In April 2015, the Los Angeles Unified School District (LAUSD) announced that it was canceling its agreement to install Pearson software on the 40,000 Apple iPads it distributed to students at a cost of $768 each. LAUSD also demanded a multimillion-dollar refund because Pearson could not deliver the math and English curriculum it promised. Although three-quarters of the school year was over, the vast majority of LAUSD students still could not access Pearson curriculum on the iPads and in classrooms that had access teachers were not using what they considered to be an inferior product.
The entire LAUSD project has been a fiasco from the start. Shortly after the computers were distributed, students hacked into the supposedly unhackable system so they could run their own programs on the machines. In December 2014 an FBI investigation of the iPad contract was launched after emails surfaced showing communication between LAUSD and Pearson officials before the contract was awarded. The total computer and program package cost LAUSD a reported $1.3 billion.
In September, Apple Inc. and Lenovo, the leads on the project, Pearson is technically a sub-contractor, agreed to reimburse the LAUSD $6.4 million for the botched project after the district threatened to sue the companies. It is still not clear which of the companies will eventually pay the bill although LAUSD holds Pearson responsible for the problems.
On the other side of the country, in December 2013 the Pearson Charitable Foundation, the company's not-for-profit, supposedly independent, agreed to pay the State of New York a $ 7.7 million penalty. The foundation, which Pearson has since closed, was illegally using donations to school districts and personnel to channel business to the for-profit publisher. According to New York State Attorney General Eric Schneiderman, "The law on this is clear: non-profit foundations cannot misuse charitable assets to benefit their affiliated for-profit corporations."
Los Angeles is only the latest Pearson disaster and is only the most recent time the company will pay for its misguided business practices. According to the website Justia.com, between January 2004 and October 2015, Pearson has been involved in 187 copyright infringement cases, mostly as a defendant. It is also the defendant in eight civil rights discrimination cases, six contract disputes, and three unfair labor practices suits. In 2011, a federal judge in New York approved a class action lawsuit against Pearson that accused the company of using photographs in textbooks without permission or payment. Attorneys for the plaintiffs charged that Pearson ran a massive scheme to use the work of tens of thousands of professional photographers without getting permission first. It then covered up its actions with "deceptive letters to secure rights after the infringement."
But these cases are just the tip of the iceberg. In 2000 Pearson paid Florida a $4 million fine when test scores were delayed. In 2005-2006 it misgraded SAT exams and paid out $3 million to plaintiffs. In 2009-2010 Wyoming fined Pearson $5.1 million when the package it purchased did not work. Pearson paid Florida another $15 million in fines in 2010. In 2011 Pearson paid Oklahoma $11 million because of problems with tests and data delivery. In 2012 Mississippi collected half a million dollars in penalties from Pearson. In 2013, Penguin, at the time a Pearson subdivision, paid $75 million after it was accused of fixing e-book prices. In 2014 Pearson was involved in a court case in New Mexico after it was charged with rigging the bidding process to secure a multi-million dollar contact to develop and administer Common Core tests. This case was dismissed on a legal technicality. In 2015 Bangalore City Court restrained Pearson India from infringing on the intellectual property of a local technology startup company, New Rubric Solutions. India is one of Pearson's major targeted Third World markets.
This multiple billion dollar global company has a very pretentious corporate mission statement. "We have a simple mission: to help people make more of their lives through learning."
But is the Pearson business model just grab, cheat, sue, get caught, get sued, and pay up? In February 2015 Pearson reported an adjusted operating profit of 720 British pounds or about 1.1 billion U.S. dollars. In the end it is probably cheaper for Pearson to pay the fines and settlement costs while negotiating new pricey contracts.
Why do government agencies and school district contracts with a company that is constantly forced to pay fines, settle lawsuits, or offer financial settlements because of suspect activity or its inability to deliver on promised services? Why do shareholders in this company tolerate this level of mismanagement? How long until voters and taxpayers just say no?
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