The SEIU is spreading the word.
Service Employees International Union, Washington, is telling trustees of public and teachers' pension funds they shouldn't invest in the latest fund of Leeds Weld & Co., New York, because of the firm's close connections with Edison Schools Inc., the country's largest privatizer of public schools.
Steve Abrecht, executive director of SEIU's Capital Stewardship Program, explained: "A lot of the participants in pension systems don't know where their private equity funds actually invest the money. Many have been surprised to learn that it was invested in Edison. Now that Leeds is raising a new fund, Leeds Weld Equity Partners IV, targeted at $500 million, we are alerting people about their background."
Mr. Abrecht emphasized: "We don't believe teacher or state pension funds should be investing in private education and have been contacting trustees through various education organizations such as the National Education Association to let them know what's going on. There is a lot of community opposition when Edison comes in and privatizes schools, and there is not a lot of profit. Privatization is not the answer to improving public education. And the stock itself has been doing poorly."
SEIU represents janitors at schools, as do some of the public pension funds.
Leeds initially invested in Edison in 1995, when the company went public. But the connection continued because both Jeffrey Leeds, principal at Leeds Weld, and William Weld, former governor of Massachusetts and now general partner at the firm, were members of the board of directors at Edison. Before stepping down this summer, they helped Edison get debt financing of $40 million to fund its takeover of 20 public schools in Philadelphia.
The financing was arranged at a time when Edison's stock price had plunged to 94 cents a share, from a high of $36.75 a share in February 2001. If the financing had not come through, the company might have been forced to close down.
Mr. Weld declined to comment on the SEIU campaign, except to say that he was aware of it; nor would he discuss how the fund-raising was going.
One placement agent, who preferred to remain anonymous, said the Leeds Weld fund had begun fund raising in the spring of 2001 and that it was not doing well. "Teachers are violently opposed to the idea of privatization, and they tell their friends at other public pension funds, too, which is making the public funds a tough sell for Leeds," he said.
The $132 billion California Public Employees' Retirement System, Sacramento, turned the fund down through its fund of funds consultant, Grove Street Advisors, said Dave Mazza, partner at Grove Street; he declined to explain why. But industry sources noted that many of the CalPERS participants are janitors in the public school system who were aware of the SEIU campaign, and they would not have been pleased if CalPERS had invested with a firm that specializes in for-profit education.