A $50 million endowment, a massive capital campaign in the works, and a wealthy, well-connected board—none stopped a D.C. prep school from taking one of the largest coronavirus loans issued.
Sidwell Friends School, a Quaker-affiliated independent school known for enrolling top lawmakers' children—including the daughters of former presidents Bill Clinton and Barack Obama—accepted a $5.2 million loan under the Paycheck Protection Program (PPP), Congress's bailout fund for small businesses affected by the coronavirus crisis.
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The school, which brings in over $40 million in tuition annually, declined to give back the loan after Secretary of the Treasury Steven Mnuchin called on "private schools with significant endowments" to "return" PPP funds. In a letter to the community, the board of trustees cited its "fiduciary responsibilities" as well as "our Quaker values" in its decision to keep the money—with the latter claim particularly raising eyebrows among critics.
In so doing, Sidwell Friends joins the ranks of other large, well-funded entities that have benefited from a program designed to protect America's collapsing small businesses. Some, like Shake Shack or news site Axios, have returned their loans following public outcry. The school, which enjoys connections to D.C.'s Democratic establishment, has faced some scrutiny for its decision to keep the money—but appears unlikely to back down.
The loan, which the school has said will be used to pay its 257 faculty and staff, is one of the largest in the second tranche of PPP funds. Data from the Small Business Administration indicate that of the 2.2 million loans it has issued since April 27, fewer than 1,500, or 0.07 percent, have been in excess of $5 million.
The Treasury Department has stipulated that companies must consider their "current business activity" and their "ability to access other sources of liquidity" before certifying that they actually need PPP funding. Sidwell Friends' chief communications officer did not respond to a request for comment as to whether or not the school had made such considerations or sought other sources of funding.
The school likely has substantial benefactors, as indicated by the wealth of its board. Members include Marla Beck, who sold cosmetics chain Bluemercury to Macy's for $210 million; Patrick Gross, cofounder of American Management Systems Inc., which was valued at $1 billion; and Mark Jacobsen, CEO of Promontory Interfinancial Network, which provides financial services for half of all banks nationwide and previously sold for $2.5 billion.
Requests for comments directed to Beck's, Gross's, and Jacobsen's firms as to whether or not the board members were approached for assistance by the school went unanswered.
The school also enjoys connections to prominent D.C. Democrats. It counts among its alumnae presidential daughters Chelsea Clinton '97, Malia Obama '16, and Sasha Obama '19.
Those connections are reflected on its board, which includes Marty Franks—a former CBS vice president who spent 15 years in Democratic politics, including as executive director of the Democratic Congressional Campaign Committee, as staff in the Carter White House, and as chief of staff for Sen. Patrick Leahy (D., Vt.). Another board member, Judy Brown, was a White House fellow in the Carter-era Department of Labor. Board members have also donated heftily, although not exclusively, to Democratic politicians—Jacobsen, for example, has poured tens of thousands into Democratic presidential campaigns since at least 2004.
Even absent support from its board, the school commands a substantial financial position. In addition to its $53.4 million endowment, official statistics indicate that the school takes in roughly $43 million annually in tuition. The school's tuition payment schedule suggests it would have received essentially all of this income by February, prior to D.C. schools closing on March 24. The school has continued to offer classes online.
On top of its endowment and tuition revenue, Sidwell Friends is in the process of a capital campaign to fund the purchase and refurbishment of recently acquired properties in Washington, D.C., proper. The school has not disclosed the amount it sought to raise and did not comment on whether or not it would be suspending the capital campaign.
The school bought one of the properties, 3939 Wisconsin Ave., N.W., from Fannie Mae in 2016 for $8.2 million. The other, 3720 Upton St. N.W., previously served as a nursing home whose residents tried but failed to block its sale to Sidwell Friends for $32.5 million in 2016.
Sidwell's federal bailout makes it just one of many high-profile entities to take considerable sums in coronavirus funding—including Harvard University, restaurant chains like Shake Shack and Ruth's Chris, and news site Axios. Their receipt of millions in PPP funding—drawing on a limited pool and competing with much smaller businesses—has produced widespread criticism, inducing many to return their loans.
Sidwell Friends has faced its own, more muted criticism, with many asking the same question raised by Atlantic staff writer Adam Harris: "What do Quaker values have to do with taking out a loan intended for struggling small businesses?"