White Hat Management is one of Ohio's largest charter school operators. In 2010, when White Hat's publicly funded schools began performing poorly, parents and board members asked the company to disclose how it spends public education funds.
White Hat refused to open the schools' books to the schools' governing boards, irrationally claiming that the funds were private, not public. Ten school boards sued White Hat, demanding financial and student records. White Hat lost in Ohio's lower court, they lost in the Appeals Court and the state Supreme Court heard the case last September but hasn't yet come to a ruling.
When governments outsource public services, contractors attempt to circumvent sunshine laws and shield important public information from disclosure using broad exclusions to the Freedom of Information Act and state open records laws that exempt "trade secrets" or "proprietary information" from public scrutiny. Contractors use those loopholes as justification to hide basic public information from taxpayers including the fees they charge the public, how they spend public funds, and the details on the quality of public services they are paid to provide.
For example:
•When the New York State Comptroller audited National Heritage Academies Inc.'s (NHA) Brooklyn Excelsior (charter) School in 2012, NHA staff refused to provide details on how the school spent its money, preventing taxpayers from knowing "the extent to which the $10 million of annual public funding benefited students." According to the audit, NHA staff refused to provide details on how the school spent $1.6 million, claiming that "the expenditures were private and proprietary."
•Recently, Connecticut public radio station WNPR submitted a records request for the billing rate of the state's health care exchange call center operator, Maximus Inc. In response WNPR received a heavily-redacted version of the contract with details of Maximus' costs blackened-out. Only after WNPR filed a complaint with the Freedom of Information Commission did the state release an un-redacted version of the contract allowing the public to see if Maximus' fees were reasonable for the service provided.
•In Florida, after transportation officials began linking design changes in highway guardrails to fatal car accidents, a consumer safety research firm requested documents and communications about the Florida Department of Transportation's (FDOT) contract with Trinity Industries, which manufactures the guardrails. In response, FDOT provided 13 files and explained that Trinity was reviewing more than 1,000 emails to redact confidential information before releasing them. According to FDOT, Trinity had obtained a protective order that prevented the release of "trade secret" records about the guardrail design.
•In Florida, the Department of Corrections (DOC) contracts with Corizon Correctional Healthcare to provide health care for inmates at 41 state correctional facilities. When an investigative news agency -- Broward Bulldog -- requested companies history of malpractice litigation from Corizon, the company refused to release the documents, claiming that the information was a "trade secret."
•Public pension systems -- government entities that manage retirements for public employees such as teachers and police officers -- contract with financial firms to invest pensioners' funds. In 2014, the Securities and Exchange Commission (SEC) expressed concern over the fees charged by buyout firms, prompting The Wall Street Journal to ask the Iowa Public Employees' Retirement System for information on the fees paid to private equity contractor KKR & Co. for a $70 million investment. In response, the IPERS conferred with KKR and released a heavily-redacted document that provided little information on KKR's fees. KKR's lawyer stated that disclosing the company's fees could cause "competitive harm."
Contractors may have legitimate reasons for keeping some company information private. But government contracting shouldn't create a black box that hides public information from public scrutiny.
March 15 to 21 is Sunshine Week in America, when journalists, advocates and public officials rededicate themselves to the transparency necessary for a vibrant democracy to function. Congress and elected officials in state houses across the country should take advantage of Sunshine Week to close these loopholes and turn the lights on secretive government contractors.