Should This College Operator Run a Key Federal Oversight Panel?

For some people engaged in the world of higher education politics, watching Arthur Keiser ascend the dais at a Washington, DC, hotel Tuesday morning as the new chair of the US Department of Education’s National Advisory Committee on Institutional Quality and Integrity (NACIQI) — the group of experts charged with advising the Department on the performance of college accrediting organizations — might be a bit like watching Donald Trump get sworn in as President of the United States: hard to fathom.

In fact, Keiser has some things in common with Trump, besides that both own properties in Florida. And these things are part of what makes Keiser’s ascendancy to the NACIQI chairmanship troubling.

Keiser University’s Record

First, both Keiser and Trump have run universities bearing their family names — and both have settled cases with the government, cases charging that their schools engaged in fraud.

Trump University was unaccredited, and thus not eligible for federal student aid dollars, but Keiser’s schools — there are some 20,000 students on 17 Florida campuses, plus locations in Shanghai, China, and Carazo, Nicaragua — thrive on such aid. In fact, the schools’ latest audited financial statement (obtained by the Century Foundation under the Freedom of Information Act) shows that Keiser schools get 86 percent of their $390 million annual revenue from Department of Education and Department of Veterans Affairs student aid.

In response to my request to interview Keiser, his staff asked for written questions, and then provided written answers that addressed some of my questions. It offered a description of Keiser University’s record that reads, in part: “More than two-thirds of students are women. African Americans compose 21% and Hispanics make up 28% of Keiser University’s diverse student body. An independent study by the Washington Economics Group estimates Keiser’s annual economic impact on the state of Florida at $3 billion with some 30,000 direct and indirect jobs positively impacted by Keiser University campus operations.”

While Trump’s school was basically a scam, the record of Keiser University, which offers programs in business, health care, information technology, criminal justice, culinary, automotive, and other fields, is more mixed, but far from exemplary. I know the school has had some conscientious instructors and administrators; I have spoken with a number of them. But its programs are expensive, it has spent less on instruction than many comparable public and non-profit schools, and it has reported relatively high dropout and loan default rates.

In 2015, Keiser University and the US Justice Department reached an agreement under which Keiser, without admitting misconduct, would pay $335,000 to settle a lawsuit under the False Claims Act, charging that the school defrauded taxpayers in the receipt of Department of Education funds. Three years earlier, to resolve a two-year investigation by the office of Florida attorney general Pam Bondi under the state’s Deceptive and Unfair Trade Practices Act, Keiser’s schools agreed, without any admission of guilt, to offer thousands of former students free job retraining and that its staff would not misrepresent information about the schools to prospective students.

Keiser University’s Conversion to Non-Profit Status

Second, both Trump and Keiser have been accused of misusing non-profit organizations for personal gain. The Donald J. Trump Foundation made a series of improper purchases benefiting Trump personally, using funds donated by others. There are no such allegations against Keiser, but instead there is this: Keiser’s chain of schools was a for-profit company, but he converted it to a non-profit in a transaction so troubling that it was the subject of major 2015 stories in both the New York Times and the Miami Herald.

In 2011, Keiser’s family sold Keiser University for $521 million to a small non-profit organization, Everglades College, which the Keisers had created. In order to buy Keiser University, Everglades took on a $321 million loan — from Arthur Keiser. The non-profit he created is thus paying him principal and interest on that loan, plus an annual salary, as chancellor and CEO of Keiser University, of $831,000. Keiser also made Everglades a charitable gift of much of the rest of the purchase price, potentially providing him with large tax deductions.

In addition, Arthur Keiser owns stakes in properties that collect some $14.6 million in rent from Everglades, in the Holiday Inn where Everglades employees stay, in a private airplane that Everglades employees use, and in a computer company that contracts with the college.

Several board members of the non-profit Everglades also have had business deals with the school — for its filing system, for recruiting services, for the school’s pool maintenance program. The board chair, Greg Wallick, a former captain of the University of Miami football team who is helping to build a Keiser University NAIA football team, is the CEO of Best Roofing, which boasts on its website that it “assists [Keiser] University with all their roofing decisions,” and adds an endorsement from Art Keiser himself: “Thanks for keeping our campus dry and saving us money.”

Keiser told the Times in 2015, regarding claims of conflict of interest, that all deals with insiders “are at fair market value” and that “We disclosed everything. There’s nothing wrong with it.” Keiser also has denied that the non-profit conversion of his school was for any improper reason, and he told the Times that the $521 valuation was arrived at by two independent auditors.

But Everglades’ 2015 financial statement — see page 14 — indicates that Keiser and the non-profit have now agreed to substantially reduce the debt, based on a much lower valuation for the schools.

The statement provided to me by Keiser states, “Repetitive questions regarding Keiser University’s status as a not-for-profit University have been answered time and time again. In summary, the transition to not-for-profit was thorough, transparent, and lengthy…. Fully disclosed tax returns and IRS 990s have always been and remain publicly available…. The structure of the corporation and acquiring of assets followed state and federal guidelines and regulations including notification and applications with both [the accrediting agency] SACS and the Department of Education. All necessary approvals were obtained. In March 2015, the Miami Herald reported that BDO, one of the country’s largest accounting firms, reviewed Keiser’s nonprofit tax filings — at the Herald’s request — and found nothing to suggest any impropriety.”

Conversion to a non-profit, as a number of major for-profit college chains have attempted (Herzing, Remington, Ultimate Medical Academy, EDMC/Art Institutes, Corinthian/Everest, Kaplan) or contemplated (ITT, Grand Canyon) in recent years, would allow a school not only to avoid paying taxes. If the status change is recognized as valid by the Department of Education, it would also (1) avoid the requirements of the federal 90-10 rule, which prohibits for-profit colleges from getting more than 90 percent of their revenue from Department of Education student aid, and (2) avoid key parts of the gainful employment rule, which takes away federal aid from career education programs that consistently leave students with more debt than they can afford to repay. Together, these rules press for-profit colleges to offer better-quality programs at more reasonable prices.

Conversion also would allow a school to escape the stigma of being part of the for-profit college industry, whose blatant abuses have become more and more clear to prospective students and staff.

The Department of Education last August rejected the application of the Center for Excellence in Higher Education, the non-profit operator of the formerly for-profit College America and Stevens-Henager chains owned by Carl Barney, to be treated as a non-profit for purposes of federal law. Under Secretary of Education Ted Mitchell said then, “Schools that want to convert to non-profit status need to benefit the public. If the primary beneficiary of the conversion is the owner of the for-profit school, that doesn’t meet the bar. It’s not even close.” The operator has sued in federal court to overturn the decision.

A final decision on Keiser’s conversion to non-profit status remains pending before the Department of Education, according to Department officials — meaning Arthur Keiser, now the chair of a key Department advisory committee, is awaiting a decision, from the same department, that could have an enormous impact on his school.

Keiser’s Engagement in Politics and Policy

Finally, like Donald Trump, Keiser has long been skilled at engaging with politicians, and making strategic campaign contributions — hundreds of thousands in total, to Democrats and Republicans like, many of them opponents of for-profit college accountability measures — as he has sought to advance his company’s interests. Keiser is the former chairman of the board and a long-dominant figure in the for-profit colleges’ national trade association, now called CECU. The group waged an aggressive campaign to fight the Obama administration’s effort to hold predatory colleges accountable for ripping off students and taxpayers — a strategy that spectacularly failed. Only the surprise election of Trump, and the resulting installation at the Department of Education of Secretary Betsy DeVos and other for-profit boosters, has given predatory for-profit colleges a potential reprieve.

Now, both Trump and Keiser have the opportunity to influence policy from an official platform, while each still running businesses that benefit from government largesse.

There are 18 NACIQI members, six appointed by the Secretary of Education, six by congressional Democrats, and six by congressional Republicans, who picked Keiser. The members serve six-year terms. The chairperson is selected by the members of the panel. Whether his fellow panelists should have elevated Keiser is highly questionable.

A year ago, in his role as a member of the NACIQI panel, before he was named chair, Keiser fought aggressively in a public hearing to prevent the group from advising the Department to de-recognize the accrediting body ACICS — despite the powerful evidence developed by the Department and outside researchers that ACICS had been asleep at the switch, failing to prevent blatant abuses at companies including Corinthian, ITT Tech, Kaplan, EDMC, Career Education Corporation, Westwood, Globe, FastTrain, and Daymar. All of those have been members of CECU, on whose board Keiser sat, and still sits today. Keiser insisted that terminating ACICS — which would force its schools to find new accreditors or lose access to federal student aid — would create “havoc” in higher education.

Fortunately, Keiser lost, by a vote of 10-3, and the Department of Education last fall made a final decision to cut off ACICS, a decision that US District Judge Reggie Walton, hearing ACICS’s legal challenge, has thus far refused to block.

It seems an inappropriate conflict of interest for any current college operator, with a financial stake in a college, to sit as a member of the Department of Education committee that evaluates the fitness of accreditors, who in turn evaluate the fitness of the operator’s college. But it looks even worse, and it is even worse, if (1) the operator’s college has a troubling record; (2) the operator is awaiting a major ruling on its future from the Department of Education; and (3) the operator is elevated to chairman of the committee.

This kind of blatant fox-guarding-henhouse dynamic has been an ongoing factor of for-profit college regulation in the disgraceful politics of Keiser’s home state of Florida. Now, it’s been brought to our nation’s capital.

The Keiser University statement to me said, on this point, that Keiser “is the senior member of the NACIQI Board, and has served for more than 10 years, as a board member and now as Chairman. He was voted in by his peers for Chairman — men and women who know his dedication to education and service.”

Keiser Critics Speaking Out

Not everyone is rolling over. On March 10, three strong advocates for students, senators Dick Durbin (D-IL), Elizabeth Warren (D-MA), and Sherrod Brown (D-OH), wrote to NACIQI members and Department of Education staff to “insist” that Keiser recuse himself from NACIQI’s review of the Southern Association of Colleges and Schools (SACS), which is up for review at Tuesday’s meeting, and which accredits Everglades and Keiser universities. They also asked that the Department of Education conduct an investigation “to ensure that there has been no inappropriate influence in SACS’s bid for renewed recognition.” The senators’ letter recounts the many troubling aspects of the Keiser non-profit conversion and financial deals with board members.

Former Deputy Under Secretary of Education Robert Shireman, now at the Century Foundation, also wrote on March 10, asking that NACIQI and the Department examine SACS’s 2015 renewal of Everglades’ accreditation, given all the issues related to the conversion. Shireman also last year filed a complaint with the IRS over the legitimacy of the Keiser conversion.

In response to my asking whether Keiser would recuse himself from considering the continued recognition of his own accreditor, the school wrote, “Dr. Keiser has made it abundantly clear to his colleagues on the board — should an issue arise which would require him to recuse himself from a particular discussion or vote, he is happy to do so. Such action is nothing new and consistent with his past service on the NACIQI Board.”

The NACIQI meeting agenda for Tuesday shows that, when the panel addresses renewing SACS’s accreditation, James W. Waldman, General Counsel to Keiser University and Everglades University, will appear to offer “Third Party Comments.”

This article originally appeared on Republic Report.