MTA Save Our Public Schools

MTA and AFT Massachusetts file ‘pay-to-play’ complaint with SEC

Campaign contributions from the financial industry that are paying for a Question 2 television advertisement starring Governor Charlie Baker may violate federal “pay-to-play” laws, according to a complaint filed today with the U.S. Securities and Exchange Commission by the leaders of the state’s two educators’ unions.

“Governor Baker’s political fortunes are clearly tied to the fate of Question 2, and it is appalling that ads starring him are being financed by donations from Wall Street fund managers who have an interest in currying favor with the administration.”

— Barbara Madeloni, MTA President

“Governor Baker’s political fortunes are clearly tied to the fate of Question 2, and it is appalling that ads starring him are being financed by donations from Wall Street fund managers who have an interest in currying favor with the administration,” said Barbara Madeloni, president of the Massachusetts Teachers Association.

Much of the funding being used for the “Yes on Question 2” campaign is “dark money” that comes from entities that do not disclose their donors, Madeloni pointed out.

“The Securities and Exchange Commission has the power to untangle this massive web of hidden money,” Madeloni said. “We urge the SEC to exercise its responsibility immediately and prevent political deals from infecting the integrity of both public pension funds and the electoral process.”

A letter to the SEC that accompanies the formal complaint states: “Over the past year, executives of seven financial firms reportedly with contracts to manage Massachusetts state pension funds have made at least $620,000 in contributions to support ballot measure committees that support Question 2, a statewide measure on the November 8 ballot that would expand the number of charter schools in the Commonwealth.” It cites a Boston Globe story reporting: “The ‘Yes on 2’ campaign says it will spend significant sums on the new Baker advertisement.”

The letter to the SEC states, “Although their more than $620,000 in contributions have not been made to Governor Baker’s re-election campaign committee, the recipient ballot committees have paid for television ads and other public communications that either prominently feature Governor Baker or may have been developed with his involvement. Those contributions are ‘things of value’ that could influence his re-election, and, if so, are subject to the Rule.”

“This looks like pay-to-play on a grand scale that’s financing a TV ad campaign to boost the governor’s political standing.”

— Tom Gosnell, AFT MA President

The Boston Globe has also credibly reported that the Governor’s office has been working closely with Question 2 proponents to coordinate campaign strategy, including presumably the extent to which Governor Baker himself should be featured, and his 2014 campaign manager has taken a particularly prominent role in coordinating their efforts from his lobbying and media firm,” the letter states. “And, Governor Baker has evidently been directly involved in fundraising efforts to support Question 2.”

The letter concludes: “An investigation by the SEC could determine the full scope of Governor Baker’s involvement with the pro-Question 2 committees and their contributors who are regulated by the Rule, and the application of the Rule to those circumstances.”

“This looks like pay-to-play on a grand scale that’s financing a TV ad campaign to boost the governor’s political standing,” said Tom Gosnell, president of the American Federation of Teachers Massachusetts. “Until this investigation is concluded, the television ad featuring the Governor should be removed from the air,” Gosnell added. “It should be taken down immediately.”

Recent news reports show that firms managing more than $1.27 billion in state pension funds have deep connections to the Yes On 2 campaign. Executives from seven of those firms have made direct contributions to the campaign. These financial firms include Highfields Capital Management, Bain Capital LLC, Summit Partners, Charles River Ventures, Fidelity Management and Research, Berkshire Partners, and State Street Bank and Trust Co.

Prominently, executives at Massachusetts pension adviser Berkshire Partners together have given $300,000 to support Question 2, including an Oct. 25 contribution from Berkshire Managing Director and co-founder Bradley Bloom.

Baker appoints two members of the state pension board, and he or his designee also serves on it. The board selects the firms that manage public pension funds.

Massachusetts is currently at the epicenter of the national effort to rapidly expand charter schools, which are publicly funded but privately run. Question 2 would allow 12 new charters every year in perpetuity. This year, charters are draining more than $450 million from local public school districts; the figure will grow exponentially if the initiative passes.

The millions of dollars in questionable contributions to support passage of Question 2 represent a massive attack on public education and democracy, in the view of the educators’ unions and their allies in the Save Our Public Schools coalition, which is urging Massachusetts residents to vote no on Question 2.

Last week, Baker addressed the members of the pro-charter Manhattan Institute in New York. Paul Singer, chair of the Manhattan Institute’s Board of Trustees, is a major financial backer of charter school expansion around the country. Singer also owns Elliott Capital Advisors, one of the hedge fund companies in which the state pension board invests the money it oversees. The Paul E. Singer Foundation has contributed at least $1.1 million to Donors Trust, a Virginia fund that gave Question 2 donor Families for Excellent Schools $100,000 in 2014.

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