The president of the education software company LeapFrog SchoolHouse has resigned in response to a company investigation into its $1 million sale to the Prince George's County schools in June, corporate officials announced yesterday.
Bob Lally's resignation is the first major fallout from a transaction that has focused scrutiny on schools chief Andre J. Hornsby and his relationship with a saleswoman for the $40-million-a-year Emeryville, Calif., company.
Lally resigned "in response to an internal investigation under LeapFrog's code of conduct relating to a commission paid to a sales representative," the company's parent company, LeapFrog Enterprises Inc., said in a statement.
"Although we are disappointed and saddened by this development, we take our code of conduct very seriously and believe we have expeditiously addressed this event," said Tom Kalinske, chief executive officer of the parent company. "We remain committed to the vision of LeapFrog SchoolHouse and have taken actions to reinforce the division's solid reputation in the education industry."
The resignation represented the first public acknowledgment by the company of any problems in Prince George's $1 million purchase from LeapFrog, which is under investigation by state and federal authorities. Hornsby and county school board members have vigorously dismissed questions about the sale, and this month the school district's ethics panel cleared Hornsby of any wrongdoing.
The Sun reported in October that Hornsby had presided over the $1 million purchase of LeapFrog early-literacy technology without disclosing that he was living with LeapFrog saleswoman Sienna Owens.
Hornsby, 51, has maintained that the purchase was in no way influenced by his relationship with Owens, 26.
Owens said in October that she handled sales only in Virginia, was not involved in the Prince George's deal and did not benefit financially from it. The saleswoman who LeapFrog and Prince George's officials said handled the deal, Debora Adam, said she received the full commission for it, estimated at about $40,000.
Lally said at the time that he knew of no problems with the transaction but said that he could not "comment on what sales representatives do with their commissions once paid to them.
"Having said that, we paid commissions, in accordance with our written company plan, to the sales representative that covers Prince George's County Public Schools on the transaction."
He said the company had started an internal investigation in response to the news reports to make sure there was nothing amiss about the sale.
In an interview at an education convention last month, Lally gave a somewhat revised account of the circumstances surrounding the sale. He acknowledged that Owens was not selling exclusively in Virginia, as company officials had maintained, saying she had been promoted to a major national sales position after the sale. He reiterated, though, that Owens was not involved in the Prince George's deal.
Last night, company spokeswoman Cherie Stewart said that for legal reasons she could not describe in detail the internal investigation's findings pertaining to Lally's role in, or knowledge of, any problems in the Prince George's sale. The investigation was conducted by the company's ethics committee, she said. "The mutual decision to resign had to do with the response to the internal investigation," she said. "Part of the issue is how people responded to the investigation. There were definitely problems with our code of ethics."
Stewart said she could not comment on whether any disciplinary actions had been taken in regards to Owens or Adam. The internal investigation "is not over," she said.
She said the company hoped to continue to work with the county in implementing LeapFrog materials, which include laptop-like learning toys called LeapPads and a computerized student assessment program called LeapTrack.
A spokesman for the county schools could not be reached last night. In clearing Hornsby of any wrongdoing this month, the school system's five-member ethics panel determined that Hornsby did not have to disclose his relationship with Owens because she didn't start working for LeapFrog until the month after he filled out his annual disclosure form in January.
The ethics panel did not interview Hornsby before reaching its finding, which drew criticism from local lawmakers who questioned the validity of the inquiry.
The panel also cleared Hornsby of any wrongdoing in his acceptance of a 10-day trip to South Africa in the summer of 2003 from the education software company Plato Learning, which is seeking a major deal in Prince George's. Plato Learning CEO John Murray resigned last month in a move the company said was unrelated to the Prince George's situation.
School board Chairwoman Beatrice Tignor said after receiving the ethics panel finding that the board considered the matter closed. But the county is awaiting the results of two other inquiries into Hornsby's dealings with education companies, by the Maryland state prosecutor and by the Maryland U.S. attorney and FBI.
Stewart, the LeapFrog spokeswoman, said last night that the company is "ready to cooperate" with the law enforcement investigations.
Lally's resignation occurs less than a month after he and other LeapFrog executives were seen socializing with Hornsby and Owens at the Dallas convention of the National Alliance of Black School Educators. The company has a close partnership with the black educator alliance, which Hornsby led between 2001 and last year.
In an interview after a cocktail reception attended by Hornsby and Owens, Lally seemed unconcerned about the Prince George's situation. The company, he said, had made sure to remove the county from Owens' national sales work, to "make sure there's no appearance of conflict of interest."