A Conflict of Interest: Chicago Taxpayers File Suit over Purchase of Land for Schools

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March 11, 2016; Chicago Tribune

Gregory Hobbs, the president of a Chicago school district’s foundation, personally profited to the tune of $195,000 in 2007 when he negotiated the sale of 100 acres of farmland for the school he represented. His multiple roles, including serving as the president of the Lincoln-Way School District’s foundation, the owner of the realty firm used for the negotiation, and the lead on the project, have continued to raise questions of conflict of interest, and is one of several concerns leading to a lawsuit filed by taxpayers.

Eight years after the sale, the district’s string of bad decisions to expand schools in response to projected population growth came to a community blow-up. Lincoln-Way had previously invested $225 million in two new high schools and had already purchased 80 acres to build a third when the 100 acres were purchased for the exact same reason. In response to the purchase of another 100 acres of land, then–school board president Ron Kokal had said that the board felt the purchase was a good decision. He said that the land may not be available or affordable in the future, and as for the extra 80 acres already available for expansion, he said that another school could be needed at a future date.

Whether these decisions to expand were in the best interest of the district were further questioned when local school officials announced they needed to shut down one of four high schools in 2015 in order to save the $5 million a year the high school expended in operations to “get off of the state’s watch list” and address the district’s “current financial situation.” Outraged community members formed Lincoln-Way Area Taxpayers Unite (LWATU) and filed a lawsuit against the district: a 530-page document, including a 60-page complaint with 470 pages of supporting documentation, filed against the Board of Education in December of 2015 that outlined “financial irregularities and mismanagement.”

Among other concerns, the filing listed the $195,000 commission paid to Hobbs as the owner of Manhattan Realty, in addition to concerns that the district did not obtain an appraisal on the property to assure the sale was conducted fairly.

The farmland, known as the Cooper Farm, was owned by the Trust of Stanley and Violet Cooper. When interviewed, Violet Cooper’s daughter, Priscilla Lantka, a trustee, said that Hobbs was the district’s representative who originally contacted the family. This would mean that he clearly represented both the district and the realty company, who had profit to gain from the transaction. When Hobbs and the district’s former superintendent, Lawrence Wyllie, were asked to discuss the lawsuit, they both declined comment, and Hobbs responded, “Quite frankly, it’s none of your business.”

LWATU attorney Steve Eberhardt said, “I have no idea what their rationale was in even thinking of buying the property. They bought [it] already being in possession of a property to build a school on.”

In a 2007 Nonprofit Quarterly report, “Now You See It, Now You Don’t: Conflict of Interest Demands More Than Just Policy,” readers were reminded that even when conflict of interest policies are in place, “a big ‘danger ahead’ sign should flash when we do not recognize them.” The article points out that one of the most obvious conflicts is when individual and corporate interests are intertwined—which seems manifestly the case when it comes to Lincoln-Way and Hobbs. Not only did an involved and official representative of the district financially gain from a transaction, that same individual took the lead on the project. What layers of oversight were missed by those surrounding Hobbs, and how can others learn from what is currently taking place in Chicago?

Hobbs’ comment to the press that this was “not their concern” is ironic in a case gaining national attention as a result of taxpayers making a lack of enforcement of conflict of interest their concern. It is an important reminder for those in the sector that the creation and enforcement of conflict of interest policies is all of our business; these policies exist for a reason, are crucial to true organizational success, and protect the charitable practices of nonprofits and the community trust of public bodies. Even when there is innocent neglect or haste by leaders, versus intent, malice or ill will, this lack of due diligence and attention to oversight can so often rightly lead to distrust and lack of credibility. In the end, this can be painful at best, and ultimately detrimental to an organization and its good work.—Michelle Lemming