Eai

Little more than two years after enthusiastically embracing Baltimore's school-privatization venture, Mayor Kurt L. Schmoke last night told Education Alternatives Inc. that its future here depends on improving student achievement."

An admission by Educational Alternatives Inc. that it exaggerated the progress of its Baltimore students has undercut the already tenuous credibility of the for-profit school-management company, industry analysts said yesterday.But the revelation may make little difference in cities such as Baltimore, and Hartford, Conn., where many teachers, parents and administrators already are polarized over the company's plans.The Minneapolis Star Tribune reported Saturday that EAI, which manages 12 Baltimore schools, inaccurately reported 1993 Baltimore test scores when it claimed it had raised students' abilities by nearly a grade in three months.

An article yesterday stated incorrectly that Education Alternatives Inc. had paid for more than one out-of-town trip by city schools Superintendent Walter G. Amprey to testify about Baltimore's school privatization experiment. In fact, Dr. Amprey said that the company paid for a trip this week to Hartford, Conn., but no others.The Sun regrets the errors.Baltimore Superintendent Walter G. Amprey yesterday launched his strongest public attack yet against critics of the city's school-privatization venture and said he hopes to expand Education Alternatives Inc.'s role to at least four more city schools.

In the latest sparring over Baltimore's pioneering experiment in school privatization, Council President Mary Pat Clarke and the teachers' union yesterday challenged a budget adjustment that would give a Minneapolis company more money to run nine public schools.Education Alternatives Inc.'s payment to the school system for administrative services will drop by $1.3 million under the adjustment, which was approved by 3-2 vote of the city's Board of Estimates. Mrs. Clarke and Acting Comptroller Shirley A. Williams voted against the adjustment.

Education Alternatives Inc., which manages schools in pTC Baltimore and Hartford, Conn., got a painful economics lesson in recent months, as the value of its $36 million investment in derivatives and securities has dropped by more than one-third.Corporate finance specialists and a national teachers union criticized EAI yesterday for investing in derivatives -- volatile, interest-sensitive investments that have cost companies and communities around the nation billions of dollars as interest rates have risen.

NEW YORK -- Two shareholders of Education Alternatives Inc. filed suit against the company, some of its officers and its accountants, claiming that they had used irregular accounting methods and made unfulfilled promises to jack up EAI's stock price last fall for personal gain.The suit, filed Wednesday in federal district court in Minneapolis, claims that shareholders who bought EAI stock between Sept. 20, 1993, and Feb. 8 were misled by the company.Taking advantage of investors' interest and the resulting high stock price, company officials sold thousands of shares of stock and reaped windfall profits.

At the request of its sponsor, the City Council postponed action yesterday on a bill that asks the council to force Educational Alternatives Inc. to provide detailed documents of its financial dealings with the city.The council granted the request of 2nd District Councilman Carl Stokes after he told the body that Mayor Kurt L. Schmoke will try to get him the information by Friday.Mr. Stokes wants the council to force EAI to immediately make public its travel and maintenance expenses and attorney fees.

Education Alternatives Inc., the private company running nine Baltimore schools, owes the city about $500,000 that it had received based on overstated enrollment figures, city school officials said yesterday.Superintendent Walter G. Amprey said school officials had told EAI that based on a state audit it must repay the money, received during the last school year for its "Tesseract" schools.But John T. Golle, EAI's chairman and chief executive officer, contradicted the superintendent, saying he had not been told that the company was expected to repay the money.

Claiming that Educational Alternatives Inc. receives preferential treatment from the city school system, critics denounced last night a proposal to boost funding for the company by $6.7 million.That criticism, coming at the first public hearing on Superintendent Walter G. Amprey's proposed $634 million 1994-1995 operating budget, opened what is likely to be a contentious debate on school priorities.City Council President Mary Pat Clarke and the Baltimore Teachers Union argued that giving EAI-run schools more money per pupil than almost all other city schools is unfair.