UA president quietly negotiating deal with embattled for-profit ITT Tech

UPDATE: ITT Tech has ceased operations at all of its campuses – 9/6/2016

“The way you’ll know whether it’s accelerating or decelerating is just reading the newspaper everyday, and see what new partnerships get formed. Because entities like a lot of the private liberal arts colleges, I think, will get in financial trouble and they’ll either close their doors, which is very hard to do, or they’ll end up partnering with another institution. When you read about more partnerships, that’ll be your clue, your cue, that this thing is speeding up.” – Dr. Scott Scarborough, on how public universities like UA will start to expand nationally.

by Chris Horne

Yes, University of Akron President Scott Scarborough says, officials are working with Higher Education Partners on a deal with for-profit chain ITT Tech that would give the university a network of satellite campuses across the United States and around the globe. He articulated the outlines of the plan in his State of the University address last October and then in more detail the next day in an interview with The Devil Strip.

However, he cautioned in a phone call Wednesday evening, the deal is not done. In fact, he says, “It could fall apart tomorrow.”

A slide from Dr. Scarborough's presentations that depicts plans to expand with satellite locations throughout the world.
A slide from Dr. Scarborough’s presentations that depicts plans to expand with satellite locations throughout the world.

Citing a confidentiality agreement, Scarborough did not confirm or deny rumors that the university would, with HEP’s help, buy out and take over campuses currently owned by ITT Tech, an embattled for-profit chain with 135 locations in 38 states. The publicly-traded company has been charged with fraud by the Securities Exchange Commission and is under restrictions by the US Department of Education regarding its use of federal student aid.

In a statement emailed Tuesday, ITT Tech spokeswoman Nicole Elam wrote, “We do not confirm or deny any rumors about our business or any transaction that we may or may not be contemplating. That said, as with most organizations and as a normal part of our operations, we regularly explore opportunities that we believe could benefit our organization. However, we have nothing to report today on that front.”

ALSO: Documents reveal political ‘Who’s Who’ of Ohio supported ITT Tech buyout

HEP, which began as an online education provider that spun off from The Princeton Review, already has agreements with two community colleges in the state of Ohio that resulted in the purchase and renovation of buildings in Middletown for Cincinnati State and in Youngstown for Eastern Gateway.

The private company, which was formed in part with capital management firm Monitor Clipper and describes itself as providing “an alternate, low-risk funding source to Colleges [sic] that need to meet increased demand in the face of decreased support from state and local governments,” will receive 15 percent of the net tuition from each of those locations for a total of 20 years.

In Middletown, the company purchased a building for $202,000 from the city then sold it for $5.8 million two years later. HEP CEO Michael Perik told the Journal-News his company, which received a $1 million HUD loan, put $5.5 million into renovations.

Scarborough noted the university is talking, and has talked to, “multiple partners” about opportunities to expand its services. He said he couldn’t offer specifics about the potential deal with HEP except that he has taken the idea around to select constituents on campus and in the community to get their buy-in and feedback. He said those who’ve heard the idea were also required to sign a nondisclosure agreement first.

Summit County Executive Russ Pry says he has not spoken with anyone from the university about the possibility of a deal with Higher Education Partners. Likewise, Christine Curry, communications director for the City of Akron, says Mayor Dan Horrigan has not met with the university about it either.

Multiple sources tell The Devil Strip that Perik, who once ran The Princeton Review and co-founded SoftKey Education Software with Kevin O’Leary (bka as “Mr. Wonderful” on ABC’s “Shark Tank”), was in the room outside the first meeting of the business executives’ advisory council assembled by FirstEnergy CEO Chuck Jones. Scarborough said Perik was not present in the meeting but refused to comment on whether Perik was in the building.

FirstEnergy spokesman Todd Schneider says Jones did not receive a presentation from anyone at Higher Education Partners. Phone calls to Higher Education Partners and Michael Perik were not returned.

hub and spokeWhether or not a deal with HEP takes place, Scarborough says he’s trying to create a “hub and spoke” system that would transform UA into a national university. This would eventually include a physical international presence and main campus programs engineered to attract more international students, who pay more than even out-of-state students. Coupled with a growing pipeline for high school students in dual enrollment programs and online classes, this is the plan to get the university much closer to Scarborough’s stated goal to increase enrollment above 31,000 within five years.

Two of Scarborough’s controversial hires also seem specifically suited to support these efforts.

The cover letter to CAST Dean Todd Rickel’s debated CV touts his experience leading “online, dual enrollment and international offerings” and managing satellite locations during his time with for-profit colleges like Herzing and the University of Phoenix. In addition to her global corporate experience and former overseas teaching position, Honors College Dean Lakeesha Ransom has degrees in international development education and international business.

During last October’s interview, Scarborough said, “We’re talking to lots and lots of different people to say, you know, ‘Can we come together to put together something that will scale to a size where both of us can survive?’ And we’ve had some say, ‘No thanks,’ and that’s okay. We’ve had some, ‘Well, let’s talk,’ and those conversations stretch on for a long time. I don’t know that I can point to any yet — well, yeah, I don’t know that I can point to any yet other than Academic Partners with nursing that we’ve put a period on yet. But we’re basically telling everyone, ‘Hey, we’re available for the conversation.”

super professorA move in this direction would increase the scale of students to a point that, Scarborough says, means they could also include the “super professor” model for large online courses. This format, described in the presentation slide deck the university released last fall, puts tenured professors in charge of a sort of mini-department, making them responsible for the curriculum that is turned over to an “instructional designer” to convert for use online so “course marketers” can shop the class to potential students all over the world. Meanwhile, part-time adjunct professors guide student instruction while success coaches check in with students.

Scarborough likened it to the “super large” lecture classes, which he took at the University of Texas, led by a tenured professor who utilizes graduate assistants to manage the workload.

Despite appearances that satellites and online learning might take attention away from the university’s presence in Akron, Scarborough describes a big picture that requires reinvesting in the main campus for a “more traditional educational experience” that would also support more specialized research and scholarship. Thus, ideas like the so-called “grand entrance” and the concept of Division I football as a marketing expense. In fact, this satellite network would help fund the “pretty high cost-structure” to improve research and scholarship on the main campus.

“So all the high-end research and traditional student experience that has both intellectual and character development, that’s going to happen here,” he said in October, describing the impact on the main campus.

In the same interview, however, Scarborough struggled to offer insight into efforts to improve the University of Akron’s six-year graduation rate, which at 41 percent is the fourth lowest among large public universities in the Great Lake Region, according to statistics from the US Department of Education. Worse still, only 12 percent of UA’s black students who enrolled in 2008 had graduated by 2014.

Scarborough described how he thinks the university can get above the national average of 46 percent, “So, we’re still not there yet but I would argue that even if we did nothing different, we will get to that 46 and here’s why: It is because we went from being an open enrollment institution in 2011 to a traditional enrollment so our graduation rate is going to improve, just by virtue who we’re not letting in anymore.”

Multiple sources in the community and those close to the administration, who requested anonymity, have voiced concerns about the impact an expansion like this might have on students, many of whom are leaving the university with substantial loan debt but without the degree to help pay it off.

The university’s department of Student Success sustained the largest number of layoffs last summer and has seen several of its top-ranked talent take jobs at other colleges and universities. This is where Scarborough says the success coaching program will help. During the interview last October, he dismissed concerns about the high workload of students the university’s success coaches have, citing his own personal experience in a similar but volunteer role at DePaul University, where he was responsible for the sale of Barat College to Academic Partnerships, the for-profit that now runs UA’s online RN to BSN program.

“What I found is that I spent the majority—the preponderance of my time—on five students, out of the 50,” he said. “So, I walked away from that experience saying, ‘Even though we’re giving people, who have a full-time job doing this, 250 students, they’re going to spend the majority of their time on 25 of them.’ But if they can help those 25 through the process in a way that, um, helps them graduate, that will be the marginal difference we can make that gets us up above the predictable success rate of, say, 46 percent.”

After the first semester of the pilot with new freshmen, the university says feedback from students about the coaches has been very positive.

The process for informing the public and getting public feedback about a deal like one that could involve Higher Education Partners or ITT Tech is murky. Despite the involvement of a publicly funded university and the potential magnitude of such a move, a deal like this could be reached and approved without requiring a period of public debate over the plan’s merits.

Jeff Robinson, communications director for the Ohio Department of Higher Education, says, “With all of Ohio’s public institutions, the Board of Trustees would approve any plans for purchasing buildings, land, etc. Our office would be involved only at the point of review and approval of the programs that would be offered and where they would be offered.”

Even if the University of Akron Board of Trustees chose not to discuss the terms of an agreement in executive session before their February 10 meeting, there is no forum for the public to address the trustees, who are appointed by the governor, during the meeting.

Calls placed to multiple UA trustees were also not returned.

Board of Regents Chair Vinny Gupta answered the first call made by The Devil Strip, paused for about 20 seconds when asked about HEP and then asked to speak later before hanging up. He did not answer subsequent calls.

A spokesman for the US Department of Education says the only oversight their officials would provide in an acquisition of an educational institution is to analyze whether any Title IV funding limits should be placed on the new owners.

“This would only be applicable to the eligibility for disbursing Title IV funds. Outside of that scope, the Department has no jurisdiction over the approval of corporate mergers and acquisitions.”


Chris Horne has worked in journalism for much of the last 10 years, including stints as a print magazine editor, a daily paper beat reporter and digital content manager for two TV stations. He is currently the publisher of The Devil Strip.