Consulting Firm Aiding the City May See Its Reputation Tarnished

A corporate consulting firm that touted its experience overhauling the St. Louis public schools to secure a $15.8 million no-bid contract with the New York City schools could see its track record tarnished by reports this week that St. Louis schools are headed for bankruptcy.

After Alvarez & Marsal, which had no previous experience in education, finished revamping the St. Louis schools two years ago, it patted itself on the back for a job well done.

A representative of Alvarez & Marsal, William Roberti, said at the time: "The district is no longer on the brink of bankruptcy."

It is now, according to reports this week from a committee of experts analyzing the school system's finances.

The St. Louis schools are also in danger of losing their accreditation and could be taken over by the Missouri State Board of Education if they don't improve on their dismal record of student achievement and school spending, experts said this week in testimony first reported by the St. Louis Post-Dispatch. They were testifying in front of a committee formed by Missouri's education board last summer to look at the still-struggling St. Louis school system, which in the past five years has seen $66 million in reserves turn into a $30 million deficit, according to the committee's co-chairman, William Danforth, the chancellor of Washington University.

Between 2003 and 2004, Alvarez & Marsal worked under a year-long $5 million contract to help reverse the school system's downward spiral.

Most recently, the corporate consulting firm was brought on by New York City's education department to advise in the administration's efforts to cut school bureaucracy as it shifts from a structure based on regions to empowerment schools. In a City Council hearing last week, local elected officials criticized the education department for hiring the company without a public bidding process.

"In St. Louis, Alvarez & Marsal was called in to improve the school district, and left it in shambles," the public advocate, Betsy Gotbaum, said in a statement. "I'm afraid if Alvarez & Marsal continues its uncontrolled march through the NYC school system we may suffer a similar fate."

At the hearing, Department of Education officials defended the firm, which helped cut $89 million in administrative costs in New York City schools last year.

"You can't blame the current problems in what's obviously a very troubled school district on the work that A&M did there in 2003. They've had four superintendents since then," an education department spokesman, David Cantor, said. "Alvarez gained the district three years of solvency."

He added: "This district will be sending more money to its schools because of the work they've done."

The president of the St. Louis school board, Veronica O'Brien, said she blames her own agency's incompetence for the city's continued woes. But Alvarez & Marsal, she added, "weren't that great of a help when they were here."