What’s Going On in LA & Eli’s Cake

Both are likely to be dirty. Is anyone surprised?



Maria Guadalupe Mena of Garfield High School: "Community members stated they were offered monetary compensation [by Green Dot] in exchange for their signature on a petition."

The Parent Revolution group Ms. Mena refers to is also known as the Los Angeles Parents Union, and is a descendant of a Green Dot “project” called the Small Schools Alliance.

The 2007 Form 990 for the Broad Foundation shows that it gave $75,000 to the Small Schools Alliance, “To match SEIU funds to support the launch of the Los Angeles Parents Union.” Broad also gave $75,000 directly to the Los Angeles Parents Union (aka The Parent Revolution”) to support its business plan. It’s almost certain that more Broad contributions will show up for 2008; when I get access to those records I’ll let you know. Incidentally, Broad directly gave $1,210,040 to Green Dot Public Schools in 2007. Green Dot is Steve Barr's charter management organization which took over LA's Locke High School and brought an armed security force to campus.

I believe the money supplied by Broad is what would be paying for the propaganda (leaflets, on-air spots, websites, etc), to make it seem like the movement is being generated by "the people," when in fact it is a carefully planned, targeted marketing campaign.

So this is how it works.

Green Dot invents an organization called Small Schools Alliance (“SSA”). Then Eli Broad gives that organization some money to give birth to another organization they will call the Los Angeles Parents Union (aka The Parent Revolution). Then Broad delivers another chunk of money directly to support the business plan of that secondary organization (LAPU/Parent Revolution). This is probably not the only money the organizations have received; there's a strong likelihood other pro-charter "philanthropists" are making huge contributions, too.

Then the organizers hook up with Ben Austin and hire him as the Executive Director of the LAPU/Parent Revolution. It should come to no surprise that Austin once worked for Green Dot Public Schools and was also a Deputy Mayor under Mayor Richard Riordan. An LA Daily News opinion piece (August 22, 2009) explains things further:

Austin's day job is an assistant city attorney for Los Angeles. His second job is executive director of Parent Revolution (n e Los Angeles Parents Union). Surprisingly, this seeming conflict of interest goes unchallenged, despite his financial interest in passage of Flores Aguilar's resolution. Parent Revolution is an AstroTurf group. It was founded by, funded and shares an office building with Green Dot. Parent Revolution supplied the audience at these town halls, an audience vetted for its allegiance with the mayor, Flores Aguilar, and Austin's corporate charter school choice resolution.

You can read more here.This whole scheme was probably devised over lunch or at a dinner party in the privacy of one of these players' homes, rather than having been generated from the grassroots level.

Now get ready for what's just appeared on the horizon.

Riordan and Eli Broad have been good friends for years and have recently been holding campaign fundraisers for State Senator Gloria Romero, who has decided to run for Jack O’Connell’s State Superintendent of Public Instruction position. This is all about manipulating things behind-the-scenes and leveraging power.

Last March, Tom Vander Ark announced "Eli Finally Won."

But did he? I hope not.

At any rate, those of you who adore Broad as much as I do will appreciate this article where he "chuckles" while eating the no-tax cake made just for him by ingenious bakers on Wall Street, ingredients courtesy of the super-corporate-elite-friendly U.S. government.

“The Wealthy Find New Ways to Escape Tax on Profits” by Diana B. Henriques with Floyd Norris, New York Times, December 1, 1996.

Last spring, Wall Street bankers made an irresistible sales pitch to Eli Broad, the billionaire home builder and co-founder of the booming SunAmerica insurance empire. For a fee, they would help him lock in $194 million in profits on some of his SunAmerica stock and free up cash to pay family debts -- best of all, without having to sell the stock and give up all future profits on his shares. He would therefore not owe a penny of the estimated $54 million in taxes he would face if he sold the shares.

Broad accepted. "We have our cake," he said recently with a chuckle, "and are eating it too."

The thousands of less affluent investors who also own SunAmerica stock, either individually or through mutual funds, get no such deals. To cash in on their stock, they almost invariably have to sell it and face a federal tax of up to 28 percent on their profits.

Seventy-five years after it was enacted, the federal tax on profits from the sale of stock, land or other assets -- known as the capital-gains tax -- is becoming largely academic to the nation's wealthiest taxpayers.

Even as a growing number of Americans with more modest incomes are paying capital-gains taxes because of their growing mutual-fund profits, wealthy taxpayers like Broad can take advantage of a growing arsenal of Wall Street techniques to delay or entirely avoid taxes on their investment gains.

These strategies, some granted by Congress and others using the tax code in legal but wholly unanticipated ways, give taxpayers these breaks:

• Owners of a private business can sell it to their employees without paying capital-gains taxes, as long as they put the proceeds in certain investments -- investments that Wall Street is eager to provide.
• Real-estate owners can swap properties without the capital-gains tax required when a sale is made, allowing them to diversify their holdings and raise cash for other purposes.
• Large shareholders can use any of several exotic Wall Street strategies to raise cash and lock in their stock-market profits without actually selling their shares, which would create a tax bill.

Some of these techniques have been around for a dozen years or more but are now being used in new and aggressive ways. Others are new -- the technique Broad used is only 3 years old. It allowed him to use his SunAmerica stock as a sort of informal collateral for an ingenious security issued and sold by Merrill Lynch, which then passed much of the money raised from that sale back to Broad.

Coming a decade after Congress enacted changes designed to make the tax system simpler and more equitable, the proliferation of these tax-avoidance techniques among the wealthiest Americans raises questions of fairness in some minds.

"The simple fact is that anyone sitting on a big pot of money today probably isn't paying capital-gains taxes," said David Bradford, an economist at Princeton University and a critic of the current income-tax system. "And the government can adopt rule after rule after rule -- but the people who will get stuck paying capital-gains taxes will be the ordinary investors who own mutual funds."

William Gale, an economist at the Brookings Institution, agreed: "How fair is a tax that the wealthy can apparently avoid but the middle class gets stuck with? I don't see any fairness in that."

The consequences of Wall Street's ingenuity worry even some of those who profit from it. "I am torn on this issue," said Robert Willens, a managing director and tax analyst at Lehman Brothers.

It’s all lovely, just lovely.