March 28, 2024

Idaho Senate Rejects Bill to Salvage U of Phoenix Deal (As UAGC Facts Get Uglier)

Idaho Senate Rejects Bill to Salvage U of Phoenix Deal (As UAGC Facts Get Uglier)

The Idaho Senate yesterday rejected legislation aimed at fixing legal problems with the deal for the University of Idaho to acquire the giant for-profit University of Phoenix. By a vote of 14-19, senators voted down Senate Bill 1450, which sought to convert Four Three Education, a non-profit created by the state Board of Education for the purpose of acquiring Phoenix, into an independent public corporation with authority to buy Phoenix. The defeated bill also sought to limit the state’s financial risk from the deal.

The stunning rebuke of the $685 million Phoenix deal by the Senate, following a similar rejection in the state House, intensified doubt as to whether University of Idaho president C. Scott Green can pull off his bold attempt to buy Phoenix. Green has insisted that Phoenix offers a “world class” operation that can bring his school into the educational future and provide millions in new revenue.

But the University of Phoenix, which its current owners, private equity giant Apollo Global Management, have been trying to unload for several years, is a school with an extensive record of deceptive practices and law enforcement violations, and a growing risk of liability for its past misconduct.  The Arkansas state trustees last year publicly rejected an effort by the University of Arkansas to acquire Phoenix, and the Idaho Statesman recently revealed that in 2021 historically black Tuskegee University also decided not to buy the school.

The Senate bill was a response to a written opinion by the legislature’s legislative counsel, later echoed by the state’s attorney general, that the Board of Education lacked the legal authority to create Four Three, and the subsequent passage by the Idaho House of Representatives of a resolution asking the Board to reconsider the deal and authorizing the legislature to sue to stop it.

Wednesday’s Senate rejection of that chamber’s own pro-Phoenix deal bill was remarkable because the legislation, introduced only on Monday, was voted out of the Senate State Affairs Committee on Tuesday with a “do pass” recommendation, with only a single dissenting vote, from Senator Melissa Wintrow (D).

But after that committee vote, state Attorney General Raul Labrador’s chief deputy sent a letter saying the new legislation did not effectively cure the deal’s constitutional flaws, and state Treasurer Julie Ellsworth wrote legislators that the bill would not prevent the state from facing financial liability “if things were to go south.”

In the brief Senate floor debate on the bill, Senator Lori Den Hartog (R) expressed concern about the apparent lack of interest by other states in buying the school peddled by Apollo. “It seems odd to me that we are the only state clamoring to make this happen,” she said, before voting no.

In the end, all four members of the Senate Republican leadership supported the bill, but a group of hard-right conservative Republicans, plus four of the Senate’s seven Democrats, combined to vote the legislation down.

Senate President Pro Tem Chuck Winder (R), who voted for  the bill, suggested to Idaho Education News that the Phoenix deal might be dead.  “If they don’t have a legal way to go forward, I don’t know that they can complete the deal,” Winder said after the vote.

Similarly, Idaho Speaker of the House Mike Moyle (R) told the outlet, “I think it’s a tough go from here for anything. I think it’s done. But I could be wrong.”

Green hasn’t folded yet. His spokesperson told Idaho Education News, “We are disappointed this bill did not pass and are reviewing our options.”

Shocking manipulations regarding the Arizona-Ashford deal

But the Senate rejection of the Phoenix deal comes as new reporting sheds additional light on the dishonesty and tawdriness underlying the comparable acquisition by the University of Arizona of another predatory for-profit school, Ashford University, now called University of Arizona Global Campus (UAGC).

The Arizona Republic reported Wednesday that University of Arizona president Robert Robbins in 2021 approved the hiring, for $10,000 a month, of a well-connected lobbyist to try to convince California attorney general Rob Bonta to accept a $7.5 payment from Ashford’s parent company, Zovio, as settlement of a $22.3 million court verdict against the school for systematically deceiving prospective students.

The Republic piece documents several layers of deception by Robbins and his team in connection with the use of the lobbyist, Richard Smotkin. The official purpose for which the University of Arizona hired Smotkin was to strengthen ties between the school and the nation of Morocco, concealing Smotkin’s mission to reduce Zovio’s liability for the lawsuit prosecuted by Bonta, with whom Smotkin had apparently cultivated a friendly relationship.

An email obtained by the Republic indicates that in February 2022, after Bonta’s office had taken Ashford to trial and about a month before a California judge issued a $22.3 million verdict against the school, Smotkin, Robbins, and Ashford University president Richard Pattenaude met with Bonta and some of his aides. After, Pattenaude wrote to a Bonta staffer, “Thank you and A.G. Bonta for taking the time to speak with President Robbins, Rick and me yesterday afternoon.” The email promised to send “a written proposal” the next day. The subject line was: “CA v. Zovio.”

Two weeks after the court ruling, Pattenaude sent Bonta’s office another email, cc’ed to Smotkin and attaching a memo arguing that the AG should accept a $7.5 million payment to settle the dispute. Another email indicates that Smotkin shared that memo “directly with General Bonta.” The memo contended that if the $22.3 million verdict was enforced it would be a “catastrophic result” for UAGC and “an extinction-level event for Zovio.”

The memo proposed an alternative outcome as a “win-win” — California would accept a $7.5 million payment from Zovio, and UAGC would forgive $45 million in loan debt owed by former Ashford students. (Perhaps this referenced a possible cancellation by Zovio of debt for private students loans owned directly by the company, debt that was unlikely to be repaid in full anyway.)

These efforts to reduce the liability amount failed. Zovio paid the $22.3 judgment in 2o22. Disgraced Zovio’s lucrative contract with the University of Arizona to service UAGC for decades was cancelled, Zovio shut down, and UAGC’s operations were absorbed by the University of Arizona. Last month, a California appeals court affirmed the judgment against the school (cutting down the verdict by $933,000 because of statute of limitations issues).

The Republic article documents repeated firm denials by Robbins that Smotkin played any role in the negotiations to reduce the verdict against Ashford and Zovio. When later confronted with the emails indicting otherwise, Robbins, through a spokesperson, claimed that the previous denials only meant that Smotkin was not involved in the deal to acquire Ashford.

Records obtained by the Republic also seem to contradict previous statements by Robbins and other University of Arizona officials that the deal to buy Ashford had not contributed to the dire financial situation that Robbins’s school now faces. The new documents reportedly show that Robbins and his team were deeply concerned about the risks facing Ashford.

And the documents revealing Robbins’ apparent efforts to save Zovio undermine his more recent statements to the Republic claiming that he believed Zovio’s demise and removal from the UAGC operation were a positive development.

The Republic also reports statements by Robbins denying to the paper’s editors that he was aware of Ashford’s predatory practices and the risks of deal for the state. “There were several lawyers and businesspeople that were advising at that time … that it was a very low-risk situation,” Robbins reportedly told the paper’s editorial board. Robbins also told the editorial board he was told that the risk that the U.S. Department of Education would “ever come and ask us to pay back money” for student loans cancelled as a result of Ashford’s  was “very low.”

If Robbins actually believed any of that when he acquired Ashford, he ended up being wrong.

The Department of Education is now seeking recoupment against UAGC for Ashford student loan debt that has been cancelled because of Ashford’s abuses.

You should read the whole Arizona Republic article because it’s shocking. The moral depths to which Robbins appears to have sunk in connection with Arizona’s acquisition of predatory Ashford University should wake up President Green about what he has been trying to lead his state into. Idaho legislators seem to have gotten the message.  When will C. Scott Green?

UPDATE 03-29-24 3:00 pm:

Idaho Education News, “Analysis: If the Phoenix deal died Wednesday, it didn’t die suddenly

President Green is apparently not giving up yet:

Idaho Senate Rejects Bill to Salvage U of Phoenix Deal (As UAGC Facts Get Uglier)

UPDATE 04-01-24:

Arizona governor Katie Hobbs, who has been sharply critical of the University of Arizona’s purchase and management of Ashford / UAGC, commented to reporters on the Arizona Republic report, saying she is “continuing to lose patience” with the school’s financial crisis and with hearing “one thing from [Robbins] and then something else from reporting.” Asked if she would urge the Arizona Board of Regents to fire Robbins or if her office would start a formal investigation, Hobbs said, “It is certainly concerning, and we’re still looking at options…. I would love for President Robbins to just share what he knew at the time that he knew it.”

Hobbs reportedly continued, “Either the fact that U of A entered into this very large purchase without understanding the liability that they were taking on. Or the fact that they did know the liability and they’re trying to cover up how much they knew. We just don’t know. There’s been too much misinformation around this whole situation.”