Wireless Generation Loses Contract in Wake of News Corp. Scandal

When News Corp. announced the purchase of Wireless Generation last year, it was unclear whether the educational software, systems, and consulting company could maintain an identity separate from that of the often-controversial media conglomerate led by Rupert Murdoch.

A phone-hacking scandal and one rejected contract later, that independent identity appears harder to preserve.

New York State Comptroller Thomas P. DiNapoli last month rejected a $27 million no-bid contract between the state department of education and Wireless Generation for developing assessment-tracking software. His office cited concerns about the current ethical cloud over News Corp.

Coming amid the scandal over illegal phone hacking by one of the conglomerate’s British newspapers and alleged transgressions by another, the decision undercut claims by the New York City-based Wireless Generation that it could distance itself from negative perceptions of the News Corp. brand. (“Scandal Clouds News Corp.'s Move Into Education,” Aug. 10, 2011.)

“In light of the significant ongoing investigations and continuing revelations with respect to News Corporation, we are returning the contract with Wireless Generation unapproved,” an Aug. 25 letter from Mr. DiNapoli’s office begins. It goes on to say that “we believe the record remains incomplete with respect to the vendor responsibility issues involving the parent company.”

“In addition, as we learn more,” it says, “we are compelled to question our previous assumptions about this project, as well as the information that led to our initial decision to support a single source procurement.”

Larry Berger, a co-founder and the chief executive officer of Wireless Generation, serves on the board of Editorial Projects in Education, the nonprofit corporation that publishes Education Week.

Union’s Criticism

Supporters of the contract, meanwhile, aren’t necessarily buying the News Corp. link as the reason for the rejection of a deal that was widely criticized by the 600,000-member New York State United Teachers, or NYSUT, for what the union said were potential improprieties.

Former New York City Schools Chancellor Joel I. Klein, who is now the CEO of News Corp.’s education division, worked with Wireless Generation to implement assessment and data software during his more than eight years as chief of the 1.1 million-student school system. He drew criticism from union leaders throughout his tenure for a perceived overreliance on student test scores as a method of teacher evaluation.

Those union officials say the $27 million deal to create similar software for statewide use was unfriendly to teachers and represented a conflict of interest for Mr. Klein and the state.

In a statement, the state education department suggested the comptroller was bowing to pressure from unions and other political forces as much as it was bending under the weight of News Corp.’s reputation.

And Joan Lebow, a spokeswoman for Wireless Generation, said opposition to her company is also based partly on what she said was a false notion that it is deeply involved in teacher assessment.

“In some consumer press reports and blogs, the company has been mischaracterized as being in the evaluation business,” Ms. Lebow said, “when it’s so clear to people we work with in every state in the country that Wireless Generation is dedicated to developing tools for teachers. The wide use of data is one among many tools.”

A NYSUT spokesman praised the comptroller’s decision, while noting that his motivations may have been different from the union’s.

“[Mr. DiNapoli’s] reasons and our reasons, I’m not sure they are one and the same. But it was the right thing to do,” the spokesman, Frank Maurizio, said of the contract rejection. The connection to News Corp., he said, “may have been the straw that broke the camel’s back.”

‘A Fair Shake’?

Steven Pines, the executive director of the Education Industry Association, a Washington-based trade group, said the rejection of the contract was at the least a little unusual, since it did not appear to be based on a measure of performance of the company slated to receive it.

Regardless of whether the motivation for rejection was concern about News Corp.’s business ethics, political pressure focused against Mr. Klein, or a combination of both, Mr. Pines said he suspected Wireless Generation was receiving more scrutiny than warranted.

“I wonder if Wireless Generation were a not-for-profit organization, would they be subject to the same level of media attention, as well as sort of heavy-handed government contract negotiations?” Mr. Pines said. “They should be monitored like no tomorrow to see if the work is being carried out or not carried out. But I just wonder did Wireless Generation really get a fair shake.”

Wireless Generation had approximately 450 employees as of July, according to company officials, including 130 added in 2011. It’s unclear whether the loss of such a contract will affect its ability to retain or add employees.

It’s possible, Ms. Lebow said, that the company will enter the competitive bidding for the contract when that process opens.