School Official Faces Dilemma Over Stock

Before she ran for the Los Angeles school board, Marlene Canter spent 25 years building a successful teacher training company.

Canter and the executives of her firm reaped millions of dollars when it was sold three years ago to the education giant Sylvan Learning Systems.

Now, Canter is scrambling to divest herself of about $4.4 million in Sylvan holdings to avoid a potential conflict of interest once she joins the board next week.

Los Angeles Unified School District attorneys want Canter to sell more than 178,000 shares of Sylvan stock because the investment could pose a conflict for her and possibly taint school board decisions involving the education company. Sylvan’s subsidiary, Canter & Associates, has had $226,000 in contracts with the district in the last two years.

Canter’s dilemma is that her written agreement with Sylvan bars her from selling the stock until the end of this year--six months after she takes office. But she said that Sylvan orally agreed Thursday to allow her to sell the stock before she joins the board.

“I don’t want there to be any perceived conflict,” said Canter, who will represent a region of the district that stretches from the Westside to the west San Fernando Valley.

“Sylvan and I agree that it’s in the best interest of everyone to move forward as quickly as possible.”

Sylvan representatives could not be reached late Thursday for comment.

Such potential conflicts are not new to school board members, who preside over a mammoth district that does business with scores of companies. This case and others highlight the fact that public service can come at a cost.

The school board’s other new member, land use attorney Jose Huizar, is attempting to avoid his own potential conflict.

Huizar works for the law firm Weston Benshoof, which advises the district on environmental matters related to new school construction. Huizar said he is quitting his $136,000 job this week to avoid any appearance of a conflict of interest.

“I didn’t want my integrity questioned at all,” said Huizar, who will represent downtown, the Eastside and the southeast area that includes the cities of Bell and Cudahy.

Current school board members have faced the same problem.

Caprice Young quit her job at IBM after taking office in 1999 because the district had contracts with the computer company.

Board President Genethia Hayes also left her job as executive director of the Southern Christian Leadership Conference after she took office that same year, in part because one of the group’s social service programs received district funding.

And board member Mike Lansing, director of the San Pedro Boys and Girls Club , abstains from votes on nonprofit groups he has been involved with over the years. Young and Hayes said they also abstain on votes on matters to which they have personal or professional ties.

“It is incumbent upon you as a public official to put up as many firewalls as you can,” Hayes said. “People have to trust in your integrity.”

Canter’s campaign manager Julie Buckner said this week that if Canter couldn’t sell the shares in time she would abstain from decisions in which Sylvan was involved. Buckner said Canter has no conflict unless a Sylvan matter comes before the school board.

State law requires school board members and other public officials to refrain from casting votes when they stand to gain financially.

The district’s general counsel, Hal Kwalwasser, said that if Canter held on to her investment it might present problems. “It may complicate or prevent us from entering in further deals with Sylvan,” Kwalwasser said.

Sylvan has done business with the school district for several years, selling its trademark tutoring services and other products. The school district has spent $3.8 million on Sylvan, including subsidiary Canter & Associates, over the last three years.

Sylvan bought Canter’s company in a deal worth $75 million, Canter said. The payout in cash and stock has been divided among Canter, her ex-husband and several executives of her firm.

Canter said she received 30% to 35% of the total.

But the agreement barred Canter from selling 178,596 Sylvan shares until the end of the year, Bob Zentz, senior vice president and general counsel of Baltimore-based Sylvan said earlier this week. He said the company had the ability to revise the agreement.