PRIVATIZATION Owning schools proves to be risky

An investment firm pleases Wall Street by no longer backing privatization.
PHILADELPHIA (AP) -- An investment firm that was one of the early backers of efforts to privatize public schools no longer believes that companies managing schools for profit can make enough money to justify the political risk of investing in them.
New York-based Leeds Weld & amp; Co., which just last summer invested $40 million in Edison Schools Inc., the nation's largest private manager of public schools, said this week it will no longer invest in school privatization companies.
"Investors frequently fail to appreciate the political risks posed by investment in companies that pursue privatization of education," the firm's principal, Jeffrey Leeds, said in a statement. "Leeds Weld no longer view companies that pursue privatization of education as likely to generate the long-term growth necessary to offset these risks."
The announcement was made jointly with the Service Employees International Union, a fierce opponent of school privatization.
Union concerns
The union, which represents thousands of government workers, including many school janitors, had been trying for nearly a year to pressure Leeds Weld into severing ties with companies such as Edison. Last September, it began lobbying the nation's large public pension funds to cut off investment dollars to Leeds Weld unless the company changed course.
Steve Abrecht, the national director of SEIU's capital stewardship program, said union members were rankled that their retirement savings might be used to fund privatization efforts that could eventually cost them their jobs.
"It didn't seem like a logical place for their retirement dollars to be invested," he said.
Wall Street
Simultaneously, Wall Street lost interest in school privatization companies, due in part to Edison's failure to turn a profit, despite years of rapid growth and its new contract to run 20 schools in Philadelphia.
In the course of a year, Edison's stock sunk from highs of above $30 to less than $2, closing Wednesday at $1.68 on the Nasdaq Stock Market. Last month, Edison announced that a group led by founder Christopher Whittle planned to buy the company and take it private.
Leeds Weld's new thinking on private-sector takeovers of public schools marks a major shift. Leeds had first invested in Edison in 1996 and had sat on its board. The firm's other major principal, former Massachusetts Gov. William Weld, had been a member of Edison's board of directors since 1999. Both resigned when Leeds Weld became involved in Edison's $40 million financing package last summer.