Kennedy's Charity Comes Under Scrutiny Over Finances

New York's Assembly will examine whether a charity that U.S. Senate hopeful Caroline Kennedy helps run was properly granted an exemption from a state law requiring full financial disclosure.

Democratic Assemblyman James Brennan questions the decision by the New York City Conflicts of Interest Board to exempt The Fund for Public Schools from a law aimed at airing the financial dealings of charities.

Kennedy, who hopes to succeed Hillary Rodham Clinton in the Senate, is vice-chairwoman of the not-for-profit organization.

The law requires most volunteer directors of charities working with state and municipal governments to disclose investments, outside pay and other financial connections. It was passed partly to assure that charities aren't shadow agencies of the governments they support.

On Dec. 10, the city board told Brennan's Assembly committee that Kennedy's charity would be exempt from disclosure. The board decision came two days after Mayor Michael Bloomberg strongly endorsed Kennedy as a successor for Clinton should she be confirmed as President-elect Barack Obama's secretary of state.

"I think it's a matter of concern as to whether the statute applies to them or not," Brennan said. "Certainly this needs to be rethought ... we'll check into it."

Kennedy spokesman Josh Isay didn't immediately respond to a request for comment.

The Fund for Public Schools has raised more than $233 million since 2002 from individuals, corporations and foundations to better fund the city's public school system. Kennedy was hired as its chief fundraiser in 2003, getting a nominal salary but is now vice-chair.

The 2006 state law seeks to reveal if government officials have "substantial operational control" of a nonprofit organization.

The Conflicts of Interest Board determined the Kennedy charity should be exempt from disclosure laws because isn't affiliated with city government.

"The fund is affiliated with the (city) Department of Education and the Department of Education is a school district, and that's how it's acknowledged in state law," said Margie Feinberg, a spokesman for the city Education Department who was also speaking for The Fund for Public Schools. "The fund isn't affiliated with a city or county or town or village."

The conflicts board wrote Brennan's committee that: "The Fund for Public Schools, Inc. would not be considered `affiliated with, sponsored by, or created by' the city. The corporation has a self-perpetuating board that is controlled by neither the Board of Education nor the chancellor."

Unlike other school districts, New York City schools have been under mayoral control since 2002. The chairman of The Fund for Public Schools is Joel Klein, the city schools chancellor who was appointed by Bloomberg, the only official needed to fire a chancellor under mayoral control.

The Fund for Public Schools is located at 52 Chambers St. in Manhattan, the old Tweed court house that is now home to the city education department.

"That would seem to indicate substantial control," Brennan said when told of Klein's role as chairman. "We would certainly suggest to them (the city conflicts board) that they are making a mistake, excluding them from coverage."

"There's this gray area," said Dick Dadey, executive director of Citizens Union, a city watchdog group that has followed the issue. "It's an agency that has it both ways at times."

"The letter of the law is being followed," Dadey said, but added: "I think they probably should not be exempt."

He agreed the state's 32-page disclosure form for directors -- similar to financial disclosures required of elected officials -- is probably unnecessary for volunteers and could chase some important people from public service. The city is currently considering a shorter form.

"We've seen the growth of use of these affiliated not-for-profits that provide very good services and strong support, but that shouldn't be done without an important level of disclosure for the public to scrutinize," Dadey said.