Tomalis spent time in NYC advising private equity investors
September 21, 2014 12:00 AM
By Mary Niederberger and Bill Schackner / Pittsburgh Post-Gazette
During nearly 15 months that Ron Tomalis spent as Gov. Tom Corbett’s special adviser for higher education, officials at some of the state’s key institutions say they never shared a moment of his time.
Not so for a group of private equity investors in New York City.
Swipe card records released by the state Department of Education show Mr. Tomalis entered his agency parking spot in Harrisburg at 4:49 a.m. Jan. 16, prior to a trip by train that the department later described as state business. His destination in midtown Manhattan was the New York Athletic Club, where he and other experts leading an hour-long panel gave those investors insight into issues they will face trying to sell classroom technology.
It’s not unusual for state officials to accept speaking invitations. And it seems clear why those looking to profit by selling products to schools would want to hear from Mr. Tomalis, who before being named the governor’s adviser served as Pennsylvania’s secretary of education.
Less obvious is what the state Department of Education believed taxpayers stood to gain by having a Cabinet-level adviser at an investor conference, whose chairman is a past business associate of Mr. Tomalis, according to federal regulatory records.
The Department of Education did not address written questions asking how the state benefited from the trip, its connection to Mr. Tomalis’ official duties and whether the department knew about the gathering’s stated purpose as a resource for private investors.
In a statement, department spokesman Tim Eller said:
“Mr. Tomalis’ business trip to New York was approved by the department prior to the date of the conference. Mr. Tomalis paid for his own expenses and did not seek reimbursement from the state. Mr. Tomalis did not receive outside compensation.”
Reached via email, Mr. Tomalis declined comment for this story.
Organizers titled the daylong conference “Private Equity Investing In For-Profit Education Companies: How Affordability Is the Game-Changer For New Business Models.’’ Mr. Tomalis’ participation came seven months before his tenure as adviser ended in controversy after the Department of Education this summer could produce only scant documentation of his work.
Mr. Tomalis resigned the $139,542-a-year post Aug. 26, a month after the Pittsburgh Post-Gazette reported on records that raised questions about his workload. In response to a Right-to-Know request, the department could produce only five emails he authored over 12 months, a largely empty work calendar, phone logs that averaged little more than a call per day, no travel expenses and no job description.
Beyond the records, a number of key higher education players said in interviews they had little or no contact with Mr. Tomalis in his advisory role. Officials at Penn State University, the University of Pittsburgh, the Pennsylvania Higher Education Assistance Agency and the state Commission for Community Colleges said they had no contact at all, nor did the Republican chair of the Senate Education Committee or the ranking Democrat on the House Education Committee.
On Wednesday, state Auditor General Eugene DePasquale said his agency will expand an audit of the Department of Education to examine, among other things, Mr. Tomalis’ performance.
Corbett administration officials have defended the former adviser, saying he was not a ghost employee as some critics argued. To buttress that, the Department of Education released daily parking swipes for 126 days between January and August of this year that Mr. Tomalis arrived at the agency garage. Generally, the space was occupied less than eight hours, but the 17 hours that he remained in the spot on Jan. 16 stood out.
At the January conference, Mr. Tomalis was a speaker on a panel discussion about technology in the classroom and how to overcome the obstacles to selling technology products and systems to schools.
The conference, termed a “master class,” was organized by Capital Roundtable, described on its website as a “conference company for the middle market private equity community.” The master class was chaired by David L. Warnock, founder of Camden Partners Holdings LLC of Baltimore. Mr. Warnock is a former business associate of Mr. Tomalis, who has been a director of firms associated with Camden.
Mara Kane, a spokeswoman for Capital Roundtable, said her firm organizes about 30 sessions a year on investing options and that once a chairman is chosen for an event, the chairman generally sets the agenda and chooses the speakers. Speakers can be recommended by others but must be approved by the chairman. Ms. Kane said none of the speakers are compensated, but they are given free admission to the conferences. The standard registration fee for the conference was $1,395.
Mr. Warnock could not be reached for comment on why he chose Mr. Tomalis as a panelist, though a representative of his firm said that Mr. Tomalis is not currently employed by any Camden entities.
The two Camden-related firms for which Mr. Tomalis served as director are English Language Learning and Instruction System and Camden Learning, which later became National American University, a for-profit school that offers both on-site and online degrees.
Securities and Exchange Commission filings show Mr. Tomalis was a director and 10 percent owner in National American University Holdings in November 2009. He is not currently listed as a director of the company. Federal filings also show Mr. Tomalis listed as a director and 10 percent owner in Camden Learning in November 2007.
Another SEC report indicates that in February 2005 stockholders of English Language Learning and Instruction System appointed two new members to its board of directors -- David L. Warnock and Ronald J. Tomalis. The report said Mr. Warnock was affiliated with Camden Partners Strategic Fund 11-A and 11-B, which “are collectively the company’s majority stockholder.”
According to its website, Camden Partners sold ELLIS to Pearson Digital Learning. Whether Mr. Tomalis has a current affiliation with ELLIS is unclear.
At the master class, Mr. Tomalis was a panelist for a session advising investors on how to overcome the obstacles to selling technology tools and systems to schools. The panel moderator, Harold Levy of the investment firm Palm Ventures, asked the panelists to address the obstacles surrounding technology in education and to explain “how do we profit from it.”
Mr. Tomalis shared the panel with Tisha Edwards, who at the time was interim CEO of the Baltimore City Public Schools; two representatives of investment firms; and a representative from Whiteboard Advisors, consultants on education policy and business environment.
In his biography for the master class, Mr. Tomalis noted that he was a director of Dutko Worldwide/Whiteboard Advisors and in that role “he was principal adviser to non- and for-profit groups, foundations, companies and investors operating in pre-K through postsecondary education environments.”
During the master class session, according to an audio package sold by Capital Roundtable, Mr. Tomalis introduced himself as “senior” adviser to Gov. Tom Corbett on higher education issues, when his title was “special” adviser to the governor. He said he was previously Pennsylvania’s secretary of education for about three years, when his tenure ran from January 2011 through May 2013, just shy of 2 1/2 years. At times, during the discussion, Mr. Tomalis referred to himself in the present tense as secretary of education but then backtracked to put it in the past tense.
During his comments, he did not promote education or educational opportunities in Pennsylvania nor did he encourage investment in the state’s schools.
Instead he spoke of the obstacles that investors would face in trying to create and sell products to schools both at the K-12 and higher education levels.
He said one of the biggest obstacles to the use of technology in education is based on “a factory model” and “agrarian calendar” but is situated in the “digital age.”
He said personalized education and choices in education are the wave of the future and that technology and the Internet could make such choices as a Mandarin Chinese elective possible for students at a school that currently offers only more traditional foreign languages.
Another example he pointed to is the success of Penn State University’s World Campus. Mr. Tomalis said as secretary of education he was an ex-officio member of the board of trustees and sat in on discussions about how the majority of 10,000 students -- 80 percent -- in the online world campus program were not from Pennsylvania. But the remaining 20 percent were Penn State students who chose to take a course online from their dorm room rather than in class.
When discussing technology purchases by school districts, Mr. Tomalis warned investors that district finances, strapped by such factors as high pension payments, may not allow for the cost of purchase of new technology products and systems and the necessary training required to use them effectively.
He advised investors that it would be wiser, rather than selling to a large urban district that likely wouldn’t have resources for staff training, to consider selling to a suburban or rural district that has resources for training and support.
“If you do it in New York City, you are going to generate the revenue stream. But you have a much greater probability of failure,” he said.
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