For Whom Beller Tolls
By ANDREW WOLF
June 6, 2008
LINK
The issue of mayoral control of the schools is due to end at midnight on June 30, 2009. If the state legislature and governor fail to act, the current Department of Education will disappear and revert into the old Board of Education at 12:01 a.m. the following day.
This is unlikely to happen, but what is likely is that there will be changes in the law that will rein in some of the mayor's powers over the schools. In getting to an improved governing structure for the schools, there is likely to be much debate. Both an honest debate and some real reform would be a good thing.
Take the case of Ron Beller (picture at right). If you have heard of Mr. Beller, [see below - Ed] it is likely to be in the context of his career as an investment banker at Goldman Sachs. Mr. Beller left that post with a hefty payout, making him a multi-millionaire in his thirties. This apparently was all the expertise needed to convince the mayor and Chancellor Klein that Mr. Beller was the man to lead the reorganization of the public schools in the period after the mayor was granted control.
Mr. Beller's name only appears in a handful of articles on the New York schools, usually in passing. That is because he never was put on any public payroll, nor was he vetted before any government body. To this day, his role is cloaked in mystery. What is known is that he is regarded as the architect of the now abandoned initial restructuring under which the Department operated until just this school year. Sources familiar with the school system insist that Mr. Beller's power at the Tweed Courthouse was second only to that of Chancellor Klein himself.
But because his operation was privately funded, he was exempt from the usual scrutiny. Mr. Beller left, I'm told, disgusted that the chancellor was "too cozy" with the teacher's union, a complaint that may come as a surprise to Randi Weingarten.
Mr. Beller and his wife Jennifer Moses (pictured right) (also a former Goldman Sachs investment banker) decamped to London. Unfortunately, they have not been as successful at avoiding publicity across the pond as they were here.
Their personal assistant, Joyti De-Laurey, (at right, below) was convicted of embezzling more than $8 million from the accounts of Mr. Beller, Ms. Moses, and a third former Goldman employee, Scott Mead. Mr. and Mrs. Beller never noticed that the millions had been taken.
More ominously, earlier this year the hedge fund Mr. Beller operated, Peloton Partners, was dissolved by his bankers, resulting in the loss of some $17 billion to the investors. This is a lot of money, a larger amount even than the total annual budget of the Department of Education during the time Mr. Beller patrolled the hallways at Tweed. No criminality has been alleged, but the business acumen that made him the choice to lead the effort to fix Gotham's schools seems not to have weathered the test of time.
As a result of this financial disaster, Ms. Moses was forced to resign from her high-profile government post advising Prime Minister Brown. And what was Ms. Moses's assignment? Coming up with a plan to fix Britain's troubled school system.
Which brings us back to New York and the upcoming debate over the future of mayoral control. Two commissions, one appointed by the City Council and the other by the public advocate, Betsy Gotbaum, at the request of key legislative leaders in Albany, are studying the issue and will shortly issue recommendations. The Gotbaum commission is generating more interest, since Speaker Quinn clings to her dream of becoming mayor with the blessing of the incumbent and few expect the Council's panel to propose changes.
The public interest here is creating a system designed to minimize damage to our school system and our children even if the worst possible person somehow sneaks into the mayor's chair. That kind of protection comes from complete transparency and a system of checks and balances that allows for the mayor to do his job while protecting the public from abuse.
When the legislature gave control of the schools to the mayor, it assigned broad and unchecked powers. This was done envisioning Mr. Bloomberg at the helm, a reflection of trust in his ability and integrity. Despite this, abuses have occurred. Secretly empowering an arguably unqualified businessman to take such a key role in this public enterprise would seem to constitute such an abuse.
Some functions of the Department of Education have been assigned to private entities. Few disapprove of hiring outside companies that can do certain assignments more efficiently, but when government creates these entities to skirt the protections to the public built into government — things such as freedom of information, open competitive bidding, and requirements for public hearings — warning bells should ring.
This is certainly as issue for the Council, the Gotbaum Commission, and ultimately the Legislature to consider.
awolf@nysun.com
Brown's new 'Agent Provocateur adviser' backs out of job after husband loses £20 million in credit crunch
Daily Mail, 05 March 2008
LINK
The former Agent Provocateur director hired by Gordon Brown to advise on social policy has been forced to put her new job on ice over "domestic" problems after her husband lost nearly £20 million in the global credit crunch.
Jennifer Moses had been due begin work in her new Downing Street office in the next few days to "spice up" policies ahead of the next election. But she has pulled out over what No. 10 was today describing as a "domestic situation".
Her husband Ron Beller has just declared himself one of the biggest victims of the global credit crunch, having lost somewhere close to half his $80 million personal fortune following the spectacular collapse of his hedge fund at the weekend.
Withdrawal: Jennifer Moses had been due to begin 'spicing up' Gordon Brown's social policies but has been forced to back out at the 11th hour over 'domestic' issues
The fund, Peloton Partners, was once worth $2 billion, has lost money as a result of buying huge numbers of US mortgages that have now plummeted in value.
Mr Beller, 45, a former executive at investment bank Goldman Sachs, now faces a protracted legal battle with investors desperate to get back at least some of the $7 billion he borrowed.
He told them by letter at the weekend that he could no longer repay them but was "working night and day to secure Peloton's future".
A Downing Street source today revealed: "Jennifer was going to take an unpaid role in No. 10 but that has been put on hold because of what has happened with her husband's business. They are concentrating on that. She was aware of the difficulties with her husband's company and now has to see how the dust settles before she can make her own job changes".
In addition to her role on the board of Britain's most fashionable raunchy lingerie firm, American-born Ms Moses, 46, is also a former Goldmans executive and the possessor of a multi-million-pound fortune and a "formidable intellect".
She has been described by Michael Gove, the Tory education spokesman and a close friend, as a cross between "Eleanor Roosevelt, a character from Sex And the City and a Woody Allen heroine?.
Her Downing Street appointment came despite a series of reports she has written as chief executive of the liberal think tank CentreForum which have been openly critical of Mr Brown and the Labour Government.
Ms Moses, a libertarian with a social conscience, supports city academies and private money in the state education system - an anathema to many Labour MPs.
"Her view is very American, according to one leading Lib-Dem acquaintance. "It is that if you can solve a problem with private money, just get on with it."
However, today's blow to her political ambitions will also cause huge embarrassment to Mr Brown and damage his attempts to bolster his increasingly unsteady leadership.
It is understood the Prime Minister - criticised for having too few influential women around - was convinced that Ms Moses would help "get things done" and demonstrate that he was not relying on a narrow Labour clique.
His 'gatekeeper', Sue Nye - wife of former BBC chairman Gavyn Davis - is the only woman in Mr Brown's inner circle.
Ms Moses's appointment would allow bridge-building with her fellow CentreForum boardmember, Lib-Dem leader Nick Clegg - especially useful if the next election resulted in a hung Parliament.
Mr Gove said before today's withdrawal: "Hiring her is the single best thing Gordon Brown in Government has done".
"Jen is a committed and intelligent individual who cares about the education of children from disadvantaged backgrounds. She puts her money where her mouth is."
The spectacular blow to Ms Moses and Mr Beller is not their first experience of public embarrassment.
Intimate details of their private life were aired during the 2004 trial of Ms Moses's personal assistant Joyti de-Laurey, who stole £1.2 million from them over two years at Goldman Sachs - without either of them noticing.
Joyti De Laurey: Past embarrassment: Former personal assistant Joyti De-Laurey stole £1.2 million from Ms Moses and her husband unnoticed
While stealing their money, De-Laurey also falsely claimed she had cancer and Ms Moses gave her an interest-free £40,000 loan to pay for private medical treatment.
She also gave her £5,000 cash and £800 worth of jewellery to thank her for organising her £500,000 40th birthday weekend in Italy.
In one year Mr Beller spent £17,000 on wine and £86,000 on travel, it was revealed during the trial.
It was also claimed that even when he and Ms Moses were both at the £10 million Georgian home in Hampstead they share with their three children, the couple would email each other rather than shout down the banisters.
By the time De-Laurey's thieving had come to light in April 2001, Ms Moses and her husband had already quit Goldman Sachs, fantastically rich on the investment bank's Stock Exchange flotation of 1999.
But according to friends of Ms Moses, the trial remains a sore point. One said today: "I think she is very embarrassed about it still.
Gordon Brown: had hoped Ms Moses's appointment would curb criticisms that his inner circle is hugely male-dominated
"It risks distracting somebody with an incredibly good brain who feels strongly about helping people from disadvantaged backgrounds."
De-Laurey, released from jail last summer half-way through her seven-year sentence, said in response to today's news of Ms Moses's withdrawal from the political post: "Let's just say I was very surprised at her appointment to Downing Street".
Speaking to London's Evening Standard at her mansion flat in the south of the capital the 38-year-old said of Mr Beller: "He has lost a lot of people's money. A lot more than I took from them - and I did three and a half years."
Ms Moses, Mr Beller and another Goldman Sachs executive, Scott Mead, have pursued De-Laurey through the civil courts to recoup the money she stole - in total almost £4.5 million.
Ms Moses, daughter of a New Jersey law firm partner and a superior court judge, took an MBA at Harvard Business School and married Mr Beller when he was a trader starting out at Goldman Sachs.
Before long she had joined him there.
After 2001, the couple decided to put their energy into "doing good", as a former associate puts it.
Mr Beller spent a year helping New York mayor Michael Bloomberg reform the city's education system, while Ms Moses helped to establish ARK in 2002, an international children's charity based in central London.
She is credited by the charity with helping to set up an Aids programme in South Africa which has helped treat 30,000 people there; she makes two or three trips to the country each year.
Ms Moses has also channelled £2 million of her own money through ARK into the King Solomon Academy in Marylebone, which opened in September last year.
She also sits on the board of Prince Charles's charitable company Duchy Originals.
February 29 2008: 11:39 AM EST
Mortgage mess socks ex-Goldman Sachs stars
A smart bet on the collapse of the subprime housing market comes back to bite Geoff Grant and Ron Beller
By Roddy Boyd, writer, Fortune
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NEW YORK (Fortune) -- Not long ago, Goldman Sachs alums Geoff Grant and Ron Beller looked like superstars. A prescient wager on the collapse of the subprime mortgage bond market generated last year a whopping 87 percent return for one of their hedge funds.
The twosome, who run London-based Peloton Partners, aren't looking so shrewd these days. They've been forced to liquidate their once high-flying ABS fund after gambling big on a mortgage bond rebound that didn't materialize. The $1.8 billion fund's collapse comes after a series of recent trades dropped sharply in value, leading to margin calls from creditors that the firm was unable to meet.
The ABS fund's implosion, coming just three years after Peloton Partners was formed, highlights the steep challenges that hedge funds face amid the credit crisis gripping Wall Street. Last week D.B. Zwirn & Co shut down its two biggest hedge funds amid investor defections. Citigroup halted earlier this month withdrawals from one of its hedge funds.
Also on Thursday, Grant and Beller told investors that they were suspending redemptions in a second Peloton portfolio, a $1.6 billion multi-strategy fund that finished 2007 up 27 percent. According to a letter sent to clients this week, the multi-strategy fund had a very large position in the ABS fund, whose bust has had a "serious negative impact" on the multi-strategy fund.
Grant and Beller said in the letter that they were assessing their options. But depending on the assets left in the ABS fund, the multi-strategy fund's investment could be almost worthless.
A spokesman for Grant and Beller did not respond to a request for comment.
The story of the ABS fund's demise began last year when Peloton took short positions on investments backed by pools of subprime mortgages, meaning it bet that their values would fall. While other hedge funds like Paulson & Co. also bet short on mortgage bonds, Peloton did something more complicated: It wagered that slices of the same bond portfolio with different ratings would diverge sharply in price - a strategy known as capital structure arbitrage.
For instance, the fund was long on AAA-rated mortgage bonds and gambled that BBB-rated subprime bonds would fall in value. That calculation paid off big when, according to ABS investors who spoke to Fortune.com on the condition of anonymity, the fund's short position fell 75 percent, from an average of nearly $100 to $25. Meanwhile, the price of the fund's AAA-rated long position declined much less.
The price differential between the short and long positions led to the 87 percent return. Trade publication EuroHedge Magazine subsequently named the Peloton ABS fund as 2007's best fixed-income fund.
Everything changed this year. The fund had about $16 billion in long positions versus $3.2 billion in shorts, according to a hedge fund manager who has seen Peloton's portfolio. The short positions - which were so profitable in 2007 - declined modestly in value, while the credit crisis drove the value of the massive long positions down an average of between $15 and $25 per bond in about a month. The fund suffered massive losses as a result.
What's worse, the fund's investment bank creditors - whose balance sheets have been brutalized in the credit crisis - did not have the resources to absorb the hit on behalf of the fund and demanded additional collateral. Peloton was unable to meet those demands.
In turn, a consortium of Peloton's lenders - its prime broker Goldman Sachs, Citadel Group and Och-Ziff Capital Management - declined to buy the portfolio. Grant and Beller are now trying to sell pieces of Peloton's portfolio, according to U.S.-based mortgage hedge fund managers who have been approached.
Founded in 2005, Peloton's collapse has caught the hedge fund community off-guard. Unlike Amaranth Advisors, which teetered on the brink of collapse for several weeks before finally selling its assets and winding down operations in 2006, Peloton's hedge fund rivals and prospective investors told Fortune.com they had little inkling of serious trouble.
The trade publication Hedge Fund Alert recently noted that Peloton's multi-strategy fund was hiring. Earlier this month, the Financial Times published a fawning profile of Grant and Beller, noting that Peloton had an unusually large risk-management staff.
Dark days for hedge fund king
Blackstone turns its back on Wall Street
The New York Times spun this tale in 2003:
May 21, 2003
Mayoral Control Changes The Politics of the Schools
By DAVID M. HERSZENHORN, NY TIMES
Two or three times a day, often more, Deputy Mayor Dennis M. Walcott scoots out the back door of City Hall and strides 43 paces to the rear entrance of the Tweed Courthouse, headquarters of the city's Department of Education.
There, Mr. Walcott, Mayor Michael R. Bloomberg's point man on education, usually goes to the third-floor bullpen to confer with Schools Chancellor Joel I. Klein about their effort to transform the city's public schools.
Mr. Walcott's constant presence is the most visible evidence of how the relationship between City Hall and the chancellor's office has been remade since Mr. Bloomberg won control of the school system last year.
The days of the mayor and the chancellor hugging one minute and vilifying each other the next are over. Gone, too, are backroom deals between the mayor and members of the Board of Education that created angry rivalries among the five boroughs.
In its first year, mayoral control has fostered extraordinary partnerships, officials say. But there are also tensions over micromanagement, as well as confusion about who makes decisions.
Mayor Bloomberg, Stu Loesser, and Edward Skyler (picture, left)It is hardly surprising that officials at City Hall and in the Education Department are struggling with this new relationship. Not since 1871, in the era of Boss Tweed himself, has the mayor had direct, unilateral control of the city's schools.
One thing has been clear from the outset: it is Mr. Bloomberg who has the most at stake, Mr. Bloomberg who bet his mayoralty on school reform, and Mr. Bloomberg who is ultimately in charge.
''The mayor is the mayor,'' Mr. Walcott said in an interview. ''I don't think any of us have any misunderstanding about who the boss is.'' Certainly, the school control law passed by the State Legislature last year leaves no doubt.
Beyond the mayor's authority, though, much remains undefined. Mr. Klein, for example, has ceded most of the political maneuvering involving education to Mr. Walcott, who has done much of the negotiating with state and local lawmakers opposed to the mayor's plans.
Major education announcements have all been made at the mayor's daily news conference, as Mr. Bloomberg stands front and center before the cameras with Mr. Klein just over his shoulder.
Yet it is Mr. Klein who is likely to be summoned to testify at legislative hearings. Officials, whether lawmakers or union leaders, are often left wondering whether their phone calls should be directed to Tweed or to City Hall.
''Joel is a commissioner,'' one union official said. ''The strings are being completely pulled from City Hall, and that wasn't the way it used to be.''
Even officials within the administration have been struggling to sort out where responsibilities lie. ''It's a new relationship, that no one really knew how to deal with,'' one education official said.
Mr. Bloomberg and his top advisers have made no secret of their intent to exercise tight control of the Education Department.
In the latest example of this, officials said Mr. Bloomberg was installing one of his own press aides as Mr. Klein's press secretary when the chancellor's spokesman, David K. Chai, steps down on Friday.
Mr. Chai is to marry in June, and he said he would follow his fiancée to Pennsylvania, where she has taken a new job. But officials in the mayor's office have complained for some time that he was not sufficiently beholden to City Hall and to the mayor's press secretary, Edward Skyler.
Mr. Chai will be replaced by Jerry Russo, who works for Mr. Skyler at City Hall, officials said, adding that the chancellor had been told, not asked, to hire him.
The hiring of a press secretary is just one small facet of the intricate relationship that has been established over the last year, a relationship that got off to a rocky start last summer after Mr. Bloomberg won control of the schools and hired Mr. Klein.
At the outset, education officials said, their colleagues at City Hall expressed avid interest in education.
''Most of the people I talked to in the city government world, they had a hard time getting in touch with City Hall, and we couldn't get them off our back,'' one Education Department official said. ''This was the mayor's priority and they were going to get involved.''
In one early incident, officials said, the mayor's office told Mr. Klein not to testify at a City Council Education Committee hearing in November.
As a result, the mayor and the chancellor were stoutly criticized for being inaccessible, and officials now acknowledge that it was a mistake to slight the Council. Mr. Klein has since testified when invited.
More recently, an effort to improve programs for children learning English has become mired not only in disagreements over education policy but also in political concerns about Hispanic voters who helped elect Mr. Bloomberg in 2001.
And on Monday, when the teachers' union announced a sharp increase in violent attacks on teachers by students, the city's response was delayed by interagency wrangling. The Education Department referred calls to the mayor's press office, which in turn referred calls to the Police Department. Police officials referred calls back to the Education Department. By the time it was sorted out, it was too late to get the announcement on television news.
Randi Weingarten, the president of the teachers' union, said mayoral control has made dealing with education issues more complicated. ''I often find myself dialing the labor relations department of the city, one or two of the deputy mayors and at least the chancellor or one or two of his deputies to get information on an issue or talk about an issue,'' she said, adding that previously she could call either the chancellor or the Board of Education president.
City Hall officials emphasize the advantages of the new relationship. For example, Mr. Bloomberg, Mr. Walcott and Mr. Klein meet at least twice a week. ''It's a beautiful relationship,'' Mr. Walcott said. ''It's a team approach.''
Other mayoral aides are also taking active roles on education issues. Patricia E. Harris, the deputy mayor for administration, for example, is working with Caroline Kennedy, the Education Department's chief fund-raiser, to court donors.
Some officials noted that even before mayoral control, the school system was financially dependent on the city and that budget officials at City Hall and in the Education Department were accustomed to working together.
Councilwoman Eva S. Moskowitz, the chairwoman of the Education Committee, said the relationship between City Hall and the Education Department had grown more comfortable in recent months, but she cautioned Mr. Bloomberg against micromanagement.
''The point of mayoral control is not to muck around,'' she said. ''Let someone decide on a vision. Let them implement it and then we the voters judge them, and parents as consumers of the system judge them.''
Ms. Moskowitz added: ''I support mayoral control very, very strongly, not that it doesn't have disadvantages. There is a danger of unilateral decision-making. There is a danger of lockdown on information, and we have seen some of that. But I think it provides an opportunity for accountability that we haven't had here in New York.''
Other city officials described the tension as healthy.
''It's not surprising that when you move into something like this, there are inherently going to be tensions and there is going to be this thing of working out how decisions get made,'' one administration official said.
''You have a Department of Education that existed as an independent entity and is now in this commissioner-style agency structure,'' the official said. ''People seem very surprised by the fact that the mayor is exerting tremendous control in decision-making. But if you look at it from one perspective it's not terribly surprising at all. It's only surprising in terms of the history.''
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