Governor’s relative earns commission from role in school takeover fight

His daughter-in-law's company, Southern Magnolia Capital, is raising money for the nonprofit that is heavily bankrolling the campaign to pass the Opportunity School District amendment, which is on the Nov. 8 ballot. Denise Deal's business is being paid a 5 percent commission on what it raises for Georgia Leads Inc., which had contributed $850,000 to the campaign as of Sept. 30.

Filings with the Internal Revenue Service last year showed Georgia Leads estimates it will take in about $9 million over three years and spend $450,000 on fundraising activities.

Stefan Passantino, the chairman of Georgia Leads, said Denise Deal’s firm was hired on merit.

“We hired her because she is an exceptionally talented and successful fundraiser and has great reach in the state,” he said. “This has nothing to do with anything but her talent and skill.”

He said the commission Southern Magnolia is earning is “well within the range” of what such fundraisers make.

But Bryan Long, the executive director of the liberal advocacy group Better Georgia, called the governor’s Opportunity School District proposal “another pay-for-play scheme to move money from the schoolhouse to Deal’s house.”

He noted that Erin Hames, the Deal adviser who helped create the Opportunity School District plan, got a no-bid contract with Atlanta Public Schools to advise the district on how to avoid state intervention.

“Now the governor is cutting his daughter-in-law in on the action,” Long said. “Voters who read the fine print know that Governor Deal’s school takeover scheme is nothing more than a golden parachute for himself, his family and wealthy friends.”

Amendment 1, which needs voters' approval, would enable an appointee of the governor to intervene in "chronically failing" schools using the local tax dollars that support them. Those schools would either be shuttered, run directly by a new statewide district or converted into charter schools under independent management.

Governor Deal says passage will empower parents and teachers to “fix” bad schools and end an “inexcusable crisis” that has trapped more than 67,000 kids in a cycle of poverty and crime. That is how many students attend the nearly 130 schools with a “failing” grade three years running on the state’s scoring system — schools that could be taken over if the measure passes. He has made personal fundraising pitches and plugged the proposal across Georgia.

Teacher groups, the Parent Teacher Association and other opponents say Deal is making a “power grab” for those schools and the dollars that go with them. They say it removes the control of those schools from local boards and communities. Opponents filed a lawsuit in September over the wording of the ballot item and preamble for the proposed amendment.

The National Education Association, the nation's largest teachers union, and its Georgia affiliate have donated more than $2 million to the fund to fight the amendment, as of Sept. 30. They were the only donors listed on disclosures by the Committee to Keep Georgia Schools Local.

Georgia Leads was set up as a nonprofit after Deal won re-election in 2014. It was designed to raise and spend money to push the governor’s second-term agenda and does not have to disclose donors.

Such setups have mushroomed since the U.S. Supreme Court’s 2010 Citizens United decision, which cleared the way for unions, businesses and others to raise unlimited amounts of political money anonymously, using nonprofit designations.

While Georgia Leads doesn't disclose donors, the AJC found more than $250,000 in contributions to the group by reviewing expenditure listings by companies and political action committees who file reports with the state ethics commission. All the donors have big stakes in legislation or funding at the state Capitol, including several special-interest lobbying groups.

John Palmer, a Cobb County educator and spokesman for the teacher group TRAGIC, said the Deal family connection to Georgia Leads shows the campaign to pass the amendment is being funded by big-money donors.

“It is nice for the governor’s family that his daughter-in-law can make a nice living raising money for the governor’s pet causes, but the many groups standing against a state takeover of schools are not backed by deep pockets,” he said.

“While its true some national education groups have helped fund some of the opposition,” he added, “the grass-roots organizations opposing Amendment 1 are comprised of Georgia parents, teachers, clergy, administrators, locally elected school board members and concerned citizens who don’t want another layer of government bureaucracy taking our local tax dollars for another experiment that has already failed in every other state where it’s been attempted.”

It’s not entirely surprising Georgia Leads hired Denise Deal’s company to raise money since she has been a big part of pretty much every campaign involving her father-in-law over the past six years.

She started working on her father-in-law's campaign when he first ran for governor in 2010. Once he was elected, dozens of Republican state lawmakers, such as House Speaker David Ralston, R-Blue Ridge and Senate President Pro Tem David Shafer, R-Duluth, hired her companies to raise money from deep-pocket donors.

Ralston, for instance, has paid Deal's firm $43,000 this year as of Sept. 30, according to campaign finance records.

Almost all the donors to top lawmakers such as Ralston and Shafer are companies, associations and individuals with a keen interest in legislation or state contracts, and they generally give to whomever is in charge.

She also raised money for REAL PAC, a fund set up during the governor's first term to push his agenda. Her company was paid $107,000 for fundraising expenses and commissions by REAL PAC from 2011 to 2013, according to campaign records.

Her company is also being paid a 5 percent commission for a separate nonprofit Deal supporters set up called Georgia Leads on Education. IRS filings by the nonprofit estimate the company will earn $60,000 through the end of December, when the contract between the company and Georgia Leads on Education ends. But the company is being paid a retainer as well and will likely make more than $60,000.

Passantino said Georgia Leads on Education is not legally allowed to donate to Georgia Leads Inc. and that the two fundraising efforts are separate.