06/01/04 -- School districts across the country are out millions of dollars since the National School Fitness Foundation (NSFF) stopped making payments in May. The foundation is now under federal investigation.
NSFF, based in American Fork, Utah, has arranged to sell $77.5 million in fitness equipment and related services to about 600 schools in 20 states.
Under the foundation's LIFT America program, districts agree to pay upfront for the equipment. The foundation indicated it would reimburse the districts with funds the foundation received from grants and donations -- but warned the districts that paybacks were not guaranteed.
Following the announcement of an investigation by Minnesota state officials, NSFF said it would stop making reimbursements to school districts. Minnesota Attorney General Mike Hatch had accused the NSFF of engaging in a pyramid scheme in which the payments of school districts who recently signed on with NSFF are used -- not grants or donations -- to reimburse districts that had signed on earlier.
U.S. District Court Judge Richard Kyle in St. Paul, Minn., signed a temporary restraining order May 18 freezing NSFF's assets in Minnesota and ordering it to stop selling fitness equipment in the state. "There is probable cause to believe defendants have committed and continue to commit federal mail and wire fraud," Kyle wrote.
The Central Kitsap School District in Washington state has gotten back just $90,000 from NSFF and still owes $570,000 on its three-year contract for fitness centers in all three of its high schools, reports district spokesperson Jeanie Schulze.
She says the district's capital projects, such as roof repairs, classroom renovations, and new heating and air conditioning systems, "may have to be delayed" to offset the loss.
The district agreed to purchase the equipment because NSFF offered "excellent equipment and a strong curriculum," Schulze says. "We've been very pleased with the program." The fitness centers have been made accessible to school staff, and the district plans to open them up to the community.
The Tyler (Texas) Independent School District received $182,000 from NSFF for fitness centers in 14 schools and still owes 33 payments, totaling $2.8 million, says Financial Director Tosha Bjork.
Before signing on with the foundation in November, "we checked it out as well as we could," she says. "Of course, we knew we might be taking a risk." The district does not expect it would have a problem covering the entire cost if NSFF fails to make another payment.
Michael L. Johnson, superintendent of the Bexley City School District, one of 17 districts in Ohio that signed agreements with NSFF, says the district still owes $160,000 and is working with booster clubs and a local education foundation to cover the payments. Most districts that signed on with NSFF generally got local bank loans to make the upfront payments to NSFF.
"Everyone who entered into agreements with the foundation knew NSFF could suspend payments. We deliberated on that point," Johnson says.
When the district agreed to participate with NSFF, it was renovating a high school and had already made plans to install a weight room. "We were also interested in the curriculum and research [NSFF had agreed to provide], not just the fitness equipment."
The Ohio attorney general's office is looking into whether NSFF is violating Ohio's charitable trust act, says a spokesperson, but is "not investigating" the organization.
Wisconsin Gov. Jim Doyle has backed off from a $10 million partnership with NSFF, announced in his state of state speech in January, to set up fitness programs in 100 schools.
NSFF President Cameron J. Lewis denies any wrongdoing. "We're still operating and moving forward and have high hopes we'll come through this," he told the Associated Press May 21.
The AP reports that Lewis has a history of personal bankruptcy and business failures and has used NSFF to pay himself a salary of over $317,300.
The foundation also operates the FitNet Broadcasting Service, which provides schools with four televisions, a satellite receiver, and sponsored educational programs that promote fitness and healthy behavior designed to be shown in P.E. and health classes.
An NSFF spokesperson says nearly 100 schools have signed on to FitNet.