Back a few years, the business restructuring company Alvarez & Marsal became deeply involved in reorganizing school districts, despite their lack of any educational experience. As a reflection of the corporate mindset of the early 2000s, A&M’s corporate experience was thought to be a major asset in rearranging school districts.
The president of A&M, Bill Roberti, who had previously been CEO of the elite menswear company Brooks Brothers was hired to take charge of the St. Louis school district, at $5 million a year.
During his 13 months as superintendent of St. Louis public schools, former Brooks Brothers chief executive William V. Roberti closed 21 schools, lopped $79 million off the school budget, privatized many school services and laid off more than 1,000 employees. He stepped down in June at the end of his contract….
The basic assumption behind the Roberti reforms was that a school district operates in much the same way as a retail business. Both systems rely on “supply chain management,” he said. “Many people talk as if there’s some magic to education. But the job of getting supplies from a warehouse to a building is the same in schools as it is in business as it is in the federal government.”
To slash costs, Roberti outsourced many operations to private contractors. He also cut hundreds of positions, including supervisors, counselors and department coordinators. He is proud of the fact that he did not fire a single teacher — dozens of teachers were permitted to retire without being replaced, which resulted in larger classes in many schools.
He left after 13 months, and the firm was hired in June 2005 (three months before the Hurricane) to take part in the restructuring of New Orleans public schools. Roberti was in charge of finance, purchasing, accounting and human resources for $16.8 million for two years. In light of the added duties after the Hurricane, A&M’s fee for three years was double the original proposal.
Then came a nice gig in New York City, where Joel Klein paid A&M $15.8 million to reorganize the school bus routes and save money. That was a fiasco, launched on the coldest day of the year, many students left stranded.
ProPublica investigated how the super-rich avoid taxes by buying super-yachts and private jets. It’s first example: the very wealthy Alvarez & Marsal.
Over the past two years, ProPublica has documented the many ways that the ultrawealthy avoid taxes. The biggest or most daring maneuvers scale in the billions of dollars, and while the tax deductibility of private jets isn’t the most important feature of U.S. tax law, the fact that billionaires’ luxury rides come with millions in tax savings says a lot about how the system really works.
There are dozens of examples of wealthy Americans taking these sorts of deductions, which are premised on the notion that the planes are used mainly for business, in the massive trove of tax records that have formed the basis for ProPublica’s “Secret IRS Files” series. The ultrawealthy, however, can easily blur business and pleasure. And when they purport to make their planes available for leasing, to fulfill one definition of using the planes for business, they tend to be more adept at generating tax deductions than revenue.
Flying to Ireland to inhale the seaside air as you drive a golf ball into the scenic distance. Crossing the country to reach your enormous yacht, which is ready for your Hudson River pleasure cruise. Hosting a governor’s wife on your very own aircraft. These are only a few of the joys that the richest Americans have experienced in recent years through their private jets. And what made them all the sweeter is that they came with a tax write-off.
Tony Alvarez and Bryan Marsal built a successful consulting firm specializing in restructuring — advising struggling or bankrupt companies on what to sell and whom to lay off. It can be a grim business: Marsal has been known to announce to prone firms that they were now a “community of pain.” But the partners, who are also close friends, own another enterprise, the Hogs Head Golf Club (“Built by Friends, for Friends, for Fun”), on the southwest coast of Ireland. It boasts views of the nearby mountains and bay.
In 2016, before opening their new course, the pair teamed up, via an LLC they named after their golf club, to buy a 2001 Gulfstream IV jet. The next year, President Donald Trump signed his big tax cut into law. It made buying a plane even more attractive: The full price of the plane could be deducted in the first year, a perk called “bonus depreciation.” Before, depreciation was typically only partially front-loaded, with the full balance spread over five years. The law also for the first time made pre-owned planes eligible for this treatment.
As a result, when Alvarez and Marsal sprang for their second plane in 2018, this one a Gulfstream V, the entire cost was deductible. That year, the pair’s two planes netted them a tax deduction of $14 million.
Last August, their Gulfstream V took off from Westchester County Airport in New York state for Ireland. About an hour later, their Gulfstream IV left for the same destination, a small airport in County Kerry near their club. Both planes can comfortably seat over a dozen passengers, but flight records don’t show who was on board. Over the coming month and a half, the two planes crisscrossed the Atlantic several times.
Were these business trips? Possibly, yes. (ProPublica’s records do not indicate whether specific trips were taken as deductions.) If so, operating expenses — including crew, fuel and other costs — from the partners’ trips to oversee the course would be fully deductible. These deductions would come in addition to depreciation.
Diane Ravitch's blog 