The Pearson Foundation, the non-profit arm of the education-testing giant, has agreed to pay $7.7 million to settle claims that it broke New York laws by misusing charitable assets for its for-profit company, Attorney General Eric Schneiderman announced today.
Schneiderman said $7.5 million of the settlement would be used to hire and retain teachers. The Pearson Foundation will also change its governance to ensure that the London-based foundation isn’t using money to benefit the for-profit Pearson, he said.
The money will be placed into a fund managed by the Attorney General’s Office to support 100Kin10, a national organization that wants to add 100,000 science and math teachers into U.S. schools over 10 years, the company said. The rest, $200,000, will pay for the cost of the state’s investigation.
“The law on this is clear: non-profit foundations cannot misuse charitable assets to benefit their affiliated for-profit corporations,” Schneiderman said in a statement. “Moving forward, funds for Pearson Charitable Foundation will be used exclusively for legitimate charitable purposes, beginning with millions of dollars to help ensure that every public school student has a great teacher in the classroom.”
In a letter to employees Thursday night, Pearson CEO John Fallon said the company has conducted an internal review of its operations and agreed to the settlement “so that we can all move on with our work, free from further distraction.”
In a statement, the company said that, “Pearson and the foundation maintain we have always acted with the best intentions and complied with the law. However, we recognize there were times when the governance of the Foundation and its relationship with Pearson could have been clearer and more transparent.”
Schneiderman charged that Pearson, the largest for-profit education company in the world, developed course materials through the foundation that the company sought to sell commercially based on the national Common Core testing standards for students—including in New York.
The investigation also found that the foundation had bankrolled foreign trips attended by school officials in the U.S. The settlement includes language that would bar the foundation from featuring its services at events it funds.
A report by Gannett’s Albany Bureau in July showed that Pearson dominates controversial testing and evaluations for students and teachers in New York, raising criticism from teachers and unions about the company’s influence.