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Board of Northeast Research Lab Severs Ties to Sister Group

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One of the nation's largest federally funded education research laboratories has quietly voted to cut its ties to its sister organization and to accept the resignation of its executive director.

Last month's action by the board of the Regional Laboratory for Educational Improvement of the Northeast and Islands was aimed at ending years of growing turmoil at the lab, which has a $5 million-a-year federal contract to provide research assistance to seven states, as well as Puerto Rico and the Virgin Islands.

Almost since its founding in 1985, questions have been raised about the lab's close links to The Network, a private, nonprofit research group that has served as the lab's fiscal agent.

Both organizations were founded and led by David P. Crandall, who was the lab's executive director until its Aug. 11 board meeting, and they shared office space in Andover, Mass. Critics contended that the relationship posed a potential conflict of interest because the two entities might compete for the same contracts.

Such concerns heightened in 1989 after federal investigators audited The Network and claimed that hundreds of thousands of dollars had been improperly charged to the government.

The questionable practices they cited included an arrangement in which Mr. Crandall bought the building where both organizations were headquartered and then leased it back to them, the lease and purchase of a Porsche automobile for Mr. Crandall's use, and an arrangement in which the organizations leased computers and other office equipment from a firm headed by Mr. Crandall's wife.

The Network disputed the audit report, which covered five years beginning in 1983. But in February, it settled out of court with the Education Department, agreeing to pay back $225,000.

Jockeying for Position

And lingering dissatisfaction over the settlement, the organization's continued ties to The Network, and concerns about the focus of the lab's work led last spring to the defection of two of the lab's most prominent board members--Thomas Sobol, New York State's education commissioner, and Vincent L. Ferrandino, who, until recently, was Connecticut's commissioner of education.

"I think we had gotten to the point of recognizing that, for whatever reasons, there were sufficient numbers of people who were not happy with the current situation," said Susan S. Ellis, the Connecticut school administrator who heads the lab's board. "The health of the lab depended on a very clear statement that the lab had to be independent and running its own show."

Board members also reasoned that the separation would put the lab in a more favorable position when it bids next year to renew its federal contract. Already, a group at Brown University has indicated that it will compete for the contract.

The situation was further clouded earlier this year by a new law that authorizes the establishment of two new education-research laboratories; the law did not specify where they will be located.

Indeed, lab officials and some observers said the upheaval at the two organizations has had as much to do with politics as it has with concerns over management.

"My sense is that there's a lot of jockeying for the next competition, and people don't like Crandall and want to make him look as bad as possible," said Braden Goetz, the legislative counsel on the House subcommittee on select education, which oversees the federal education-research laboratories.

As for the audit, current and former lab officials said that, while The Network's financial arrangements may have appeared improper, their intentions all along were to save money. The Porsche, they said, cost no more to lease than other, less exotic, four-door vehicles.

Charges Disputed

"Providing cars to corporate heads is pretty standard, including in the nonprofit world," Mr. Crandall said.

And the sale and lease-back of the office building were arranged to help a financial bind at The Network, officials said. The federal government does not allow its funds to be used for mortgage costs, but it does allow for rent payments. Moreover, Mr. Crandall said, it would have cost the organization $100,000 to move.

But the government does not allow contractors to deduct for rental costs in sale-and-lease-back arrangements unless the rent is equal to the amount the organization would have paid had it continued to own the building.

The board's own review of the audit determined that all of the disputed arrangements, made on the advice of lawyers, had been proper. They chose to settle the matter anyway, after years of fighting it, in order to wipe the slate clean in preparation for the upcoming competition.

But the settlement did not close the book on these issues. Mr. Ferrandino, Mr. Sobol, and other board members said the lab's financial share in the settlement was unfair because the years covered by the audit included a period of time predating the lab's existence.

Board members also questioned the length of the payback period, which goes beyond the lab's current contract.

"These administrative and management difficulties could perhaps be more readily surmounted if the laboratory were making an important contribution to the education-reform efforts under way through the region," Mr. Sobol wrote in his April letter of resignation. "Unhappily, that is not the case."

Changing Focus

Observers inside and outside the lab agree that some of the criticism that has been heaped on the organization stems from dissatisfaction on the part of state education officials who wanted the lab to meet their states' specific needs. But the lab, which serves a diverse mixture of states and territories, construed its mission more broadly.

It created a regional teaching credential to allow teachers to easily move from state to state and is working to do the same for administrators and special educators. The lab also worked with individual schools across the region to assist them in their reform efforts.

But lab officials said last week that they planned to take a new tack now that the Goals 2000: Educate America Act has signaled a new federal emphasis on state-level school reform.

"We now know we need to rethink what we do over the next five years," Ms. Ellis said. "We need to be tied into state-level reform initiatives."

Under the new administrative arrangement, lab officials said, the lab's mission will be made clearer and more distinct from that of The Network.

Mr. Crandall, who observers said lacked the political and managerial savvy for his lab post, will continue to head The Network. Although it is the smaller of the two organizations, The Network is a more entrepreneurial organization with a broader mission. Observers inside and outside the organization, including Mr. Crandall himself, said that group is better suited to his strengths.

"It was difficult. It was strained, and it was hard, but it was amicable," said Phyllis Field, a board member from Rhode Island. "But now both agencies can operate at their full potential."

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