A divided University of Arkansas System board of trustees today rejected a resolution supporting President Donald Bobbitt’s contentious and largely secretive proposal for a nonprofit affiliate to buy the University of Phoenix.
The vote on the proposed resolution involving one of the nation’s largest for-profit online colleges was 4 for it, five against it and one abstention.
The question now is whether Bobbitt will try to proceed with the plan without board support — a move that apparently is legal though perhaps not wise considering his contract expires Dec. 31 and he would be going against his bosses’ will. The answer appears to be no.
“Dr. Bobbitt has previously said it would be difficult to move forward without support from the Board for this project,” UA System spokesman Nate Hinkel said late today. “That statement remains true, and he is certainly disappointed in the outcome of the meeting.”
Under the proposal, the UA System would affiliate with Transformative Education Services, or TES Inc., an Arkansas-based nonprofit created in August. TES in turn would buy the University of Phoenix and gradually turn it into a nonprofit, though that would take some time.
Perhaps the harshest words today came from trustee Sheffield Nelson, who voted against the plan. He complained that the proposal has been carried out under secrecy for a year and a half.
“I think it’s a mess,” and Phoenix has a “terrible reputation,” Nelson said. Bobbitt “has spent an enormous amount of time [on this proposal] and intentionally misled us,” Nelson said.
By all accounts, Phoenix has a troubled financial and regulatory past, though supporters of Bobbitt’s proposal say the university has changed, while opponents disagree.
An Arkansas Times source has put the deal’s cost at $500 million to $700 million. Bobbitt recently confirmed to The Washington Post that the Times’ minimum estimate was accurate. University leaders supporting the plan have said repeatedly that no public funds would be spent and said Phoenix would not become a part of the UA System.
Voting for the plan to move ahead with the plan that’s been quietly in the making for two years were trustees Nate Todd, Ed Fryar, Ted Dickey and Jeremy Wilson. Opposing it were Nelson, chairman Morril Harriman, Kevin Crass, Steve Cox and Tommy Boyer.
Trustee Kelly Eichler, who also is a deputy chief of staff to Gov. Sarah Huckabee Sanders, recused and said nothing during the online meeting, though she had previously indicated support for the proposal. Eichler’s husband, Brad Eichler, is chief operating officer at Stephens Inc., which stands to make millions if the deal goes through. Little Rock-based Stephens is the UA System’s mergers and acquisitions partner. The bigger the price tag, the more Stephens would make, according to information the Times previously obtained.
Harriman stressed his concern that the UA System’s board would have “no control” and “no governance” regarding Phoenix even if the deal is approved.
Bobbitt has said Phoenix approached him and a UA System vice president in May 2021 about a purchase. But the matter remained a tightly guarded secret from the public until the Times learned of it through a source in January. Though Fryar said board members have been kept updated throughout the past two years, other trustees have complained that they were largely kept in the dark until a specially called meeting last week when they were inundated with information. Even then, a Stephens employee was quietly told to shut up when he was apparently about to say the cost of the deal was $535 million. He stopped just before he spoke the word “million.”
Bobbitt has said the UA System would get about $20 million a year from Phoenix as a result of a licensing agreement tied to the deal.
Trustee Cox did not comment during today’s meeting but expressed frustration at last week’s session over being hit with so much information just days before a filing on the proposal was to be submitted to the federal government.
“This is the first day I have heard a lot of important information” about this deal. “Is that fair,” on a deal “this big?” he said. “It’s really unfair.”
Crass, the newest trustee and a lawyer, said it was inappropriate to compare this deal to a contract with a soft-drink vendor as one or more supporters has done. “This is different from a mere vendor. We all recognize that we’re giving up control,” he said.
Crass asked what are the UA System’s rights if the deal goes wrong at some point. He expressed concern that the system would have to wait until a 10-year contract ended before it could get out of the deal even then. He said trustees were being asked to “take a leap of faith” and said he could not in this case.
Patrick Hollingsworth, interim general counsel for the UA System, said that “the right to exit is there if the other party defaults.”
But Crass said he was concerned about the “limited right to terminate” the deal and the UA System’s “absolute lack of control.”
“The UA System does not have the right to do anything about it,” he said.
Based on emails previously obtained from the UA System, some trustees were clearly kept more in the loop than others. Fryar was among those more informed and already has a seat on the TES Inc. board.
Fryar said today that Bobbitt first informed the board of the Phoenix effort in June 2021 and said there have been “periodic updates to the trustees” since then. “This is not something that has been thrust on the board at the last second,” he said.
Even if the plan proceeds somehow, closing is not expected until December.
Skip Rutherford, dean emeritus of the University of Arkansas Clinton School of
Public Service, has been paying attention to the Phoenix story. In an email before today’s vote, he too cited some of the same problems others have.
“Critics have also noted the secrecy surrounding the deal followed by a quick
board vote,” Rutherford said. “That may be a good ‘deal making’ strategy but it is not a good ‘deal selling’ one. Conflicts of interest or the perceptions of them are also not helpful.”
In a tweet over the weekend, Rutherford stressed the significance of today’s vote. “If approved, it will significantly change the state’s higher education landscape,” he wrote.
Rutherford, who initiated the Clinton School’s online Master of Public Service degree, said there are about 36,000 exclusively online students in Arkansas colleges and universities. “Regardless of whether Phoenix would officially be a UA System campus, most will assume it is,” if the deal goes through, he said. “Phoenix would add around 79,000 on-line students.”
Rutherford said he could see both sides of the issue. In any event, he said Bobbitt “deserves credit for exploring new revenue streams. In today’s higher education environment, that’s wise. I don’t have access to the deal’s fine print, so I don’t know whether it would be for the better or the worse over the long haul. I certainly hope
better though I worry about a diminishing management and strategic focus on campuses.”