Shalhevet Missing $2 Million?

So I received a bunch of interesting documents about Shalhevet.

Apparently, in 2004, an accountant was hired to go over the school’s books and halfway through his audit, he was fired by school founder Jerry Friedman.

I got sent copies of a bunch of Shalhevet checks that Jerry Friedman wrote to himself.

Here’s part of the report I’ve posted: “At a board meeting, the board approved an unsubstantiated $3.2 million loan to Jerry Friedman. This was passed after a school board member asked if Roland’s [Arnall] was OK with this booking of the loan which was answered by Jerry in the affirmative. Roland in a conversation with me said he absolutely did not say such a thing, board members were not able to get Jerry to relinquish these loans, in order to fulfill a condition that he would not advance Shalhevet funds unless all prior loans were converted to pledges. (Eventually Roland agreed to allow Jerry to keep $1.3m, still unsubstantiated, on the books.)”

Here are some further excerpts of the report:

What I found on the ground at Shalhevet was anything but what was in the job description had indicated and after a couple of months when I was able to fully access the situation I realized how much trouble the school was in. Speaking with Roland Arnall about the debt situation, he claimed it was misrepresented to him and he did not know the extent of the trouble. Initially he was going to walk, but ended up agreeing to support me in converting the business from its position as a “sunk ship” into a successful operation.

At the school board meeting last week in the interim WASC report that was presented it said in 2004 they recommend the school brings in an Executive Director and that should solve the financial and business problems, what it did not say as of 2004 was that:

* The school was found to be have a $3.5 million operating deficit and nobody knew it.

* That there was no functioning accounting or business office in place.

* The school had financed itself by not payroll taxes for years, not paying employee’s benefits, and not paying vendors. There was no credit left anywhere.

* The board of directors, who have ultimate fiduciary responsibility, were ineffective and had been misled as to the situation of the school.

* The school had alienated donors by selling and not delivering naming opportunities for a gymnasium, a library and many other promises not kept. Long term pledges were called in desperately early, and countless other broken promises had hurt the school’s credibility to fundraise.

* Covenants in the bank loan called for mitigation of known asbestos, lead and mold problems that were never rectified.

* Covenants in our bank loan called for quarterly reviewed statements that were never prepared. Accounting review of ’03 was found to be totally unreliable.

* Fire alarms were not functioning, fire exits were bolted shut. There were many documented plant issues that were safety hazards.

* Fingerprinting and background checks for teachers had not been performed.

* The previous controller was found to have been paying phantom employees. Stacks of checks were brought to Jerry that he signed without any backup. Employees were stealing from the school in a multitude of ways.

DURING MY TIME AT THE SCHOOL SOME OF THE CHALLENGES I FACED IN FIXING THE ABOVE ISSUES WERE:

* Constant pressure to fundraise to meet payroll obligations.

* Being assigned to take care of virtually every issue that came up within the institution and not having appropriate personnel to manage the projects.

* Being forced to handle issues, such as having to frantically fundraise to cover payrolls when the headmaster is on vacation out of the country.

* Dealing with abusive phone calls and messages insisting things get done or get paid when there are no resources to take care of them.

* IRS officers showed up threatening to close the school.

* The bank called the loan which necessitated having to deal with their workout group while trying to find a new lender.

* The sewage backup that flooded the downstairs (last year) was found to have not been the first time this problem happened, and it was not properly cleaned up the previous time.

* OSHA officers came in and threatened to close the school. An administrator of ours called them in with mold complaints.

* There were lawsuits from disgruntled parents who had paid in advance in good faith.

* There were lawsuits from a myriad of vendors.

* Assets were seized from our bank accounts for lawsuits that were not handled.

* Teacher contracts were in complete disarray with most teachers and administrators having some unique deal with the school, often not in writing.

* Teacher workloads were found to be widely disparate with some teachers making in excess of $80k for teaching two classes. There was nominal teacher oversight with teachers not showing up and often students going off campus. Parents frequently called with discussions about the problems with education.

* Here are some of the salaries:
Rabbi Elchanan Weinbach, $260,000
Kenneth Milman $150,000
Rabbi Avi Greene $150,000
Samuel H. Gomberg $150,000
Edward H. Eiseman, $85,000

* Over a third of the school’s education fund was going to administrators, yet the administrative team constantly passed all responsibility to the business office.

* I had prepared a professional restructuring plan that advocated cutting over $700k in admin costs that would serve to improve the education. It was ignored while responsibilities of over a third of our education costs go to administrators whose contributions should be questions as a proportion of their cost to the school.

* Having been instrumental in opening the new elementary school, I was disparaged by parts of the community for unethical hiring practices among the schools, for which I had nothing to do with.

* My first breakfast at the school was bagels and cream cheese I found to have been served on the caterer’s meat dishes. I had to change out three caterers because of the faulty assumptions of the way the administration handled the catering.

* The health department had issued warning letters to the kitchen which were not previously followed.

* Although my position entailed overseeing the budget and business of the school, I was unable to control spending and in constant conflict with the administration where Jerry ordered spending that the school did not have.

…We have a roadmap from Alan Harrison, who audits more private schools in the city than any other auditor, who said our school was by far the worst he had ever seen. Nonetheless, he had taken us on, but we have not complied nor followed up with him.

There is still work to be done and while I have lost many battles, but until a few months ago the big picture showed that I am winning the war. The previous administration responsible for the ills above seems to be on his way out. There is a more active board recognizing the problems… There is financial transparency and numbers to work with.

So what happened from June until now that things have gone awry and off track, much of the infrastructure I have built is coming unraveled, top teachers left.

THE ISSUES THAT ARE BEYOND MY CONTROL THAT NEED TO BE CORRECTED ARE:

* I had advised that the learning specialist had many computer issues because he has been downloading pornography and does not know how to delete it from his computer.

* The kitchen is constantly being asked to provide catering for the school at or below cost which will show a loss and shouldn’t (ie, an event at Jerry’s house he approved and had our kitchen personnel)

* I have the school van being driven by one of our maintenance personnel who does not have the proper license. I have also seen many van rentals when we now have our own van.

About Luke Ford

I've written five books (see Amazon.com). My work has been followed by the New York Times, the Los Angeles Times, and 60 Minutes. I teach Alexander Technique in Beverly Hills (Alexander90210.com).
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