Columbia.
According to the attorney general’s report, Pearson had hoped to use its charity to win endorsements and donations from a prominent foundation, which appears to be the Bill and Melinda Gates Foundation.
“Pearson Inc. executives believed that branding their courses by association with the prominent foundation would enhance Pearson’s reputation with policy makers and the education community,” a release accompanying the attorney general’s report said.
The Pearson Foundation and the Gates Foundation in April 2011 announced plans to develop 24 new online reading and math courses aligned with Common Core. According to investigation, Pearson executives wanted to sell the courses commercially and predicted potential profits of tens of millions of dollars.
The Pearson Foundation sold the courses to Pearson for $15.1 million after Mr. Schneiderman’s office began its investigation. The attorney general also inspected a series of education conferences sponsored by the Pearson Foundation, which paid for school officials to meet their foreign counterparts in places like Helsinki and Singapore.
Several school officials who went on the trips represented education departments that had contracts with Pearson. The investigation did not determine whether those officials had awarded any new contracts based on any improper influence.
The report, however, found that executives from other companies were not invited to attend and it gave Pearson’s corporate side a clear advantage. The report by the attorney general portrayed a culture at Pearson in which the lines between business and charity were often blurred.
Pearson is the largest donor to the Pearson Foundation. The foundation’s staff included several employees from Pearson, and the foundation’s board was made up entirely of Pearson executives until 2012.
Under the agreement, the Pearson Foundation would change its governing structure by appointing three board members to review any financial transactions that might benefit the business side. Additionally, the foundation agreed to bar Pearson executives from attending its education conferences.
In addition, the foundation would not feature Pearson products at its education conferences.