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University of Arkansas System board votes against University of Phoenix deal

The University of Phoenix Chicago campus in Schaumburg, Ill. Trustees of the University of Arkansas on Monday voted against a potential affiliation deal with the University of Phoenix. (Scott Olson/Getty Images)
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The University of Arkansas System board of trustees on Monday narrowly voted against a resolution that would have endorsed a potential affiliation with the University of Phoenix, a for-profit giant that had been tangled in a legal and regulatory morass.

The 5-4 vote is only symbolic because UA System President Donald Bobbitt has the authority to move forward without the board’s approval. Still, Bobbitt was seeking support for a deal that has divided faculty, staff and other stakeholders within Arkansas’s public colleges and universities.

A potential deal to buy University of Phoenix draws scrutiny in Arkansas

UA would not directly purchase Phoenix but created a nonprofit — Transformative Education Services Inc., or TES Inc. — last year to acquire the school, shielding the state higher education system from legal and financial liability. Bobbitt said Phoenix would function as an affiliate with a licensing agreement that could yield the UA system about $20 million in revenue.

The University of Phoenix enrolls about 79,000 students across the country, almost all of whom are enrolled in online classes. Bobbitt previously told The Washington Post that Phoenix “is a large university with some tremendous technologies, 1 million alumni and some first-rate programs,” adding, “They have a retention model that we think could also benefit our traditional students.”

Opponents of the deal, including the faculty senate at the flagship University of Arkansas in Fayetteville and the staff union, have said the partnership could imperil the reputation of the UA system. Phoenix, they argue, carries too much legal baggage and UA leadership has been too secretive about discussions with the school.

Trustees who spoke out against the deal on Monday said they were troubled by the lack of control the UA system would have over Phoenix and the challenges the system could face if it wanted to back out of the agreement.

Kevin Crass, an attorney who serves on the board, pointed out that UA would have to wait until the final year of the ten-year licensing agreement to terminate the deal. He also said UA would only have minority representation on the TES board. Crass said he worries that if Phoenix did anything inconsistent with UA’s mission “the UA system does not have the right to do anything about it.”

Crass said he also found it troubling that the trustees did not have access to a due diligence report on Phoenix prepared by Stephens Inc., a local financial services firm. C.C. “Cliff” Gibson III, former board chairman, had also voiced concern about the lack of a report to Bobbitt.

The UA system previously denied a request by The Post to release the due diligence report, arguing the material falls under a competitive advantage exemption in Arkansas’ freedom of information laws.

UA’s leadership has been in discussions with Phoenix for nearly two years. But board trustee Sheffield Nelson said the board has been shut out of those talks and that even now “no one knows what they are voting on.”

Ed Fryar, another trustee on the board, disputed Nelson’s claim and said Bobbitt told the board about the discussions a month after they began and has provided periodic updates. Fryar and others who threw their support behind the licensing agreement said it offered an opportunity for UA to generate more revenue. Passing on the deal, he said, would be akin to Arkansas failing to fight for FedEx to remain in the state 50 years ago.