Raise Your Hand If It's Cheating

Jack Grubman, telecommunications analyst at Salomon Smith Barney testifies on Capitol Hill Monday, July 8, 2002 before the House Financial Services Committee hearing on WorldCom. Grubman said Wednesday, Nov. 13, 2002, that he was just trying to puff up his image when he said in an e-mail that he raised his rating on AT&T stock to help his boss win a power struggle at Citigroup.
At one New York City preschool, ABCs might be important, but not as important as AT&Ts. Stock analyst Jack Grubman asked Citigroup chief executive Sanford Weill to help get Grubman's twins, a boy and a girl, into an exclusive pre-school. Weil didn't just phone the director of the school on Grubman's behalf. Citigroup made a donation to the school of a million dollars. In exchange for Weill's help, Grubman allegedly gave AT&T a higher rating than he would have otherwise.

Grubman's change in the way he recommended AT&T not only helped AT&T, but also helped Citigroup's investment banking unit, Salomon Smith Barney, and made Weill look good within Citigroup. The twins got into the preschool, and everybody was happy.

Generally speaking, one parent recommending another parent's children to a school is not necessarily a bad thing. "I'm friends with Mr. and Mrs. Smith, they have a lovely family, and I think their kid would fit in quite well in our school," is not an awful thing for a parent to say to a school director. Young people are helped to gain admission into schools all the time because of "who they know." I've never heard anyone seriously claim that the Kennedys got into Harvard and the Bushes got into Yale purely because of their good grades and SAT scores.

However, when the recommendation to a nursery school comes with a million dollar donation, it gets my attention. In this case, the donation didn't come from Weill's pockets. It didn't come from Citigroup's philanthropic foundation. It came from Citigroup's corporate funds. That's right: the stockholders paid for it. I don't know about you, but if I buy a stock, I don't expect my money to be used to help get some rich guy's kids into a private school.

Of course, so far, nobody involved in Nurseryschoolgate has been formally charged, and everybody is innocent until proven guilty. It could all be one amazing, unbelievable, incredible coincidence. But the fact that so many people believe it's possible has to make us think about both Corporate America and our educational system. If a million dollars changes hands for a pre-school, what do these people donate when they want to get their kids into college? A Pacific island? A small country? A pound of lox?

What makes this pre-school so fantastic that it's harder for a toddler to get into than it is for a freshman to get into Harvard? What is so important about a specific nursery school that people are willing to pay $14,000 a year for tuition? Do they have better blocks to play with? Do the teachers know Barney personally? Do they use imported macaroni for their artwork?

Tuition at educational institutions has skyrocketed lately. Even if your kids have been educated for free through high school, college costs can be colossal.

Some schools recognize this, and are starting to be flexible and creative. Lindenwood University in Missouri allows parents to barter for their kids' education. The school's president, Dennis Spellmann, will trade a liberal arts education for anything the dining hall can use. So far, at least six families have traded their hogs for education. Lindenwood even advertises in the Farm Journal — "Pork: The Other Tuition Payment."

Other colleges use a barter service so that parents offer things they have to other parents who offer other things to other parents who offer other things to schools. It's not a bad system. The colleges get things they need, and the kids get an education they wouldn't have been able to afford.

Doesn't "I'll donate the timber to build the gym bleachers instead of paying tuition for my kid" sound a lot better than "I'll help your kids into nursery school if you help me manipulate some stocks?" Maybe New Yorkers could learn something from Middle America. If you're a plumbing contractor, maybe you could donate your services to the preschool and install some potties. If you're an accountant, maybe you could help keep the school's books. If you're a pediatrician, maybe you could exchange free checkups for tuition.

But I don't expect the barter system to catch on with New York private preschools. The closest they'll probably come to parents trading their prized hog for admission is parents trading inside information on hog futures for admission.

Lloyd Garver has written for many television shows, ranging from "Sesame Street" to "Family Ties" to "Frasier." He has also read many books, some of them in hardcover.

By Lloyd Garver