Thursday, December 31, 2009

Investment fraud threatens vital Philadelphia school for kids with learning problems

From The Philadelphia Inquirer:

Among the victims of Joseph S. Forte's investment fraud is a small Main Line private school that means the world to Margaret Cort.

"Hill Top saved Joe's life," said Cort, referring to her son, a freshman at the Rosemont school that specializes in teaching children of above-average intelligence who have learning problems that prevent them from doing well in a traditional school.

Cort said her son now "knows he has to go to college," but she doubts that would have been possible without Hill Top Preparatory School, which was founded in 1971 for children in grades 6 though 12 whose learning disabilities are not predominantly language-based.

Fortunately for the Cort family and others connected to the 81-student school, Hill Top limited its use of the endowment Forte managed to capital projects, such as the installation of thermal windows in its main school building, which was built as a summer residence.

Forte was sentenced last month to 15 years in prison in a Ponzi scheme that resulted in $35 million in losses to Hill Top and other investors.

"At least I don't have a huge line item on the income side of my budget that isn't going to be there any more," Hill Top's headmaster Thomas W. Needham said.

But he still misses the cushion that an endowment, even a small one, provides. "If we were all fat and happy in terms of the general economy, then I wouldn't be as nervous or as concerned as I am," Needham said.

Figuring out exactly how much money Hill Top lost in Forte's fraud is difficult.

The endowment was started early this decade by several donors who had money in Forte's investment fund.

Income from a portion of those investments with Forte, who joined the board of Hill Top in the year ended June 30, 2002, was put into a separate account in Forte's partnership. After about two years, sometime between June 2003 and June 2004, the principal was given to the school as well, but kept in Forte's fund.

As of June 30, 2006, the value of Hill Top's stake in Forte's fund was $1.59 million, according to the school's tax form for that year.

Forte's link to Hill Top was John N. Irwin, chairman of Hill Top's board from 1995 until his resignation in February. Irwin, whose youngest daughter graduated from the school in 1991, was one of Forte's original investment partners.

As a board member, Forte "was very quiet, asked good questions at the board meetings, came to all the meetings, showed up at the events," said Needham, who became Hill Top's headmaster in 2007.

Beyond the loss of the endowment, Hill Top's annual giving campaign has been hit by the loss of contributions from Forte and Irwin, as well as from the Thornton D. and Elizabeth S. Hooper Foundation in Wayne, whose money was in Forte's fund, Needham said.

Needham said he has been the head of schools without endowments before, but to have one disappear the way Hill Top's did was "a shock." However, because the school gets almost all of its revenue from tuition, operations are steady, he said.

An endowment-funded program that reimbursed some of the expenses for teachers pursuing advanced degrees was discontinued, but financial aid for families that cannot afford the school's $34,400 annual tuition is unaffected because it has always been paid for out of the operating budget, Needham said.

"There's no huge hardship story," Needham said.

That means students such as seniors Kevin McLaughlin, Matt Lake, and Zac Gotlib can finish their careers at a school that, they said, has made a huge difference in their lives. "Hill Top was able to teach me the way I learn," said Lake, who started at Hill Top in ninth grade and plans to study art in college.

Ninth-grader Natasha Hubbard Blatt said she is really happy at Hill Top. "My old school was so wrong for me," she said. "Too bad" was the message she got from teachers at her old school when she had a hard time. At Hill Top, "they let me play with Silly Putty because it helps me pay attention," she said.

Needham said the notoriety of getting caught up in a Ponzi scheme has not been good, but he is confident in Hill Top's future.

Once things settle down, the board will start a new drive to establish an endowment, "and we'll probably be a little more careful about who we select to manage the funds for us," Needham said.