A wealthy New York organization that poured $15 million into last year’s unsuccessful ballot question to expand charter schools in Massachusetts was hit Monday with the largest fine in state campaign history after officials found the group was illegally hiding the identities of its donors.
Families for Excellent Schools-Advocacy, a nonprofit that was the single largest funder behind Question 2 in Massachusetts, was slapped with a $426,466 fine, the largest in the 44-year history of the state Office of Campaign and Political Finance.
The group was also forced to reveal its donors — showing it was anonymously receiving major checks from two Baker administration officials and numerous wealthy contributors from the world of high finance in Massachusetts, New York, and other states.
The newly revealed donor list showed the group received checks from Amos B. Hostetter Jr., the former cable television magnate from Boston, who gave $2 million; Seth Klarman, the billionaire chief executive of Baupost Group, a Boston hedge fund, who donated $3.3 million; and Alice Walton, an heiress to the Walmart fortune, who gave $750,000.
Paul Sagan, a technology executive who was appointed by Governor Charlie Baker as chairman of the state Board of Elementary and Secondary Education, which oversees charter schools, donated $496,000. Mark Nunnelly, a former Bain Capital executive who was recently promoted from his position as Baker’s chief information officer to a Cabinet post overseeing cybersecurity, gave $275,000. Nunnelly’s wife, Denise Dupre, contributed $275,000.
As a general rule, nonprofits such as Families for Excellent Schools-Advocacy, or FESA, are not required to disclose their donors if they are not engaged directly in political activity. However, state campaign finance officials said an investigation revealed that FESA was soliciting checks specifically to support Question 2, which would have allowed for the creation or expansion of up to 12 charter schools per year in low-performing school districts.
Therefore, officials said, the group had violated the law. In addition to paying the fine and revealing its donors, the group agreed with the IRS to dissolve itself, and Families for Excellent Schools, its umbrella group, agreed not to fund-raise or engage in any election-related activity in Massachusetts for four years.
“Massachusetts voters deserve to know the identity of those who attempt to influence them before Election Day,” said Michael J. Sullivan, director of the Office of Campaign and Political Finance. “Complete and accurate disclosure of campaign activity is the goal of OCPF and the cornerstone of the campaign finance law.”
Jeremiah Kittredge, chief executive of Families for Excellent Schools, said: “Though we believe we complied with all laws and regulations during the campaign, we worked closely with OCPF to resolve this matter so we could move forward with our mission of working alongside families desperate for better schools.”
Baker, who strongly supported Question 2 and appeared in one of the ballot question’s closing campaign ads, said Families for Excellent Schools was responsible for violating the law — not the members of his administration who donated to the organization.
“OCPF did an investigation, concluded that they violated the law, and fined them appropriately for that. But that’s on the group,” Baker said. He added, “Paul Sagan and Mark Nunnelly both complied with all state laws with respect to this.”
Families for Excellent Schools has promoted charter schools across the country. In New York, it spent $9.4 million on lobbying in 2014 and ran ads blasting Mayor Bill de Blasio for his opposition to charters, while praising Governor Andrew Cuomo for supporting them.
The group was chaired last year by Paul Appelbaum, principal of Rock Ventures LLC, a New York investment firm. Its vice chairman was Bryan Lawrence of Yorktown Partners, another New York investment firm.
In Massachusetts, the $15 million that FESA spent on Question 2 represented 70 percent of the $21.7 million in donations collected by the main pro-charter ballot committee, Great Schools Massachusetts. Some of the money was used to run ads that featured images of a racially diverse group of children in a classroom.
Teachers unions poured more than $15 million into the campaign to oppose Question 2. Voters roundly rejected the question, with 62 percent opposed in November.
After the election, state campaign finance officials subpoenaed bank records from FESA that showed it was raising money from donors and then giving it directly to Great Schools Massachusetts. Great Schools Massachusetts, unlike FESA, was required to disclose its donors. So those who donated to FESA avoided having their names revealed during the campaign.
“I am shocked but not surprised,” said Barbara Madeloni, president of the Massachusetts Teachers Association, which helped fund the opposition to Question 2. “We always knew that they didn’t want the public to know it was being funded by millionaires and billionaires.”
Maurice Cunningham, a political scientist at the University of Massachusetts Boston, said the cloak of secrecy helped Families For Excellent Schools-Advocacy project an image as a grass-roots organization focused on helping urban youth.
“You can’t say, ‘We’re Billionaires for Excellent Schools,’ ” said Cunningham.
Sagan had previously been disclosed as a donor on Question 2. In August 2016, he gave $100,000 to the Campaign for Fair Access to Quality Public Schools, a pro-charter ballot committee that was required to reveal its donors. A month later, he filed an ethics disclosure form in which he acknowledged that, “As a private citizen, I have contributed personal funds to educational and political organizations, including organizations that are advocating a position on Question 2 on the November 8, 2016 state ballot.”
On Monday, Sagan released a statement acknowledging he had also donated to FESA.
Nunnelly defended the donations he and his wife made to FESA: “For 25 years, my wife and I have been dedicated supporters of Massachusetts public schools and all they do to maintain our position as the national leader in public education.”
Cunningham said he hoped the fine would curb the role of so-called dark money in state elections. “Citizens have a right to know who is trying to influence their votes,” he said.