Exclusive: Documents show teachers unions spend millions of dollars on alleged grassroots groups
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Shortly before noon on a wet weekday in February, an excited group of young people slipped unnoticed through a rear door at New York City’s Waldorf Astoria Hotel.
Many had on hoodies and knit caps, but under their winter layers they were dressed in red or white T-shirts declaring “Hedge Funds = Inequality” and held red protest placards against their bodies.
Once in, they proceeded directly to the hotel’s resplendent grand ballroom, raised their signs, and began chanting raucously for economic justice — “It is time for the inequity to end! It is time to pay your fair share!” — temporarily disrupting an elite investment conference attended by several of the world’s richest people.
Some of these 800 investors may have recognized the cut-out red shears wielded by demonstrators as the emblem of Hedge Clippers — a group formed little more than a year ago to counteract “billionaire-driven politics.” Its frequent protests of fund managers — outside their offices, at their charity events, by their homes — quickly made the group a fixture of the New York protest scene.
Few would guess from the ragtag, grassroots feel of the protest that Hedge Clippers’ organizers have been funded with millions of dollars from teachers unions — or that the group is led by a teachers union lobbyist and based at the Broadway headquarters of that union, New York City’s United Federation of Teachers.
All told, the UFT and its upstate colleagues, New York State United Teachers, along with their national affiliate, directed $5.5 million over the last five years to the groups that created and collaborate most frequently on the Hedge Clippers project — led by $2.5 million to Strong Economy for All, a coalition of labor and advocacy organizations.
Last year alone, the unions sent $800,000 to fund political activity by Strong Economy for All.
Tracing how these relationships are funded is not always straightforward. Strong Economy for All is an independent organization but doesn’t collect contributions sent to it or pay many of its expenditures; the UFT does.
Such an arrangement “allows unions to establish a front group,” according to Dick Dadey, executive director of Citizens Union, a non-partisan good-government group.
“It gives the perception that [Strong Economy for All] is an independent, grassroots-based, non-profit organization fighting for a stronger economy when it is, in fact, supported by only a handful of unions with very large contributions,” Dadey said.
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Union boss, union shop
Michael Kink, the executive director of Strong Economy for All, which launched Hedge Clippers, is a UFT employee, according to federal tax and labor records. He was hired in 2011 to create and lead the coalition. Last year he earned $183,000 as a union “supervisor”; in each of the last two years he has been one of the 15 highest-paid of nearly 700 UFT employees the union lists on U.S. Department of Labor filings.
Kink’s UFT affiliation does not appear to be widely known; lobbyists and ethics watchdogs expressed surprise when asked about the connection by The 74. He acknowledged in an interview that he has never identified himself as a UFT employee: “It has not come up,” he said. “I don’t think I have anything to say about that right now.”
He added: “I mean, I work for the Strong Economy for All coalition, get paid by the Strong Economy for All coalition.”
Kink does not appear on the coalition’s federal tax returns, which require organizations to list board members and other top officials, including their highest-paid employees.
In a statement, the union described itself as “the administrative and logistical arm of the Strong Economy for All Coalition.” In that capacity, “the UFT administers salaries and benefits for the coalition’s two full-time employees out of the funds donated by coalition members,” it said, referring to Kink and the coalition’s organizing director.
Photo: Strong Economy’s 2013 990 filing
Federal tax filings for the coalition list William “Billy” Easton as its president. Easton is better known in New York political circles as the executive director of the Alliance for Quality Education, one of the coalition groups most active in Hedge Clippers. AQE primarily lobbies for increased school spending, as well as more oversight of charter schools and against high-stakes tests. His duties as Hedge Clippers president are not specified; he draws no salary.
Easton said he appeared as president on the coalition’s tax returns because “[AQE is] among the founding organizations.” He said Kink doesn’t appear because “he’s the executive director. The president position is a board position, uncompensated.” (Easton appears on AQE tax returns as its executive director, however, and his compensation of $52,000 for that position is listed.)
The other officer listed on the returns is treasurer David Hickey, who worked pro bono, as well. When not keeping books for Strong Economy for All, Hickey serves as chief financial officer for the UFT and earned more than $300,000 in total compensation last year.
Photo: Strong Economy’s most recent 990
The Coalition’s address on tax returns is 52 Broadway, also the UFT’s downtown Manhattan headquarters. (NYSUT records place the coalition at an Albany office shared by coalition members.)
“The UFT provides office and logistical support,” a spokesperson for the 200,000-member union said in a statement.
Seeding the grassroots
Teachers union support for Strong Economy for All and its members does not come as a revelation, nor is there evidence that it has been improperly undisclosed. The New York unions are themselves members of the coalition, which was created in 2011 to advocate for labor-related causes.
Further, the Hedge Clippers website identifies its sponsor (“the project is supported by the Strong Economy for All Coalition”) and press accounts usually report the Hedge Clippers are backed by labor unions or, specifically, by the American Federation of Teachers — the D.C.-based national affiliate of the New York unions, a contributor to Strong Economy for All, and the union that has most visibly opposed hedge fund influence.
“They’re very clear on the web site who they are,” says Susan Lerner, executive director of Common Cause New York, a government ethics watchdog. She points out that a visitor to the Hedge Clippers home page could then go to the Strong Economy for All site and see the UFT and NYSUT logos. “There’s no confusion who’s backing these folks and what direction they’re coming from,” she says.
But while most education-watchers assume labor supports Hedge Clippers, the magnitude of union funding is less well known. The same is true for the unions’ in-house control over the movement, which may help explain why protests have foregrounded the threat hedge funds pose to public education — despite little evidence that this is true, according to some observers.
“The politics of this gets pretty reductionist fast,” said Andrew Rotherham, co-founder and partner at Bellwether Education Advisors, a nonprofit consultancy. (He also serves on The 74’s board of directors)
“Some fund managers are reformers and charter supporters, but it’s a big field. Most aren’t involved at all. If I were a teacher, I’d ask myself, ‘Is this really something I want my [dues] spent on?’”
Kink argued that activist fund managers have done harm across a range of interrelated social issues that include education.
“We’re talking about a larger fight for a more fair society,” he said. “I do think it’s much broader than education, although it includes education. [Education] is part of what we do but it’s not all of what we do.”
Hedge Clippers was launched as a response to the successful 2014 effort backed by wealthy fund managers to elect a Republican majority in the New York State Senate, Kink said. Several of these investors, along with a few dozen leaders of other funds, had become active in charter schools and advocated for an increase in the number of charter seats across the state to meet growing demand — with more options, many parents would choose charter schools, leading to an enrollment decline in traditional unionized schools.
It does not appear that the involvement of funders shifted policy or influence. The community of charter advocates may have helped push lawmakers to revise charter provisions in its favor (doubling the limit on new charters in New York City, for example), but that move — part of a 2015 legislative compromise that encompassed housing as well as several education issues — seemed to reflect the continuing growth of the charter movement rather than a thrust forward.
And while the Hedge Clippers often portray hedge funds as innately destructive of public education, policy observers say this conflict is largely limited to New York, where most of the largest funds are located.
“Outside of New York, I’m not sure any of this matters a whole lot,” said Michael Petrilli, president of the conservative Fordham Institute, a Washington, D.C.-based think tank. “It feels a little bit like you guys are all on the playground together.”
On the New York City protest “playground,” the overlapping leadership, personnel, and activities by the organizations working on Hedge Clippers blur the line between where one organization’s efforts begin and another’s end.
The Hedge Clippers’ crusade against opaque financial dealings also seems at odds with the fact that in the last election only two organizations contributed more than the AFT to 527s — less-regulated groups that, since the U.S. Supreme Court’s Citizens United decision, can raise unlimited money for or against candidates, according to the Center for Responsive Politics.
Neither the AFT, nor the coalition partners, Citizen Action and NYC Communities for Change, responded to requests for comment.
“This is about transparency, the right to know”
Lerner, of Common Cause, did not always give organizers of Hedge Clippers a stamp of approval. When her organization last graded the transparency of “grassroots lobbying advertisements,” in 2011, Strong Economy for All received an F.
The Alliance for Quality Education received an F and the lowest numerical score of any group. NYSUT and the UFT received a C and C- respectively.
Jeffrey Henig, a professor of political science and education at Teachers College who has written extensively about public education policy, said the rise of the reform movement in the years following No Child Left Behind (the 2002 reauthorization of the nation’s school funding law that stressed school and teacher accountability) jarred unions into realizing that after enjoying a “somewhat favored position for decades,” they needed to reach beyond their members to shape public opinion.
“Issues like inequality, issues like privatization, issues like the test-score industry as it is linked to high-stakes testing have been useful to the major teachers unions as a mobilizing focus,” Henig said. “Not just energizing their teachers, because that’s what they’ve always been able to do, but for reaching out to parents groups and others.”
In targeting hedge funds — and focusing on two or three of the few dozen fund managers who promote charter schools — Henig says unions leverage concerns about social inequity to frame important policy fights, like those over education and pension reform, as being part of a larger groundswell against Wall Street.
“It’s always helpful to have a foil on both sides,” said Dana Goldstein, a journalist and author of “The Teacher Wars.” “I think to the extent unions may be focusing on hedge funds, they’re playing off of an overall feeling in the electorate, everything from how much people love Bernie Sanders to there’s an anger out there about what’s perceived as Wall Street’s excesses and [its] ignorance about what matters to the typical person.”
Goldstein suggests that the notion of transparency has become especially important in 21st-century public life.
Teachers union advocacy efforts have been rooted in the value of transparency. “This is about transparency, a right to know,” AFT President Randi Weingarten said of a 2013 report that singled out hedge fund managers who associated with groups backing pension reform. The report described the aim of the 1.6 million-member union as “shining a bright light on organizations that harm public sector workers.” (Weingarten and other union leaders regularly describe their political activity as “shining a light” on powerful institutions.)
Today, Hedge Clippers conveys that message with slangy confidence. “We’re dark money’s newest nightmare,” its Twitter page says.
The theme runs throughout union depictions of the group. A recent NEA publication lamented hedge fund influence but reported that hope was in sight. “It does not have to be this way,” the publication, EdVotes, said, by way of introducing “the Hedge Clippers, a pro-democracy activist group that is working to shine light on the shadowy world in which hedge fund managers operate.”
Average readers, presumably most of the 3 million NEA members the article was directed to, were introduced to the Hedge Clippers as bearers of light — but not informed that NYSUT, the New York branch of the readers’ union, spent more than $500,000 of members’ paying Hedge Clippers’ bills.
NYSUT did not return calls for comment.
Hedge Clippers: born on third base
Hedge Clippers was born almost fully formed. Drawing on the resources of Strong Economy for All and individual groups, it positioned itself as a populist uprising against the 1% — like the Occupy Wall Street movement, out of which Kink says it grew, but more specialized.
It also “personalized” issues for greater impact — repeatedly targeting the same few investors and criticizing their personal as well as professional lives.
UFT President Michael Mulgrew suggested that the founding vision of Strong Economy for All led organically to Hedge Clippers. In creating the coalition in 2011, he said, “We wanted a voice to push back against the economic policies and the rhetoric that was designed to diminish both the economic well-being and the voice of working people in this country.
“We were not going to sit quietly as big-money interests lied about their intentions,” he said. “We created the Strong Economy for All Coalition to put truth to their lies.”
One of the two homeowners quoted as “responding” in the release, a woman named Amy Fleming, was described as living in Vestal, New York, a town outside Binghamton. “Our biggest problem is getting the truth out and battling misinformation and disinformation,” she said. But Hedge Clippers did not disclose that Fleming worked in upstate New York with the new group’s partner, Citizen Action.
The only other quote in the release came from Karen Scharf, president of Citizen Action.
Hedge Clippers report about One57 was the second installment in a still-active series of extensively footnoted but overblown pieces called “Hedge Papers.” They purport to expose “the inner workings of New York’s billionaire hedge fund elite” and criticize hedge funds across many sectors; a few have been picked up in media reports.
Several issues in the series address education, including disparaging accounts of charter schools, the New York City charter school network Success Academies, and the pro-charter group Families for Excellent Schools. The group also dedicated individual reports to billionaire charter proponents Daniel Loeb of Third Point and Paul Tudor Jones of Tudor Management — among the most frequently targeted figures in the Hedge Clippers campaign.
Hedge Clippers’ focus on Jones surprised onlookers in the business world. The Memphis native has a reputation for environmentalism and philanthropy — he created the anti-poverty Robin Hood Foundation — and business media talking heads did not view him as an obvious target for protests against inequality. “Compared to other hedge fund managers,” Business Insider reported, “Jones is not very active in politics.”
Jones was one of the billionaire investors that helped New York Republicans take over the state Senate, however. He founded a charter school and sat on the board of StudentsFirstNY, a pro-reform group. Among its many investments, the Robin Hood foundation supported charters, and was itself supported by hedge-fund managers and other billionaires.
Turning the Robin Hood trope on its head, Hedge Clippers’ materials — the hedge paper report, a web site, video, graphics, social media — portrayed him as a contemporary robber baron who took from the poor to give to the rich — “amassing massive wealth while adding to the burdens of the poor,” its report said.
“With Hedge Clippers, there’s a particular focus on the hedge fund billionaires and the hedge fund elite as the poster children for the inequality economy,” Kink said at the rally, where he was joined by the leaders of other Strong Economy for All groups.
The ‘Secretive Few’
The new group received a prominent endorsement later in March when New York Times Metro columnist Ginia Bellafante commended its effort to “outline the ways hedge funds bleed the economy through self-interested practice.” She recounted a protest outside Loeb’s Central Park West apartment, where she said the Hedge Clippers “offered a tutorial to the public on the complicated ways hedge funds work and accumulate money.”
“The Hedge Clippers will accomplish a great deal if they can simply turn the secretive few into the widely infamous,” she concluded.
Bellafante’s praise gave the group a boost in legitimacy, but some of her conclusions appeared credulous. Describing the activists as “backed by the American Federation of Teachers, prominent labor and community groups, and Zephyr Teachout” — the progressive icon — makes mush of distinctions between funders and advocates.
Since the Greenwich rally, Hedge Clippers has protested across New York City — at high-flying investment conferences, in luxury hotels, and outside the offices of money managers in Midtown and on Wall Street. It marched for higher wages inside elegant restaurants as well as fast-food franchises, and denounced hedge funds for worsening Puerto Rico’s economy.
It has also gone to Albany to lobby for bills raising taxes on the state’s wealthiest residents and closing the so-called carried interest loophole, which allows much of a hedge fund manager’s income to be taxed as capital gains — a significantly lower rate than regular income tax.
The campaign enjoyed spikes of media attention around four events.
July 2015: Its best-publicized protest to date was a demonstration outside the East Hampton, New York, summer home of Loeb, who was hosting a fundraiser for Gov. Andrew Cuomo.
For the 200 rally-goers, the event was a two-fer, because of Cuomo’s several large hedge fund donors. Along with street-wide parade banners, a pair of planes pulled banners with the familiar equation “Hedge Funds = Inequality.” The event was not disrupted, according to attendees.
March 2016: Hedge Clippers joined the Patriotic Millionaires, a group of affluent business people that advocates ending the carried interest loophole, to celebrate the introduction of an Assembly bill raising state income taxes on hedge fund managers. The New York Times identified Michael Kink as one of the bill’s authors.
February 2016: Hedge Clippers and AFT jointly issued a report finding that hedge funds fees damaged college endowments.
April 2016: Trustees of New York City’s pension for civil employees voted to remove $1.5 billion the plan invested in hedge funds. New York magazine reported that public advocate and fund trustee Tish James “[gave] some credit to the Hedge Clippers for the decision to divest.”
The ‘Rashomon’ question: Protesters or staffers?
The effect of union contributions on how public events are perceived in the media can be seen in depictions of a January 2015 NYSUT rally protesting state education policies.
Unfolding on the Great Western Staircase in the state capitol building in Albany, the rally attracted the two other major union leaders, several state Democrats, and 1,000 “coalition partners,” according to NYSUT’s newsletter. Its story was headlined: “NYSUT and broad coalition fight for fairness on Moral Monday.”
An AFT video featured leaders of Strong Economy for All assembled among the VIPs. At least one, Zakiyah Ansari of AQE, spoke; others wore AQE T-shirts and held placards in the telegraphic style, plain sans serif white letters against a red background, that would come to be associated with Hedge Clippers (its launch was a month away).
Teachout, the activist who ran against Cuomo in 2014, said in a tweet that the rally was “a beautiful show of moral power.” (A month before, at a press conference for her report denouncing “the legal corruption” of hedge funds, she was joined onstage by Kink, Easton, Citizen Action’s Scharf, and others — some holding posters of fund managers who supported an effort to put Republicans in control of the state Senate.)
Teachout’s “show of moral power” and NYSUT’s “broad coalition” both referred to the presence of groups who had received millions in union dollars to engage in political advocacy — including gathering for rallies, like this one.
Union leaders insist that they do not pay protesters to attend events.
During the rally, which coincided with the start of the state’s budget season, a NYSUT leader urged legislators to increase education funding to avoid potential teacher layoffs across the state. The AFT’s Weingarten decried Albany’s penchant for “blaming educators”; and Mulgrew, the UFT president, faulted the governor for talking like a “‘so-called ‘reformer’” rather than “looking at ways to raise revenues from the 1 percent.”
The “broad coalition fight[ing] for fairness,” as NYSUT described them, endorsed these views with rousing cheers — giving the appearance of widespread support for policies then being negotiated by lawmakers that would increase union membership and potentially deflect accountability for job performance by teachers.
As Hedge Clippers now looks to move into other states, discussion about its funding, leadership, and supporters will likely grow.
After its protest at the Waldorf, the group’s chief organizer, Charles Khan was asked on Fox Business how Hedge Clippers was funded.
“We are kind of run and funded by community groups all across the country,” he replied. “From teachers to janitors to working-class people. We are supported by a lot of people.”
He did not mention that he, too, is an UFT employee.
—With reporting by Peter Cook
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Disclosure: This article contains references to Success Academies Charter Network and its chairman, Daniel Loeb. Loeb is a funder of The 74, and Editor-in-Chief Campbell Brown sits on the board of Success Academies. She was picketed by Hedge Clippers at a speech in September 2015.