Concerns raised in Neil Bush deal

[Carol Holst <kceh@airmail.net>]

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HoustonChronicle.com -- http://www.HoustonChronicle.com ;| Section: 
Local & State


Feb. 12, 2004, 4:51AM

Concerns raised in Neil Bush deal

HISD vote today on funding offer
By RON NISSIMOV
Copyright 2004 Houston Chronicle


LIST OF DONORS
Donations made to the HISD Foundation for purchasing educational 
software from Neil Bush's company came from:

• The Friedkin Companies, Inc. $25,000

• Landry's Restaurant Foundation $25,000

• Wells Fargo Foundation $25,000

• Former Iranian Ambassador and Mrs. Hushang Ansary $25,000

• Astros in Action Foundation $10,000

• Stearns Charitable Fund $5,000 Neil Bush's involvement in raising 
money for an HISD charitable foundation to help buy his company's 
educational software raises serious legal and ethical concerns, experts 
say.

The head of a national watchdog group described it as "self-dealing" and 
characterized the agreement as pushing "the border of legality."

The Houston Independent School District Board is scheduled to vote today 
whether to accept the money, part of a proposal touted by some HISD 
officials and Bush's company as win-win arrangement that would bring 
innovative learning tools to district schools at a reduced cost.

The board was originally scheduled to vote on the deal in December but 
postponed a decision on accepting the $115,000 Bush helped raise, 
requesting more information about the software and how HISD entered into 
the agreement without taking bids.

Some board members questioned whether Bush was benefiting from his 
family name.

Bush's Austin-based company, Ignite, agreed last summer to provide its 
eighth-grade U.S. history software to 23 HISD schools at half price this 
academic year, on the condition that the HISD Foundation, a 
philanthropic group, would come up with the remainder of the funds. The 
schools, which have been using the curriculum since August, each paid 
Ignite $5,000.

Some observers question the role that Bush and his company played in 
raising the additional money through the philanthropic organization 
because Bush and other Ignite executives contacted major donors, asking 
them to make tax-exempt, charitable contributions earmarked for the 
for-profit business.

"The spirit of (IRS) laws are to prevent this kind of self-dealing, 
particularly in the name of philanthropy," said Rick Cohen, director of 
the Washington, D.C.-based National Committee for Responsive 
Philanthropy. "It sounds like it really pushes the border of legality."

Cohen, who is not a lawyer, said philanthropic tax laws are "porous" and 
rarely enforced.

Bush was out of the country and unavailable for comment, said Ken 
Leonard, Ignite's president. He said Ignite did not seek legal opinions 
on the financial arrangement, relying on the expertise of the HISD 
Foundation.

Jenard Gross, chairman of the HISD Foundation, said in a statement that, 
"We have examined all donors contributing to (the Ignite curriculum) and 
determined that no legal conflicts exist."

Frances Hill, a professor at the University of Miami School of Law who 
specializes in tax-exempt organizations, said Ignite's arrangement with 
the HISD Foundation falls into "a squishy (legal) area."

Hill said if Ignite officials simply helped the foundation raise money, 
the actions were legal, even if the funds were earmarked for Ignite. 
However, if Ignite representatives exerted "substantial influence" over 
the foundation, the fund raising could have been illegal, she said.

"The real story here is probably less the technicalities of tax laws 
than the question of how they got into this in the first place," Hill 
said. "If charities are simply there as intermediaries to facilitate 
business, it raises questions of whether that is really all charities 
are for."

Hill added that this could be the future model for companies wanting to 
do business with schools. "This is going to then mean that contracts are 
not going to be bid on a competitive basis," she said.

Ignite first pitched its eighth-grade U.S. history software to HISD in 
2002, and at that time the district agreed to pay $45,000 to use the 
product in six middle schools in 2002-2003. The following year, Ignite 
and school officials discussed expanding the program, but there was 
concern the asking price, $10,000 per school, would be too high, Leonard 
said.

He said Ignite and HISD officials together had a "spontaneous 
combustion" to ask schools to pay $5,000 each and collect the rest of 
the money through the HISD Foundation. He said Ignite has never 
previously entered into such an agreement with a school foundation since 
it was founded in 1999.

The foundation took the leading role in raising the money, Leonard said, 
but Ignite officials initiated contact with some potential donors, or 
gave the foundation names of potential donors.

The money was eventually raised from the Friedkin Companies Inc., 
Landry's Restaurant Foundation, Wells Fargo Foundation, former Iranian 
Ambassador Hushang Ansary, Astros in Action Foundation and Stearns 
Charitable Fund.

Ansary, a Houston businessman and longtime GOP supporter who described 
himself as a "minimal" investor in Bush's privately held company, said 
he was contacted by either Bush or one of his representatives.

Mariam Harper, vice president for the Houston Astros' community 
development division, said Bush contacted team owner Drayton McLane 
about a donation.

Officials at Wells Fargo and Landry's said they did not know who 
contacted their companies. Friedkin Companies, owned by Toyota 
wholesaler Thomas Friedkin of Houston, did not return a call from the 
Chronicle.

Rosanna Ruiz contributed to this report.


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