This story is shocking. Former officials in the Obama administration, once in charge of regulating predatory the for-profit higher education industry, now want in on the action themselves. Their financier is Obama’s best friend. The story was written by Michael Stratford and Kimberly Hefling. Please read this report as background for what follows.
Mercedes Schneider wrote about it here.
She writes:
Obama’s close friend, Marty Nesbitt, and others are seeking US Department of Education (USDOE) approval to purchase the fiscally-troubled for-profit, University of Phoenix. Nesbitt and former Deputy Secretary of Education, Tony Miller, run a Chicago-based private equity firm, Vistria Group.
Vistria Group is part of a small collective that wants to purchase University of Phoenix, and the for-profit school’s parent organization, Apollo Education, is apparently all in.
USDOE approval would keep the student loan and Pell grant bucks coming to University of Phoenix– which happens to be the subject of three state attorneys general as well as the Federal Trade Commission (FTC).
The price tag for Vistria et al. appears to be $1.1 billion. As it stands, University of Phoenix receives $2 billion annually in public money.
If University of Phoenix goes under, then all of those student loans are forgiven– which means taxpayers foot the bill. If Vistria et al. acquire University of Phoenix, then the goings-on at the school become private. No more requiring that that public be made aware of the salaries of the school’s executives, or that the public be made aware of litigation against the school, or that the public know about pending investigations.
The story was originally posted at PoliticoPro, which is an expensive subscription; fortunately, it is now available for free at politico.com. Here is an excerpt from the original story:
As the Obama administration cracks down on for-profit colleges, three former officials working on behalf of an investment firm run by President Barack Obama’s best friend have staged a behind-the-scenes campaign to get the Education Department to green-light a purchase of the biggest for-profit of them all — the University of Phoenix.
The investors include a private equity firm founded and run by longtime Obama friend Marty Nesbitt and former Deputy Education Secretary Tony Miller. The firm, Chicago-based Vistria Group, has mounted a charm offensive on Capitol Hill to talk up the proposed sale of the troubled for-profit education giant, which receives more than $2 billion a year in taxpayer money but is under investigation by three state attorneys general and the FTC.
What stands out about the proposed deal is that several key players are either close to top administration officials, including the president himself, or are former administration insiders — especially Miller, who was part of the effort to more tightly regulate for-profit colleges at the very agency now charged with approving the ownership change. For-profit college officials have likened those rules to a war on the industry, and blame the administration for contributing to their declining enrollments and share prices.
The proposed sale carries high stakes for taxpayers, students and investors: The University of Phoenix’s financial stability may depend on the $1.1 billion acquisition. If the company were to fail, more than 160,000 students could be displaced and the government would be on the hook for hundreds of millions in student loans.
But the investors’ effort to seek Education Department approval of the school’s ownership change also raises questions about potential conflicts of interest.
“There is at least a taste of unseemliness involved in this,” said Mark Schneider, a former top education official under President George W. Bush. “They regulate it. They drive the price down. …They are buying it for pennies on the dollar.”
Vistria Group said it isn’t seeking special treatment. “We expect the Department to evaluate this proposed transaction on the merits,” the company said in a statement.
Vistria is part of a consortium of investors involved in the proposed acquisition, which has already won over shareholders of the school’s parent company, Apollo Education Group. But now the investors need the Education Department and the school’s accreditors to sign off on the ownership change to keep the federal money flowing — most of it in the form of student loans and Pell Grants.
With those decisions looming, Miller and at least one other former Obama insider have met with staff to Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.) and Dick Durbin (D-Ill.), looking to reassure some of the loudest critics of for-profit colleges in the president’s own party, several Senate aides confirmed to POLITICO. Those lawmakers have pushed Obama’s Education Department to be even tougher on for-profit colleges.
Miller has also met with staff members working for other committee members, including Sens. Michael Bennet (D-Colo.), and Bob Casey (D-Pa.), as well as with Sen. Lamar Alexander, the Tennessee Republican who chairs the Senate education committee. Nesbitt was not part of those Capitol Hill meetings, according to the aides….
But the specter of former insiders pushing the sale of a company in an industry that has long been in the administration’s crosshairs is not lost on critics. For seven years, the Obama administration has waged a crackdown on poor quality and predatory practices at many for-profit colleges, with the president himself excoriating some schools for “making out like a bandit” with federal money, but saddling students with big debts and leaving them unprepared for good jobs. He did not name the schools.
“It’s ironic that a former senior official at the Department of Education — an agency that has intentionally targeted and sought to dismantle the for-profit college industry — would now take the reins at the country’s largest for-profit college,” said Rep. Virginia Foxx, a North Carolina Republican who leads the House Committee on Education and the Workforce’s higher education subcommittee….
The sale price, which shareholders approved last month after initially balking at a lower price, is considered a bargain by some industry observers. The day Obama was sworn into office on Jan. 20, 2009, the company’s stock closed at $86.54 per share. Today, it’s trading at around $9, although a recovering economy, unfavorable media coverage and the for-profit industry’s general slump have also contributed to that drop.
Some Senate Democrats said they are also uneasy with the investors’ plan to take the university private, which means it would no longer have to publicly disclose information such as executive compensation, lawsuits or when it’s a target of investigations. Those details are useful to prospective students, they say, at a time when the school faces inquiries from both state and federal authorities.
“Essentially, a company that receives more than $2 billion annually from federal taxpayers — nearly 80 percent of its revenue — is going dark, and it’s happening at a time when the University of Phoenix has come under increased scrutiny from state and federal regulators,” Durbin wrote in a March letter to the Education Department.
Republicans think that the Obama officials drove the price down by their regulatory actions, then moved in to buy it at a bargain price.
This transaction is unsavory. It should be stopped. The conflicts of interests and self-dealing are abhorrent.
Here’s a post about how one of these borrowers was hurt:http://billmoyers.com/story/whats-wrong-obama-administrations-plan-help-student-debtors/
“Republicans think that the Obama officials drove the price down by their regulatory actions, then moved in to buy it at a bargain price.”
They think that because that’s exactly what they themselves would have done. And they’re right that that’s what Obama officials did. Isn’t bipartisanship great?
Anytime a politician says that law/bill “X” (think NCLB) was the result of bipartisanship and “working together”, well, let’s just say, “hold onto your wallets and/or sanity.
Nothing surprises me anymore re: politicians and lawyers, not to mention BIG $$$$$. What BAD people.
The problem with the outrage from politicians is that most of them were in on the for-profit college scam.
It is breathtaking how complete the capture was- it was like Durbin was the only one fighting this- for years- THEY KNEW it was a disaster and the money kept flowing and they all kept collecting it. There have been incredibly detailed Congressional reports since 2009. Hundreds of witnesses and documents. It didn’t matter.
90% of them have unclean hands on this- Democrats, Republicans, members of the Obama Administration. Very few of them have the moral or ethical stature on this to even complain.
What happened here was the online for-profits destroyed their own reputation. Government did nothing to protect people. It took years but word of mouth spread. People were on their own. No one helped them.
It makes me wary about students trusting the US Dep of Ed for advice. They give bad financial advice to 18 year olds and older returning students who don’t know their way around college. I wonder if they’re an honest broker.
Why did they promote these schools? Why didn’t they steer people to public community colleges? They’re not supposed to be selling garbage. That isn’t their role.
Very few of them have the moral or ethical stature on this to even complain.”
Talking about the “moral stature” of politicians is like talking about the “human stature” of chimpanzees. Neither is upright.
Just to give you an idea how pervasive this was and how systemic the rot was, here’s the high powered roster who conspired to rip off some of the most vulnerable students in the country:
“The story of how the for-profit colleges survived the threat of a major federal crackdown offers a case study in Washington power brokering. Rattled by the administration’s tough talk, the colleges spent more than $16 million on an all-star list of prominent figures, particularly Democrats with close ties to the White House, to plot strategy, mend their battered image and plead their case.
Anita Dunn, a close friend of President Obama and his former White House communications director, worked with Kaplan University, one of the embattled school networks. Jamie Rubin, a major fund-raising bundler for the president’s re-election campaign, met with administration officials about ATI, a college network based in Dallas, in which Mr. Rubin’s private-equity firm has a stake.
A who’s who of Democratic lobbyists — including Richard A. Gephardt, the former House majority leader; John Breaux, the former Louisiana senator; and Tony Podesta, whose brother, John, ran Mr. Obama’s transition team — were hired to buttonhole officials.
And politically well-connected investors, including Donald E. Graham, chief executive of the Washington Post Company, which owns Kaplan, and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi, made impassioned appeals.”
These people are multi-millionaires. They happily saddled kids and poor people with mountains of debt that they can’t discharge in bankruptcy and they will be stuck with their entire lives. We should deliver the bill for this debacle to these individuals. Let them pay for it.
http://www.nytimes.com/2011/12/10/us/politics/for-profit-college-rules-scaled-back-after-lobbying.html?_r=0
Obama’s basketball buddy, Rahm Emanuel, is using privatization to drive gentrification in Chicago. Emanuel’s “opportunity zones” designate where developers will be changing housing patterns to profit. Once they re-sort residents through selective and cheap charters, developers can grab land for yuppie housing near the CBD while pushing minority groups to less desirable fringe neighborhoods. Obama and his cronies are opportunists.http://www.huffingtonpost.com/2013/03/19/rahm-emanuel-opportunity-_n_2908859.html
Where is Rahm Emanuel on performing the basic government function of funding his city’s schools?
Maybe the Best and Brightest should lay off “innovating” and try doing their jobs. They can start with “basic competence” and then graduate to “innovating”.
If they’re bored with basic management maybe they should go the private sector. They’re not doing me any favors sticking around.
Ed reform was in on this scam too. Remember “Education Nation” the ed reform propaganda event?
“This year marks the second iteration of Education Nation, which launched in 2010 on the heels of “Waiting for Superman,” a popular documentary that increased the focus on education policy, while also drawing criticism for presenting charter schools as the ultimate solution. Some condemned last year’s Education Nation conference for siding with the education reform movement, for excluding teachers and for presenting shallow content.
The summit included a film premiere and panelists such as former Washington, D.C., schools chancellor Michelle Rhee, U.S. Secretary of Education Arne Duncan, American Federation of Teachers president Randi Weingarten, several governors and former President Bill Clinton. Celebrities such as Jennifer Garner and LeBron James were on hand to voice their perspectives. The event also provided an opportunity for some major schmoozing, with refreshment rooms and cafes that rarely closed.
Education Nation’s panels focused on the importance of learning and college attainment. But one of the event’s main sponsors has been accused of having different motives. The event took place in a tent whose central outside decoration was the logo of the for-profit University of Phoenix.
The University of Phoenix has 200 campuses and online degree programs. An ABC news investigation found that the school routinely makes promises about work eligibility that it can’t deliver on, resulting in students mired in debt without the benefits of a degree.
A U.S. Senate committee investigation found that 66 percent of associates degree students and half of bachelor’s degree students at the school withdrew after beginning their programs. About 22 percent of University of Phoenix students defaulted on their loans during 2008, while the school’s owner, the Apollo group, devoted 22 percent of its spending to marketing.”
They basically endorsed these schools. The advertising was all the one I watched. I mean, come on. How irresponsible and reckless are they? Young people are supposed to trust these people for advice? God, I hope not.
http://www.huffingtonpost.com/2011/09/27/education-nation-gates-survey-university-phoenix_n_982718.html
“For-Profit Colleges”
Junk degrees
And crushing debts
About as sleaz
Zee as it gets
Phoenix flies
Then turns to ash
But never dies
In hunt for cash
They were all getting online “criminal justice” degrees here. There’s 30,000 people in this county. We don’t need thousands of police and probation officers. They’re making 9 bucks an hour as security guards and they didn’t need a degree for that.
Someone should be held accountable but we all know how this goes by now- the only people who will be hammered are the debtors. There will be no mercy for them, while the multi-millionaires who pushed this will pay no price at all.
This investigative report on student loans lays out the scam in all it’s gory details.
The Department of Education needs to be shut down (yesterday).
It has become a “den of inequity” (spelling intentional)
IMHO, it can’t be fixed, not even by someone with the right attitude. It is permeated by corruption.
Ed reformers who got played by Chris Christie won’t admit they got played:
“If Christie’s intended reallocation of state school aid was merely the detritus of a desperate leader glamored by the orange charlatan—sprung from pique at his political demise, his transformation from rock star to laughing stock—then we could all roll our eyes and look away.”
He was never a “rock star”. He was always a hack. It was always about destroying public education. Any fool could see it.
I don’t mind that the echo chamber gets played by these charlatans constantly, but they should have the decency to admit he rolled them. Christie is gutting public education using charter schools as his argument. They created this monster. They’re lousy advocates for public education.
http://educationpost.org/why-gov-chris-christies-fairness-formula-is-anything-but-fair/
One of Christie’s most classless, venal moments was when he was asked “who he would like to punch in the nose,” he mentioned the president of the teachers’ union.
SomeDAM Poet
June 30, 2016 at 11:17 am
This investigative report on student loans lays out the scam in all it’s gory details.
The Department of Education needs to be shut down (yesterday).
It has become a “den of inequity” (spelling intentional)
IMHO, it can’t be fixed, not even by someone with the right attitude. It is permeated by corruption.”
One would think they would “get” that this stuff erodes credibility. It makes it impossible for people to rely upon them. They seem to feel the lack of faith comes from voters, as if there’s no rational reason for it, and that’s just not true. They have to earn trust. It isn’t a gift they get forever. It’s like spending money you don’t have. They have to PUT SOME IN to take some out.
People really have to start reading billionaire ed reform sites/employees because they’re running public policy.
This is my favorite gem today:
“Far too often, we run into situations where stakeholders believe a portfolio strategy is nothing more than a charter school growth strategy. We encourage city leaders to think beyond the obvious. While we ultimately aim for a system of autonomous and accountable schools, we know there may be more than one path to get there.”
While our goal is to privatize all your schools, we’re more than willing to pretend we’re “agnostics” if it helps the politicians we bought sell this short-term. Phasing out public schools is also an option! No reason to get all Pinochet about it. 🙂
https://www.msdf.org/blog/2016/06/way-grow-great-schools/
This is John King’s speech to his fellow “movement” members in the charter sector:
https://www.ed.gov/news/speeches/leading-way
What a shame that no one at the vast United States Department of Education can find public schools that do a good job or are worthy of this kind of gushing praise.
I would suggest they aren’t looking.
I listened to Obama speak with the president of Mexico and prime minister of Canada yesterday. Interesting how he ended the press conference with a twisted argument that he was a populist president. It made me think about that truthful and insightful article in Washington Monthly that Diane posted, “Populism with a Brain”. Our president seems to think that conspiring with the CEOs of tech companies is populism. Our president is wrong.
Ha! So funny and so sad.
More names. It’s a very long list:
“Former Pennsylvania governor Ed Rendell (D) was among the leaders, along with former New Jersey governor Tom Kean (R), former MacArthur Foundation president Jonathan Fanton, and Harvard professor Sara Lawrence-Lightfoot, recruited by a new industry-created group, the Lanny Davis-directed Coalition for Educational Success, to create and monitor a code of conduct for career colleges. That panel proved to be nothing more than a public relations stunt when it ultimately just disappeared.
This overwhelming force led Senator Dick Durbin (D-Ill.) to say the for-profits “own every lobbyist in town.”
“For 2012, at the APSCU convention in Las Vegas, the keynote speakers were former President George W. Bush and K-12 school reformer Michelle Rhee. After I and others criticized Rhee for agreeing to speak when her whole education message is about accountability, she pledged to deliver tough words to the industry. But when she got there, Rhee soft-pedaled her critiques and told the group that some of them were “doing incredible work.”
https://www.thenation.com/article/perfect-lobby-how-one-industry-captured-washington-dc/
What do presidents do after they leave the White House? I think the odds favor that Obama will lend his name to the autocratic, for profit, corporate public education reform movement, and this move to buy The University of Phoenix is a harbinger of things to come. Will Obama be on its board? Will he be its CEO? Will he be a major share holder? Will he become its public face?
Lloyd,
Obama will command $200,000 or more to speak, as other presidents did
True
And write another memoir that comes with an advance that is several million.
G. W. Bush was paid $7 million for the first 1.5 million copies sold for his memoir “Decision Points:
Bill Clinton has earned an estimated $38 million for the books he has written since leaving the White House.
Your starting to sound like me. And my animosity is toward Obama as well as Clinton having voted for each twice. I vote meteor
http://fusion.net/story/320621/vote-giant-meteor-in-2016/