Magazine

A Turnaround Ace For New Orleans


Just one look at Bill Roberti's mug tells you all you need to know. When it comes to business, he's brusque and focused, not much for small talk or a joke. Even as he folds his tree trunk of a body into the elementary school desk that has become his makeshift office space, he oozes steely resolve, honed through a dual career as a U.S. Army Reserve colonel and corporate turnaround artist. He doesn't waste words, and when he does speak, he booms. If the commanding 59-year-old is more indelicate than ever these days, it's because he's knee-deep in the most daunting challenge of his professional life: reconstituting the entire New Orleans public school system.

Roberti is a managing director at Alvarez & Marsal LLC, the New York turnaround consultant renowned for whipping Timex, Interstate Bakeries (LBCIQ), and the post-Richard Scrushy HealthSouth (HLSH) into shape. In June, 2005, the firm was awarded a modest contract to help straighten out the crooked finances of the New Orleans system's 117 schools and its administration. After Hurricane Katrina the job has ballooned into something unimaginably more important. Even before Katrina flooded 80% of the city and emptied it of almost all of its residents, the New Orleans public school system was the worst of all major U.S. cities and faced intractable corruption, infighting, and racial tension. No one knows the odds against the schools better than Roberti, who did similar financial work at A&M for the St. Louis school system. Largely because of him and his staff, 10,165 students are back in the 20 public schools that are up and running.

The school board had faced a dicey, day-to-day cash crunch early this year. But as the city slowly repopulates, increased local tax revenues and federal funds have taken this year's budget off life support. The state also helped by deferring $68 million in unemployment insurance payments until January, 2007. For the first time since Katrina, Roberti was able to propose a balanced budget to the school board at its Mar. 21 meeting. But he is quick to point out that finances remain precarious. "One hiccup could still send us into a tailspin."

The original $16.7 million contract A&M got from State Superintendent of Education Cecil J. Picard has expanded to $18.6 million, encompassing physical rebuilding as well as the initial financial work. Now the firm is reconstructing the financial and physical infrastructure of the entire 117-school system as well as sifting through the real estate and insurance mess created by the storm. Picard says the money for the contract comes out of the Orleans Parish School Board budget, whose deficit had gaped to $112 million earlier this year. So far, A&M has recovered $29.5 million from private insurers and obtained a $30 million community disaster loan from the federal government.

When the work began last summer, Roberti found a school system that was dysfunctional in a daunting number of ways. It was $450 million in debt, and state audits in 2004 and 2005 showed employees were siphoning millions in unauthorized paychecks. Phantom workers got payroll checks for years after they retired or were terminated. The accounting department employed no accountants. "Every aspect of the system was not working," says Roberti, a divorced father of two grown daughters. He's now living in a rented house with other A&M workers in the city's Algiers section.

What makes the job harder is the city's lingering devastation. It's been almost seven months since Katrina struck, yet conditions remain so putrid in some sections that Roberti and 35 A&M colleagues in New Orleans have each received eight vaccinations for diseases such as typhoid fever, diphtheria, and hepatitis. Some developed a hacking wheeze known locally as "Katrina cough," caused by airborne irritants remaining after the flood. At many city schools it's like Katrina happened yesterday. At Joseph Hardin Elementary in the Lower Ninth Ward, for example, overturned furniture, collapsed ceilings, and the stench of mold make it hard to venture more than a few feet into classrooms.

NEW RECRUITS

A cornerstone of Roberti's rebuilding plan has been the opening of charter schools. Of the 20 public schools open in New Orleans, 16 are charter schools; the other four are run directly by the New Orleans school board. After Katrina, A&M directed recruiting of the principals and teachers -- many of whom had prior teaching experience, but none of whom, in the charter schools, were bound to the teachers' union contract. Some locals complain that Roberti is "selling off the school system." Such opposition isn't surprising; charter schools generate strong emotions just about wherever they're launched. But at Dwight D. Eisenhower Elementary School in Algiers, one of the new charter schools in New Orleans, principal Cynthia Bernard is amazed at the streamlined chain of command A&M put in place: "Without the bureaucracy, things get done quickly and easily now."

Not everyone was eager to hand financial control to outsiders. Former school board President Torin Sanders refused to sign A&M's $16.7 million contract after the board voted to approve it last June. A proposal to install Roberti as interim superintendent met with cries of racism; the school superintendent is African American, and the board vote went along racial lines. Local attorney Willie Zanders obtained a court order temporarily blocking passage of this year's $430 million school budget because it didn't include $160,000 in salary for his client -- an ex-operations chief suspended in a dispute with the previous school superintendent. "That's the kind of nonsense that goes on," says Roberti.

The political back-and-forth is a reality in the fractured city, but Roberti and his team have managed to earn the respect of many locals through an undeniable drive to get the job done. A mere two days after the storm, with schools empty and the city still lawless, Roberti and two colleagues, Sajan P. George and Rajeev Jain, used Roberti's military ID to negotiate National Guard checkpoints to reenter the city. Their goal: retrieve payroll records on computer data tapes from a school administration building in Algiers. Arriving just before nightfall, they sought protection from a New Orleans Police Dept. tactical unit set up at a nearby elementary school "so they would know what we were doing and we wouldn't be shot at," Roberti explains. They slogged through foul water and retrieved the tapes, allowing them to dole out paychecks to workers scattered across the nation within two weeks of the storm. "It was important to give employees the money they were owed as soon as possible -- they had no homes and needed all the help they could get," says Roberti.

Making nice with community groups isn't a task that normally falls to corporate consultants, but Roberti has no choice. At a Jan. 5 school board planning meeting, he laid out the system's dire financial straits. With detailed spreadsheets of cash flow and budget amendments, he showed that at that point revenues for the 2005-06 school year were down $271 million from pre-storm forecasts and that the schools would be facing a $65 million yearend deficit in June.

The board members, a mix of educators and concerned parents with little experience managing multimillion-dollar operations, had trouble keeping up. They interrupted him. Some found it hard to read a balance sheet. "We'll get to that in a minute, if you'll let me finish," Roberti told more than one board member.

As he tried to wrap up, a chaotic discussion about possible insolvency erupted. Brief grimaces betrayed moments of frustration, yet Roberti kept his cool, answering each question in clipped rebuttals. Eventually, his no-nonsense style sparked grudging admiration: "Your straightforward manner is refreshing, Bill," said board member Una Anderson. "Like a punch in the face, but refreshing."

By Coleman Cowan


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