Cornerstone founder Clark Durant accused of self-dealing by charter schools' biggest private funder

The Pulte trust calls on AG Nessel to investigate Durant and the New Common School Foundation, a non-profit created to raise funds for the schools
Posted: 6:30 PM, Dec 11, 2020
Updated: 2022-02-01 07:11:49-05
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A fissure has erupted between Clark Durant, the founder of Detroit’s Cornerstone charter schools, and the executors of the trust and estate of the schools’ largest funder: the late Bill Pulte Sr.

Last week Mark Pulte, the son of Pulte Sr. and a co-trustee of the William J. Pulte Trust, submitted a complaint to the office of Attorney General Dana Nessel. In it he called for an investigation into Durant as, well as the New Common School Foundation (NCSF), a non-profit Durant created to raise funds for the Cornerstone schools, a group of private, religious schools he opened in the 1990s, and subsequently transitioned into public-charter schools.

"I have grown increasingly concerned that NCSF, which is ostensibly a Michigan non-profit public charity whose mission is to educate disadvantaged students, is actually operating as a for-profit entity with the primary purpose of financially benefiting Mr. Durant," Pulte, whose father has donated tens of millions of dollars to the foundation over the last two decades, wrote in the Nov. 30 complaint obtained by 7 Action News.

Pulte’s complaint comes in the midst of an already tense legal battle between the trust and the foundation.

In March, following a 7 Action News investigation into ethical questions surrounding rental contracts between Cornerstone’s public charter school boards (which Durant advises as CEO of the Cornerstone Education Group) and the NCSF (which acts as landlord, as well as a charity fundraising for the schools), the trust requested an audit from the foundation.

"The trustees remain confounded why your client refuses their reasonable request for an audit regarding the funds they have donated to the New Common School Foundation," a trustee attorney wrote in a Mar. 12 email to the NCSF's chairman Jeffery Neilson.

"The lack of transparency is unsettling, particularly given the history of generosity from William Pulte, and more recently the trustees of his trust," the email continued, referencing the fact that in 2019, following the death of Pulte Sr., the trust signed a settlement agreement with NCSF promising to finish out a 2013 pledge made by Pulte Sr., and pay the foundation $1.45M a year through 2025.

When the trust never heard back, the trustees, in July, withheld a promised payment. In response, NCSF asked a Florida probate court to enforce the settlement agreement. They claimed the trust was in breach of contract, stating that the settlement agreement never tied payments to an audit. In October the probate judge ordered the trust to continue making the payments. The trust has since appealed, and Pulte subsequently filed the complaint with AG Nessel's office.

Pulte AG Complaint by Allie Gross on Scribd

While, 7 Action News' spring investigation raised questions about the ways in which public dollars were being spent within the Cornerstone network, the current back and forth highlights equally pertinent questions when it comes to private dollars. The Pulte trust wants to know how their donations are being used. But Bruce Baker, a Rutgers University professor and expert on education financing, points out that the public should be just as interested — and deserving — of these answers. The five Cornerstone schools, educating roughly 3,500 students, bring in around $20 million a year in public dollars.

"Most of the money that is going to run these schools — to provide the annual public service of providing education tuition-free to these kids — is public taxpayer dollars," Baker said, noting that while the NCSF may not be legally obligated to provide the trust — much less the public — with their private financial statements that doesn’t necessarily make it right.

"The public deserves an opportunity to be stewards over that taxpayer dollar and know just how that money co-mingles with all of this other money that is flowing through these kind-of murky non-profits," he continued. "They need to know this is what their system has reverted to: these battles among wealthy, private individuals to figure out how they’re going to control this quasi-public education system, where they can’t even get the information from each other, no less can the public get the information from them."

Pulte and the trust declined to comment for this story citing the pending litigation, however, their concerns about Durant allegedly using the foundation to enrich himself are highlighted in court documents, as well as the AG complaint. The documents raise questions around: the rental agreements 7 Action News investigated; loans made between Durant and the foundation; the foundation’s alleged decision to engage in speculative art buying; the alleged use of foundation dollars to sponsor a trip to Israel; and Durant’s compensation, which skyrocketed from just over $500,000 in 2017 to over $800,000 in 2018 after Bill Pulte Sr. passed away.

The New Common School Foundation contends the Pulte trust is trotting out frivolous accusations in order to get out of its "financial obligations" to the foundation. They also maintain the trust is going against the wishes of Bill Pulte Sr.

"Ultimately, this is not a legal case. What’s at stake is far greater," Neilson, the foundation chairman, wrote in a statement to 7 Action News.

"This case is about the legacy and impact of a very generous man, Mr. William Pulte," he continued. "Mr. Pulte had a clear vision that recognized the demand for quality urban education in Detroit. For twenty years until his death, he strongly supported both the Foundation's and Cornerstone’s mission to help meet that need. The Foundation has been and remains committed to the long-term vision of Mr. Pulte. The Foundation has acted fully in accord with his wishes as to Mr. Durant and the significant projects underway and previously approved by Mr. Pulte. We are hopeful the Pulte Estate will fulfill its commitments, affirmed now by two Court Orders, in keeping with Mr. Pulte's wishes and legacy."

When asked why the NCSF would not consent to the Pulte trust’s request for an audit, the foundation responded: "New Common School Foundation already has its financial statements audited by an independent CPA firm annually."

7 Action News did not hear back when we asked for copies of the audits, or if they were shared with the Pulte trust.

Court documents indicate, however, they were not: "To date, NCSF has refused to provide the Estate and Trust with a financial audit. In fact, NCSF has failed to provide any financial transparency despite repeated requests for information," the trust’s attorney wrote in a September court document.

Pulte reiterated the claim again last week in his complaint to the AG: "Mr. Durant has refused all my requests for an audit."

Without an audit, the trust’s allegations are culled largely from tax documents: 990s that nonprofits are required, by law, to submit to maintain their non-profit status. This is where they pulled data on Durant’s compensation, which saw over a quarter of a million-dollar bump between 2017 and 2018.

"In the past," Pulte wrote in the AG complaint, "Mr. Durant has publicly tried to defend the amount of his compensation on the basis that my father’s donations were intended, in part, to cover Mr. Durant’s compensation. However, I suspect that this drastic jump in compensation in 2018 was timed with my father’s death in March that same year to avoid accountability to NCSF’s long-time major donor."

According to tax documents Durant received a total compensation of $523,294 in 2017. The following year, his compensation jumped to $843,475.

"I can think of no justification for Mr. Durant’s staggering 61 percent increase in compensation between 2017 and 2018," Pulte continued in the complaint.

NCSF 2018 990 by Allie Gross on Scribd

NCSF maintains Durant’s base-salary remained the same in 2018 ($475,000) but that the increase was due to bonuses — a $100,000 retention bonus and a $235,000 incentive bonus — that were recommended by an independent consulting firm, and approved by the foundation board with Durant abstaining from the vote.

7 Actions News inquired about who was on the board when the vote occurred, we did not hear back from the NCSF. The foundation’s tax documents list no board members, and there is no documentation online of who currently sits on the board of the foundation.

The only people listed on the 2018 990s are: Durant (president), Nielson (chairman) and Mindy Barry (director).

Barry is the former CEO of the Cornerstone Education Group and a former school board member at Madison-Carver Academy, one of the Cornerstone public-charter schools. Neilson represented Durant’s U.S. Senate campaign in the 1990s when it was accused of violating campaign finance laws.

The Pulte trust also raises questions about various loans that have been made between the foundation and Durant over the years.

In 2014, for example, Durant borrowed $300,000 from the foundation. In court documents, the foundation explained that the loan was made "with full approval of the Foundation board to afford [Durant] the ability to make a leading and/or matching gift which would encourage other donors to do the same."

NCSF, in court documents, maintains Durant is continuing to pay 4 percent interest on the loan every year and that the loan will be paid when due in 2026. 7 Action News asked the foundation for further clarification on the terms of the loan, we did not hear back.

Pulte in his letter to the AG raised two points about the loan. First, he questioned whether the arrangement would allow Durant to make a donation and then claim a charitable deduction. Second, he asked what this indicated about the foundation’s processes for wooing donors.

"At best," Pulte wrote in the AG complaint, "this appears to be a disingenuous characterization of the donation and one must wonder how many other donors would not have contributed to the campaign if they were aware of the true nature of Mr. Durant’s donation."

The trust, in the AG complaint and court documents, also raised questions about a $495,000 loan — with 5 percent interest — Durant made to the foundation in 2017 for — as marked on the foundation’s 2017 tax documents — the "purchase of a foundation asset."

In court filings, NCSF conceded the loan, and interest, were paid back in 2018. They explained the purpose of the loan was to help the foundation purchase "a painting that could be used to facilitate donations from collectors of similar sought after works."

Further, they claimed the painting was "sold, at a small profit to the Foundation, to a third-party outside purchaser and collector who made an additional and substantial donation to the foundation" which was then used on part of a school expansion project.

NCSF did not respond to 7 Action News' questions about what art was purchased, and how long the foundation has been engaging in art investments. Without a response or access to an audit, we could not confirm the details of the transaction.

The trust, in response to news that the foundation was using funds to buy art, wrote in court documents: "There is no legitimate reason why New Common School Foundation should be using its cash reserves to make speculative investments in high-end artwork."

The trust went on to say that they believed Durant was "using NCSF’s assets to fund his hobbies and grow his personal art collection."

In the AG complaint, Pulte pointed to two examples where a Winston Churchill painting — Garden Scene — was featured in exhibitions and the museums cited the art as being on loan from Clark Durant and The New Common School Foundation.

Durant has publicly expressed much adoration for Churchill. In 2018 he was inducted into the Association of Churchill Fellows. That same year, he made plans to commission a sculpture by Churchill's granddaughter for one of the Cornerstone campuses.

Finally, the Pulte trust raised questions about the use of foundation funds for a trip to Israel. Pulte, in court documents and the complaint to the AG, claimed Durant invited him to go on a trip to Israel and suggested that they could use foundation funds to cover the trip. He maintained he did not go on any trip but had "information and belief, Mr. Durant did visit Israel, and he used NCSF’s funds to pay for his travel expenses."

The NCSF, responding to the allegation in court documents, maintained Durant had traveled to Israel but that the trust mischaracterized the trip. They stated that it was not for "personal benefit" but rather a trip with other "business leaders and public officials."

While the foundation conceded expenses were paid for by the foundation, the trip’s objective was about business.

"Mr. Durant’s expenses were paid for by the Foundation. Mr. Durant’s specific trip objectives included a prayer at the Western Wall with a major corporate partner of the private Cornerstone Schools, introducing two other Cornerstone leaders to the roots of the Cornerstone enterprise in the land of Israel and building relationships with donors and potential donors," NCSF stated in a court document, adding that while Durant did invite Mark Pulte to go on a different Israel trip, this trip never occurred.

"A pilgrimage was planned for that trip, a pilgrimage which William Pulte, Mark’s father, had encouraged Mr. Durant to arrange," the court document states, not addressing whether foundation funds had been offered, even if the trip had never occurred.

7 Action News reached out to the NCSF for comment on the new AG complaint, we have not heard back. Currently, the trust’s payments are in an escrow account as they wait for the probate litigation to proceed.