Throwing good money after bad and refusing to cut his losses with risky healthcare bets cost Jack Schuler most of his fortune—and left hundreds of underserved kids in the lurch.
By Giacomo Tognini and Matt Durot, Forbes Staff
On March 21, the roughly 70 employees of the Schuler Education Foundation, based in the affluent suburb of Lake Forest, Illinois, were summoned to an emergency all-hands meeting. Over the past two-plus decades, the nonprofit founded and funded by a former president of healthcare giant Abbott Laboratories, Jack Schuler, had spent at least $150 million counseling and tutoring more than 1,800 low-income students from Chicago and Milwaukee-area high schools to help them gain admission to elite colleges; those colleges in turn covered most (if not all) of the students’ tuition and other costs.
The employees, who first had to certify they wouldn’t record anything, were let into a Zoom room where the nonprofit’s executive director Joanne Bertsch read from a script announcing that the foundation would shut down on May 24. Everyone would be let go except for a skeleton crew of seven college counselors left to support students through August. Schuler, who had been caring for his wife before she died on April 4, and his daughter, the foundation’s cofounder Tanya Schuler Sharman, sat there in silence. No questions were taken, and the meeting wrapped up after about five minutes. The next day, high schools and their students—most of them Black or Latino, and set to be the first in their families to attend college—were notified by Bertsch in an email, part of which is excerpted below:
“The Schuler Program has been funded since 2001 with shares of stock in various companies. Heartbreakingly, these assets have plunged in value. We simply do not have the resources to continue.”
The timing of the email wasn’t ideal. “Highland Park High School received an announcement from the Schuler Scholar Program at the same time as our students and families did—late Friday afternoon right before spring break,” Karen Warner, chief communications officer for the local school district, tells Forbes. On the following Monday, the same message was sent out in Spanish.
“We weren’t trying to bury the news,” a spokesperson for the foundation emailed Forbes, “but making sure that people had the information before making plans for the following week.” The spokesperson added that Bertsch sent employees a pre-recorded video address by Schuler a week later, on March 29, and that employees were encouraged to reach out directly with questions since the size of the March 21 all-hands meeting made a Q&A session impractical.
The decision came as a shock to the foundation’s staff, most of whom are embedded in the 16 high schools served by the program, where students are otherwise guided by understaffed and overwhelmed college counselors (if at all). "Pulling out in this way is doing a lot of harm to these communities," says a current Schuler Education Foundation employee. "[These students] put in a lot of time and commitment, and for us not to uphold our side of the bargain is really tough for me to wrap my head around."
Just three years earlier, Schuler and the foundation were riding high, as Schuler joined Forbes’ billionaire ranks in April 2021, thanks largely to his stake in Quidel Corp., one of the earliest companies to receive FDA approval for Covid-19 tests. A month later, the foundation announced its biggest initiative yet: a pledge to spend $500 million over a decade encouraging universities to enroll more undocumented students. But payments were suspended for that program, called the “Schuler Access Initiative,” as early as last August.
Eight of the 10 colleges in that program confirmed to Forbes that Schuler halted its funding, which was intended to be matched by other donors dollar-for-dollar. Some private donors such as billionaire Steve Tisch, who gave $10 million to Tufts University for these undocumented students, have still honored their matching grants. And some colleges have turned to fundraising or are drawing on their own reserves to make up for the lost funding from Schuler. But it still leaves a gap.
“We are disappointed that the Schuler Foundation has halted funding for these deserving students,” says Mark Land, vice president of communications at Union College, one of the schools that was partnering with the foundation on the Schuler Access Initiative.
The foundation tells Forbes that the initiative is not canceled and that it hopes to add additional funds, but did not respond to follow-up questions on the subject.
How did a foundation that was ready to spend $500 million just three years ago suddenly find itself on the verge of going broke? To answer that question, Forbes reviewed tax documents, securities filings and internal emails, and interviewed 12 current and former employees and students in the Schuler Scholar Program, the main program funded by the Schular Education Foundation; all of them asked to remain anonymous because they currently work at the foundation or they fear backlash due to the small size of the nonprofit community in the Chicago area. Forbes also revisited transcripts from a series of interviews with Schuler back in 2021 after he declined to be interviewed for this story (though he did respond to some emailed questions through a spokesperson).
The nonprofit’s stunning reversal of fortune was tied to the ups and downs of its aging benefactor, who obviously cared deeply about both the students he served and the companies he hoped would change the world. But Schuler took excessive risks that blurred the line between his foundation and his speculative personal investments—and in attempting to bail out his struggling for-profit ventures, the 84-year-old ended up sinking his charity.
Forbes estimates that Schuler's personal portfolio of volatile stocks—most held in trusts for his family—and real estate are currently worth around $200 million, down from $1.1 billion in April 2021. A spokesperson for Schuler said the estimate was too high, but didn’t provide sufficient information to substantiate that claim. It seems unlikely Schuler has significant cash or other assets outside of that, given the precarious financial situation of his foundation. But some former employees of his nonprofit question just how much financial pain the Schulers are feeling.
“Plenty of his money is tied up in trusts for his kids and grandchildren,” says one former longtime staff member of the foundation who worked closely with Schuler. “Not that there's anything wrong with that, but it begs the question: Why not take some of your personal wealth and use it for a proper sunset of the Schuler Scholar Program, instead of pulling the rug out from everyone.”
“I intend to give away all my money, except for a family home in Colorado that has sentimental value to my children,” Schuler emailed Forbes through a spokesperson; the home to which he’s referring is a 7-bedroom, 6,200-square-foot house in the ski town of Beaver Creek. He did not specify whether the assets already held in trusts for his family are included in that calculus.
“The legacy of the Schuler Scholar Program is not about me, but the grit and intelligence of the 1,800 students – from under-resourced communities and low-income families – at these remarkable institutions,” Schuler added in the statement. “For 23 years we prized each Scholar, watched with awe at their achievements, and invested almost $200 million in their collective future. It’s a privilege to be part of this community.”
BETTING THE HOUSE
The Schuler Foundation grew more dependent on a single pharma stock in recent years, as the nonprofit’s assets sank and its liabilities mounted. Its holdings of Covid-19 test maker QuidelOrtho, its largest asset since 2013, are now worth an estimated $47 million—equal to its total liabilities in 2022, the most recent year available.
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chuler’s problems appear to have started as early as 2018 with a company called Accelerate Diagnostics, where he’s been the largest individual shareholder and a director since 2012, the year it listed on the Nasdaq with a promising technology intended to speed up testing for infectious pathogens. At the end of 2017, when Accelerate’s stock was trading just 14% below its all-time high, Schuler’s 26% stake was worth $382 million. An additional 3% stake held by his foundation was worth $40 million and accounted for 29% of the nonprofit’s gross assets.
“Jack touted Accelerate Diagnostics as the second coming of Christ,” says a longtime former staff member of the Schuler Education Foundation. “He was like, ‘This is going to change the world. And he would say, ‘Outside of [the foundation], this is what I'm going to be known for. This will be my legacy: Schuler and [Accelerate]. He was all about ‘Accelerate, Accelerate, Accelerate.’”
During 2018 and 2019, as Accelerate’s stock fell by 35%, the Schuler Education Foundation stepped in to buy $42 million of the company’s convertible notes to help fund a strategic overhaul that had been ongoing since 2012. In other words, Schuler’s foundation loaned money to one of his largest investments with the option to forgive the loan in return for stock. Theoretically, this could have generated a windfall for the foundation if Accelerate’s stock bounced back.
But Accelerate’s stock continued to tumble, hitting the Schuler Initiative—a three-year pilot program with Wellesley, Bates, Middlebury, Williams and Carleton that aimed to improve engagement between liberal arts schools and their young alumni—particularly hard. The foundation’s holdings of the stock, about half of which were later sold to fund the program, fell another 43% by April 2020. That should have left $10.6 million worth of shares to be split between the five colleges. But the money got held up.
The Schuler Education Foundation didn’t gift its Accelerate stock directly to the schools in the Schuler Initiative. Nor did it sell the shares and send the schools cash. Instead, it routed the stock to a different foundation—apparently due to an Internal Revenue Service rule—which then sold the shares two months later and distributed the proceeds to the schools. During these two months, the Accelerate shares fell another 11%, lowering the sum the schools got by another $1.2 million, to $9.4 million. These weren’t the last issues Schuler would face with Accelerate. But the company’s decline did fade into the background for a little while as one of his other big bets boomed.
By December 2020, the pandemic-fueled surge in healthcare stocks had sent shares of Covid-19 test maker Quidel Corp. soaring by 139% in just 12 months. At the end of that year, the Schuler Foundation’s 3% stake in the company made up 74% of its $267 million in gross assets.
Quidel was also a good bet for Schuler personally. He retired as a director in June 2020 after 14 years on the company’s board but held onto the 7% stake he owned outside of his foundation. When Schuler made Forbes' Billionaires list for the first and only time the following April, nearly three decades after he was fired as president of Abbott in 1989, those shares were his most valuable asset, worth $390 million, or more than a third of his then estimated $1.1 billion net worth.
A month later, he joined the Giving Pledge, a "movement of philanthropists" founded by Warren Buffett, Bill Gates and Melinda French Gates; signatories promise to donate at least half of their fortunes to charity before they die or in their wills. (The commitment is not legally binding and has come under criticism for its vagueness about whether assets transferred to family, like the stock in Schuler trusts, are included in that calculation.) It was thanks to a meeting with Gates, Schuler wrote in his pledge letter, that he decided to expand the Schuler Scholar Program in the early 2000s.
“Our foundation documents specify we must focus on helping underserved and undocumented kids graduate from the most selective colleges and we must spend all the money and go out of business within 30 years of my death – preferably much earlier,” Schuler wrote in his letter. “I was pleased my three children – Tino, Tanya and Tess – along with Renate, my wife of 50+ years, agreed that I should give 100% of my wealth to the foundation.”
But before long, Schuler found himself with a lot less to give. Quidel’s shares slid by 25% during 2021, as the profit margins of its Covid tests were squeezed and the firm announced an unpopular $6 billion acquisition of publicly traded competitor Ortho Clinical Diagnostics. That cut the value of the foundation’s Quidel stock to $133 million.
A bigger problem was the fact that even having fallen that much, those shares accounted for an eyebrow-raising 93% of the foundation’s $143 million in total gross assets by the end of 2021.
That’s partly due to the fact that the value of the foundation’s third largest asset, a nearly 5% stake in rare disease treatment developer Soleno Therapeutics (where Schuler was then the largest individual shareholder, with an additional 16% stake) fell by 79% during 2021, to $1.6 million. But the biggest reason was that the $42 million of Accelerate Diagnostics convertible notes it purchased back in 2018 and 2019, which the foundation had written down to $24 million by the end of 2020, were moved off the books entirely in September 2021.
That same month, the IRS granted tax-exempt status to a new nonprofit called the Schuler Initiative Supporting Charitable Trust, which is described in securities filings as “not an affiliate of Mr. Schuler,” though his daughter Tanya is one of the organization’s three trustees. According to the trust’s tax documents, its purpose was to fund the $500 million Schuler Access Initiative for undocumented students launched in May 2021.
During its first year of operation, the only activity reported by the charitable trust was receiving the Schuler Education Foundation’s Accelerate Diagnostics convertible notes. In its most recent available tax return for 2022, the trust reported a $5.6 million loan from Jack Schuler for “escrow funds.” Its only other activity of any substance was to exchange the Accelerate Diagnostics convertible notes for common stock that would have been worth around $4 million at the end of 2022. Not a single dollar went out the door to the Schuler Access Initiative’s partner colleges through the end of that year.
"It's hard to understand large dollar amounts going back and forth like this, particularly when the stock's having such volatility," says Brian Mittendorf, a professor of accounting at Ohio State University who specializes in nonprofits.
Meanwhile, shares of Quidel—since renamed QuidelOrtho—continued to sink, dropping 41% during the eight months through August 2022, as the company missed analysts' estimates for revenue and earnings. The Schuler Education Foundation’s most recent available tax filing, as of the end of that month, reported that QuidelOrtho stock made up 90% of its $86 million in total gross assets. The stock is down another 48% since.
SLIPPERY STOCKS
Schuler poured much of his personal net worth and the foundation's assets into shares of several volatile healthcare firms; one, QuidelOrtho, is at a near-six-year low while at least two others now trade for around $1 per share or less. The chart below shows cumulative returns by year since 2017 for Schuler’s and the foundation’s four biggest stocks.
In its 2022 tax return (fiscal year ending August), the foundation also listed $8.5 million in new “loans from officers, directors, trustees and other disqualified persons”—likely Jack Schuler, given that he and his three kids were four of the foundation’s eight “officers, directors, trustees, [and] foundation managers” listed. The other four were then-executive director Jason Patenaude; Michael Gordon, an attorney at Sidley Austin; former Carleton College president Steven Poskanzer; and Matthew Strobeck, a director and investor in QuidelOrtho, Accelerate Diagnostics and another of Schuler’s biggest bets, lung disease diagnostics company Biodesix. All four non-family members have since left the board and are no longer trustees.
Strobeck’s investment firm Birchview Capital also squandered a $4 million investment from Schuler in 2019 on an early-stage eye disease treatment company, which the foundation wrote off in 2022. “Jack was brought in by another investor, and they obviously had higher hopes for the technology,” a spokesperson for Schuler and Strobeck tells Forbes.
The foundation also reported about $38 million of other, unspecified third-party loans payable as of August 2022, bringing its total liabilities to $47 million—and leaving it with a net asset balance of just $39 million. A month later, the nonprofit began to cut costs. An internal email sent by then executive director Patenaude announced a hiring freeze in September 2022. “These measures are in response to the drop in the stock market, where we hold the bulk of our Foundation assets,” Patenaude said in the email, which was shared with Forbes.
But even after nearly five years of wildly fluctuating stock prices–and Schuler’s continued refusal to diversify his foundation’s holdings to safeguard them for the long-haul–the foundation’s leadership continued to believe that the market would turn in their favor. “Selling our assets now, when they are historically under-priced, directly reduces the number of Scholars we can serve in the future,” Patenaude’s email explained.
“To be clear, these controls do not reflect any financial insecurity in the Foundation,” added Patenaude, who did not respond to multiple requests for comment for this story. “Our organization remains financially sound and capable of meeting all of its obligations.” Just over a year later, in November 2023, Patenaude left the organization after six years as executive director.
In the rare instance where Schuler and his nonprofit actually sold stock, it backfired. From August through December of 2022, Schuler sold off his remaining 8% stake in Soleno Therapeutics for $1 million before tax. Then from February through May of 2023, the foundation dumped half of its additional 10% stake (including warrants) in the company for around $1.5 million and dropped below the Securities and Exchange Commission’s 5% ownership disclosure threshold. The shares that were sold would be worth nearly $40 million today, thanks to a nearly 1,500% runup in Soleno’s value since August 2022, following a series of successful clinical trials.
In the meantime, the foundation’s obligations kept growing as it continued to accept new students, enrolling a new class of roughly 200 freshmen and sophomores at its partner high schools in May and June of 2023. At the same time, as part of a restructuring of Accelerate Diagnostics, Schuler agreed to buy an additional $4 million of the company’s common stock. He also accepted another $28 million worth of common shares and warrants in exchange for convertible notes and preferred stock that had cost him $58 million (plus the forgiveness of a $6 million loan he’d previously made to the company) during the second half of 2022.
In July 2023, the foundation announced layoffs and further cuts to its programs internally. Then in August it told Scripps College, part of the $500 million Schuler Access Initiative, that it was rescinding a $15 million gift. Meanwhile, instead of contributing cash to shore up the foundation, Schuler personally doubled down on his medical stocks, spending $16 million to buy more shares of Biodesix that same month, after scooping up another $29 million of the company’s stock during the previous two years.
By last December, the situation had grown so dire that the nonprofit stopped accepting new applicants to its programs and canceled its upcoming annual summer camp—a long-running requirement for all students in the Schuler Scholar Program, where kids would cook their own food, sleep in tents and go to the bathroom outdoors. “It was considered essential until they decided the budget wasn't there,” a current foundation employee tells Forbes.
As recently as this January, Schuler was still buying stock, shelling out another $2 million for shares and warrants of Accelerate, which has now lost 99% of its value since it helped make Schuler a billionaire in April 2021. “I think Jack didn’t want to be on the wrong side of the bet with some of these biotech investments, so he kept investing to try and turn things around,” says the former longtime staff member of the foundation who worked closely with Schuler. “He hates losing.”
On March 4, staff were informed that the nonprofit would stop funding fly-out college visits for juniors and sophomores in the Schuler Scholar Program, including upcoming trips that had already been scheduled, replacing them with visits closer to home. Seventeen days later, Bertsch sent the email announcing that the foundation was winding down.
According to the plan sent out to students, families and schools on March 22, the foundation intends to honor the $10,000 scholarship it promised to pay each of its roughly 580 students already in college over four years.
Of the 672 Schuler scholars still in high school, only the nearly 380 juniors and seniors will still receive that full scholarship upon enrollment at one of the foundation’s partner colleges—mostly small, private liberal arts schools in the Northeast—plus some funding for seniors to visit schools this semester. Freshmen and sophomores will only receive a $2,000 scholarship over four years before the program will shut down entirely.
That may provide some comfort to the high school students, but scholarships were always a small part of what the Schuler Education Foundation offered them, since most (if not all) of their cost of attendance was covered by their chosen colleges after the nonprofit helped them gain admission. Most critically, by the end of August, Schuler scholars will be left without any of the counseling and tutoring that made the program so effective. The Schuler Education Foundation’s current executive director, Joanne Bertsch, tells Forbes that the nonprofit is working on finding alternative resources to help replace the Schuler Scholar Program, in order to minimize the disruption to its students, but it hasn’t found a savior yet.
"I don't think it's realistic at all,” says a current foundation employee. “Even if there are some [programs] in the area that can handle it, they [won’t be able] to handle the huge influx of kids.”
“This plan mirrors a fire sale more than a careful spend down of resources,” says Ohio State’s Mittendorf. “It really speaks to the real consequences of the high-risk portfolio this foundation held.”
Additional reporting by Monica Hunter-Hart.
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