Noble Charter School Network’s Taking It To The Bank

Gary Comer a Noble Network Charter School

When word recently broke that Chicago’s Noble Network of Charter Schools was raking in $386,745 over the last three years by charging students fees for everything from chewing gum to not looking teachers in the eye, people were justifiably outraged. But another ingredient in Noble Network’s “secret sauce” (as Rahm Emanuel calls it) is equally disturbing: its cozy relationship with Northern Trust, the mega-bank and investment company.

And although Northern Trust brags of  a “social responsibility” agenda whenever it donates money to college scholarships for Noble students, throws fundraisers to buy school calculators, or lets Noble hold board meetings at its S. LaSalle Street building [1], the bank’s involvement with Noble is not quite the charitable gesture it is painted out to be. Northern Trust, in fact, profits from loaning money to Noble, and one of its bankers, Jean Sheridan, sits on the Noble Network’s board of directors responsible for oversight of the schools’ finances.

When Noble opened Muchin College Prep in 2009 on one floor in a 16-story building at 1 N. State in the Loop, Northern Trust loaned the charter outfit $3.9 million for construction and renovation costs. The Chicago-based IFF (once called the Illinois Facilities Fund) also loaned Noble $1 million for the project, [2] which Crain’s Eddie Baeb estimated would cost around $10.4 million. [3]

At the time, Jean Sheridan, a member of the Noble Board of Directors,  was Northern Trust’s COO of personal financial services and chair of Noble’s audit and finance committee.  Noble does disclose Sheridan’s double-roles as banker and charter school board member, but no mention of the Northern Trust loan appears in the group’s 990 tax forms.

For that information, one needs to examine the audit done in October 2010 by Ostrow Reisin Berk & Abrams, Ltd, which lists the five-year loan’s interest rate as 4.560% and maturing in November 2014. From 2009 through 2010, Noble paid Sheridan’s bank $181,957 in interest.

At 5.68%, the IFF loan’s interest rate cost Noble $65,321 for the years 2009-2010. Noble also paid IFF $112,506 for project management during the same years, according to tax records. Moreover, Noble has forked over more than $89,557 in interest for an earlier loan from IFF for the Golder College Prep school. [4]

In a 2011 budget narrative, Noble noted Northern Trust’s financial hold and involvement in the Muchin school and the Gary Comer College Prep:

Given the rapid growth of the Network as well as its model of opening a school in a facility and growing to capacity, executive management must keep careful track of its cash position, particularly while the Network is operating under full capacity.

There are two primary restrictions on the use of cash, identified on the Sources and Uses summary on page 1. The first is a requirement to maintain at least $4M of unrestricted liquid assets per the terms of Noble’s $3.9M loan from Northern Trust for the 1 N. State facility. The second, a new requirement for FY11, is to maintain a $900,000 security deposit for the new Comer High School.

Given the challenging funding environment, Noble’s management is currently in discussions with Northern Trust and Comer Enterprises to determine if the security deposit requirement can be reduced, waived or otherwise modified so that the amount of cash available for general operations is not impacted by this requirement. [5]

How these negotiations turned out is unknown, but it is obvious that Noble recognizes the financial impact Northern Trust and other lenders are having on the charter management organization.

This is not surprising.  Under the corporate model, charter schools are tied by their loans and bonds (Noble has millions in bond liabilities, with total interest paid expected to rise as high as $17 million), forcing them to downsize staff and cut spending for textbooks just so the management can profit, as Noble does, with CEO Michael Milkie earning a handsome $208,576 in2010, and his director, Ron Manderschied, $122,308. [6] Manderschied is also the president of the Northwestern University Settlement Association, which collects rent money from Noble for one of its schools. Noble now pays Manderschied’s outfit over $3.6 million yearly in leasing fees. [7]

The owners of the Muchin College Prep building did well, too, taking in $1,565,272 in Noble rent money in 2010 alone. In contrast, Noble pays just one dollar in rent to the Chicago Public Schools for its Chicago Bulls College Prep. [8]

Noble’s non-union schools have those scandalous disciplinary fees to fall back on, too, and the public handouts seem endless. In 2010 alone, Noble raked in over $39 million in government contributions

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Julie Woestehoff, the executive director of Parents United for Responsible Education (PURE), whose Chicago Tribune co-op-ed [10] was recently highlighted on the Ed Show, believes Noble needs to be more accountable and transparent to the public whose money it uses: “It’s irresponsible to take on huge expansion loans with large interest payments and then gouge low-income families for trivial rule infractions to cover your expenses,” she says. “There is no meaningful oversight when a direct beneficiary of those interest payments sits on the charter board.”

And Northern Trust? It was sued in 2010 by the Chicago Teachers Pension Fund for losing hundreds of millions of dollars through its alleged risky behavior during the financial crisis.

There’s a reason why bankers sit on independent charter school boards which govern the fiscal oversight of charter schools, and with Noble you are seeing it in action. Still a Noble board member, Jean Sheridan has climbed the corporate ladder and now heads the bank’s financial regulatory reform management program. Some financial regulation for Noble and other charter schools would go a long way, but it doesn’t seem to be coming to the windy city anytime soon.


[1].  The bank’s exact donations to the William Osborn Scholarship fund are not known, but other donors contribute, as well. The Northern Trust Charitable Trust boasts of charitable contributions to education, but most money recipients are members of the school privatization movement: Teach for America, New Leaders for New Schools, and Christel House Bangalore, a charter school operated by Christel DeHaan, the former Resort Condominiums International (RCI) owner who has extensively funded the Indiana corporate school movement, to name a few. Not surprisingly, the Renaissance School Fund, which funnels money to charter management organizations in Chicago, is also funded by Northern Trust. The bank’s former CEO, William Osborn, was once a Renaissance School Fund board member.

[2].  A charter school loaning company, IFF is taking heat for suggesting in their Walton family-funded report that 36 more charter schools are needed in Washington D.C. IFF, a Community Financial Development Institution, was just awarded $25 million in New Market Tax Credits, and Chicago Public Schools has also given at least $2 million to IFF.

[3].  Eddie Baeb, “Charter High School to Open in the Loop.” Crain’s Chicago Business, December 3, 2008. Reposted at Chicago Real Estate Daily.

[4].  For details on the Northern Trust and IFF loans (as well as a $31, 636 loan to Noble to buy a 2007 Honda Pilot, and a $29, 505 loan to buy a 2010 Honda Pilot), see the Ostrow Reisin Berk & Abrams, Ltd audit, Noble Network of Charter Schools and Noble Day Care: Years Ended June 30, 2010 and 2009, October 26, 2010, pages 18-19, available in PDF. For bond liabilities, see pages 20-21 in the audit. The page numbers listed in these notes refer to page numbers in the original documents and not in the PDF boxes, unless otherwise noted.

IFF’s management fee is noted on page 8 of the 990 (PDF).

Northern Trust’s senior  vice president, Ramon Cepeda, sits on the IFF board of directors.

[5].  Noble Network of Charter Schools, “Noble Network of Charter Schools Budget Narrative for FY 2011,” June 7, 2010, page 5 (PDF).

[6]. Milkie and Manderschied’s salaries are found in Noble’s 2010 990 on page 34 (this refers to the page number found in the PDF box under the “View” icon in the pull-down menu, and not the page in the text itself).

[7].  See Noble’s annual report filed with the Illinois Attorney General’s office in 2006, page 14 (PDF ). Noble’s lease with NUSA is for the long-term.

[8].  The exorbitant rent paid is detailed on page 67 of the Ostrow Reisin Berk & Abrams, Ltd. audit. For Noble’s one dollar rent to CPS, see “Amendment to Lease Agreement,” January 2010, page 5 (PDF ).

[9].  Government contributions to Noble for the year 2009-2010 can be found on page 9 of the 990 (PDF).

[10].  Jasmine Sarmiento and Julie Woestehoff, “Changing the Code of Discipline,” Chicago Tribune, February 23, 2012.


photo credit: Zol87


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