How Betsy DeVos keeps making millions of dollars as education secretary
Washington — U.S. Education Secretary Betsy DeVos has reported at least $170 million in outside income during her first three years in Washington, benefiting from her family's business empire that includes stakes in sports teams, movies and a son-in-law's company that contracts with the federal government.
DeVos' annual disclosure reports reviewed by The Detroit News provide a rare glimpse of the complicated web of real estate holdings, private equity and hedge fund investments of the DeVos family, which Forbes has estimated to be worth $5 billion.
The 62-year-old education secretary's wide-ranging investments feature a distillery that makes craft spirits, Elon Musk's Space Exploration Technologies, a minor league hockey team called the Orlando Solar Bears and a company that owns and runs a resort and marina in Eleuthera, Bahamas, that's currently closed due to the coronavirus pandemic.
Critics of DeVos say the Michigan native's financial holdings, which include a company that offers biofeedback therapy for children with Attention Deficit Hyperactivity Disorder, could lead to conflicts of interest as she guides the nation's education policies inside President Donald Trump's administration.
Because of Trump's personal history, it's not surprising that he would choose "super-rich business" people for his cabinet, said Jordan Libowitz of the watchdog group Citizens for Responsibility and Ethics in Washington.
“But it does raise extra concerns about potential conflicts of interest because more assets give more opportunity for people to benefit themselves," Libowitz said.
The education secretary's supporters counter that there's no evidence of impropriety, arguing DeVos has complied with ethics requirements and distanced herself from investment decisions while she's been in office.
The income is "passive," meaning DeVos has had no control over the sources of it, said Greg McNeilly, chief operating officer for the Windquest Group, an investment management company that DeVos owns with her family.
“If she were to have abandoned that deployed capital, it would have resulted in lost jobs," McNeilly said.
DeVos, the richest member of Trump's cabinet, has donated her $199,700 annual salary to charity each year she's been in office, including to a group of historically Black colleges, the Special Olympics and the Mattie Miracle Cancer Foundation, which supports kids with cancer.
She divested from certain education-related entities at the start of her tenure to guard against conflicts of interest, but the former businesswoman and school-choice activist has continued to profit from other investments, including the controversial "brain-training" company Neurocore.
$56M in 2019 income
DeVos last year reported at least $56 million in income, according to a Detroit News analysis of her financial disclosures, which also report more than $400 million in assets.
Her 2018 reported income total was at least $56 million, and for 2017, it was at least $57 million.
The true totals are likely higher because the federal disclosure forms report values in broad ranges and, for several entries, DeVos reported income of "over $5,000,000."
DeVos also doesn't have to report specific amounts for certain assets held by her husband, Republican former gubernatorial candidate Dick DeVos, heir to the Amway fortune.
Betsy DeVos' income in 2019 included over $10 million from the ethnic and gourmet food distributor KeHE and more than $5 million from a private equity fund with the firm AEA Investors.
She also reported indirect income of $100,000 to $1 million in interest from a loan of more than $5 million to Neurocore, which has drawn scrutiny for promoting unproven methods to treat conditions like ADHD and depression.
DeVos, an evangelical Christian, has financial stakes in the Christian films "Camp Manna" (2018) starring Gary Busey and the 2012 "Blue Like Jazz."
The DeVos family owns the National Basketball Association team the Orlando Magic and the Lakeland Magic G League franchise, valued at more than $50 million and which Forbes estimated this year to be worth $1.43 billion. The family also controls the minor league hockey team Orlando Solar Bears; the Class A baseball team the West Michigan Whitecaps; as well as a minority stake in the Chicago Cubs, which it bought in 2015.
DeVos' investments include security fence provider Electric Guard Dog; a string of MVP Athletic Clubs; and AoBiome, which is working to develop bacteria-based therapeutics for medical conditions.
Other investments are Boxed Water is Better, which sells water in cardboard cartons; a company that makes "ruggedized" portable coffee makers; Ridge Cider Co., which makes hard cider; and Coppercraft, a whiskey distillery in Holland, Michigan.
The DeVos family's most widely recognized brand is, of course, Amway Corp., the global multi-level marketing giant. DeVos in 2018 disclosed loans from family trusts to Amway's holding company, Alticor Global Holdings, which she reported were repaid last year. Amway cut about 300 jobs over the last two years as part of a restructuring.
DeVos’ disclosure report also lists debts, saying Dick DeVos is a co-borrower on a 2015 loan of more than $1 million from PNC Financial Services Group for the West Michigan Aviation Academy, which is a tuition-free charter school the DeVoses founded in 2010.
Dick and Betsy DeVos also disclosed tax information and business holdings in 2006 when Dick unsuccessfully ran for governor but did not detail their value. At that time, they also listed 449 charities to which they had contributed.
The DeVos family is known in west Michigan for its philanthropy and institutions, such as the Helen DeVos Children's Hospital, as well as its financial contributions to the Michigan and national Republican parties.
Democrats have made her a favorite target within the Trump administration, often painting her as catering to wealthy and corporate interests and invoking her divisive tenure in fundraising appeals and campaign ads. One of the original members of Trump's cabinet, DeVos last year suggested she might not stay on if Trump wins a second term.
"Secretary DeVos is not interested in education to help students. She sees education as an opportunity to divert tax dollars to private, for-profit companies, many of which she and her family invested in," said Ellen Offen of Ann Arbor, a former Detroit school teacher and vice president of the nonprofit group Protect Our Public Schools.
But DeVos has complied with her agreement with the Office of Government Ethics, said Angela Morabito, the secretary's spokeswoman at the Department of Education.
"Despite continuous and false attacks from the media and Democrats, no one has ever produced even a shred of evidence of impropriety by Secretary DeVos," Morabito said.
"She holds herself to the highest ethical standards, takes her obligations under law seriously and remains in full compliance with her ethics agreement."
As part of that 2017 agreement, DeVos pledged to remain "vigilant" in identifying any matters affecting entities in which she holds financial stakes.
DeVos in the agreement also said she had resigned from the board at Neurocore and from seven other positions, but she was permitted to keep her financial interest in Neurocore and a number of other entities, including the Windquest Group, because the likelihood she would participate in matters affecting those entities was "remote."
She divested dozens of assets upon entering office to "eliminate even the appearance of a potential conflict," said Nick Wasmiller, a family spokesman.
"The outside income earned by Ms. DeVos is from investments in businesses and organizations where she has no involvement, direction or control of their business activities," Wasmiller said.
"In addition, none of her investments are related to enterprises that would be impacted or enriched by her decisions as secretary."
'That's the challenge'
The watchdog group Citizens for Responsibility and Ethics in Washington and other critics have argued DeVos' continued stake in Neurocore could be viewed as an endorsement by the secretary of education of its treatments.
DeVos' stake in Neurocore could be a potential problem, said Richard Painter, who served as chief ethics lawyer under President George W. Bush.
Painter argued she should recuse herself from all department issues related to attention deficit disorder in part because the agency could have a role in considering Neurocore's therapy as a potential option for school children and whether the federal government says it should be covered by insurance.
"This is a company with a solution to a core problem in American primary and secondary education," said Painter, who teaches corporate law and government ethics at the University of Minnesota Law School.
"She's the secretary of education, and she really shouldn't be invested in the company, or she's going have to recuse from a fair number of ADHD-related subject matter. That's the challenge."
CREW has called on DeVos to issue a recusal statement regarding Neurocore.
“We have not seen it taking advantage of any Education Department policies,” CREW’s Libowitz said. “There isn't a clear conflict there, but a potential conflict.”
The Office of Government Ethics, which sets standards of conduct for the executive branch, has examined the DeVos investment in Neurocore and found there to be no conflict, McNeilly said.
Trump also did not divest from his business holdings when he became president, which Painter said set a "terrible example" for conflicts of interest in his administration.
"So now other people don’t want to sell assets. They want to hold on to as much as they can, and so they take their chances on conflicts," Painter said.
"We've got a lot of guys — and some women — carrying massive portfolios. This administration more than any other has just a lot of billionaires, people with a ton of money invested all over the place, and it creates a lot of potential conflicts.
"Not to mention the fact we have a bunch of very rich people making decisions that affect everybody else."
Another investment by DeVos that has drawn scrutiny is her $1 million to $5 million stake in a defense contractor called Lextm3, which is run by DeVos' son-in-law, Nate Lowery, who is CEO and co-founder.
Lextm3 manufactures electric power distribution and control equipment for military applications, according to its website, and has been awarded federal contracts worth more than $6 million since 2015, almost entirely with the Department of Defense, according to federal documents.
DeVos' stake in Lextm3 was not among the 102 entities she said she would divest from in her 2017 ethics agreement. Lextm3 does not appear to have any contracts with the U.S. Department of Education. For that reason, Painter said he did not think it poses the potential for conflict.
A Lextm3 spokeswoman didn't respond to a request for comment, but McNeilly noted the company doesn't contract with the agency DeVos oversees.
DeVos family contributions
Members of the DeVos family have long been among the top political donors in Michigan.
During her January 2017 confirmation hearing, Betsy DeVos indicated she and her husband would halt their giving.
“If I am confirmed, as you know, I will not be involved in or engaged in political contributions, and my husband will not either,” DeVos told members of the U.S. Senate, Health, Education, Labor and Pensions Committee.
Betsy DeVos has stopped making contributions, according to a review of federal and state disclosures. Her husband has not.
Ahead of the 2018 election, Dick DeVos gave to political action committees at the state level in Michigan.
“As it relates to Dick, I think there’s a big difference between (giving to) federal candidates and the rest of the world of political giving, and that was a distinction there wasn’t really an opportunity to make,” McNeilly said at the time. “But I think in his mind, that’s kind of where the line was drawn with her testimony.”
But in September 2019, Dick DeVos gave $400,000 to America First Action, a super political action committee that supports Trump. In October 2019, he gave $5,600 — the maximum allowed for an individual — to Trump's reelection campaign, according to campaign finance disclosures.
The pledge from the secretary's confirmation hearing was about giving to lawmakers in the legislative branch who oversee Betsy DeVos, McNeilly said.
“It would be odd for members of the cabinet not to support their boss' re-election efforts," he said.
Overall, members of the DeVos family have given about $8.3 million to political candidates and causes since the beginning of 2019, according to a review of federal and state disclosures.
At the state level, they've given $985,000 to the Michigan Republican Party over that time.
DeVos earns over $170 million
Education Secretary Betsy DeVos has earned at least $170 million in outside income during her three years serving in the federal government. This total likely undervalues her income because federal disclosure forms report values in broad ranges. Several entries report income of "over $5,000,000.”
2017: At least $57.6 million
2018: At least $56.9 million
Large DeVos assets
Education Secretary Betsy DeVos reported assets valued in the hundreds of millions of dollars for 2019; however, government disclosure forms report values in broad ranges topping out at “over $50 million,” so the total value of her assets is not discernible from the reports.
- Alticor Global Holdings Inc. (over $50 million)
- Orlando Magic Ltd. (over $50 million)
- CCM Limited Partnership (over $50 million)
- Alticor Export DV Co. ($25 million to $50 million)
- AEA Investors Fund V LP ($5 million to $25 million)
- Electric Guard Dog Holdings LLC ($5 million to $25 million)
- Pangaea Two LP ($5 million to $25 million)
- Neurocore LLC ($5 million to $25 million)
- Roundtable Healthcare Partners IV ($5 million to $25 million)
Source: 2019 financial disclosure reports for Betsy DeVos, U.S. Office of Government Ethics
Betsy and Dick DeVos have debts that she reported in 2019.
- $1 million-plus personal loan from PNC Financial Services Group Inc. (Dick DeVos is a co-borrower on a loan for West Michigan Aviation Academy, a charter school the DeVoses founded in 2010.)
- $15,000 to $50,000 credit card balance
- $1 million-plus Exercise line of credit from CCM Limited Partnership
Source: 2019 financial disclosure reports for Betsy DeVos, U.S. Office of Government Ethics