When UC Davis Chancellor Linda P.B. Katehi was named last week to a $70,000-a-year board seat overseeing DeVry Education Group, public-interest groups and Assemblyman Kevin McCarty were stunned.
Katehi stepped into a situation fraught with problems, they said, as DeVry and other for-profit schools face increasing scrutiny from federal officials for possibly deceiving students about job and income prospects. They questioned why she would bestow the stature of the University of California on a for-profit institution facing serious questions.
Katehi decided to quit Monday after hearing concerns about the appointment, according to her UC Davis spokesman, Gary Delsohn. She sent her letter of resignation to DeVry Education Group on Tuesday.
“I initially chose to accept the appointment because I believed I could contribute to improving the educational experiences of the students attending DeVry institutions, but in light of a variety of other issues that have come to the fore, I have determined that I am unable to serve,” Katehi wrote in her resignation letter.
Delsohn said DeVry approached Katehi before the company was sued by the Federal Trade Commission.
“She wasn’t aware of the suit and wanted to help,” he said. “... The last thing she wanted to do was to participate in anything controversial or that would distract from anything she was doing at UC Davis.”
The resignation came after letters from McCarty and public interest groups questioned why the chancellor would take a post with an organization under examination by the FTC and U.S. Department of Education, the latter of which has told DeVry that it risks losing student aid money if it continues to make claims it cannot substantiate.
DeVry said in a January statement that it “intends to vigorously contest” the FTC complaint, which it believes relies on “anecdotal examples that exaggerate the allegations but do not prove them.” A DeVry spokesman did not return calls Tuesday.
Students cannot receive Cal Grants to attend the for-profit institution, according to the California Student Aid Commission. Under state law, colleges are ineligible for Cal Grants when they have high loan default rates, low graduation rates or both.
Leaders from Consumer Watchdog, the Center for Public Interest Law, Housing and Economic Rights Advocates, the Veterans Legal Clinic and Center for Responsible Lending sent a joint email to Katehi earlier Tuesday asking her to resign from the DeVry board immediately.
“It is an epic lapse of judgment for the chancellor to let a corporation that is currently being sued by the Federal Trade Commission for deceiving students to exploit the good name of the University of California,” said Ed Howard, senior counsel for the Center for Public Interest Law, before Katehi announced her resignation. “The chancellor should immediately resign, return any money she has been paid, and the regents and the Legislature need to act decisively to prevent chancellors from ever doing something like this again.”
DeVry Education Group, which operates DeVry University, announced the appointment of Katehi and University of Arizona President Ann Weaver Hart in a press release on Feb. 22. DeVry operates 13 campuses in California, including one in Folsom, according to its website.
“We are pleased to welcome such accomplished educators to our board,” stated Christopher Begley, DeVry Education Group board chair, in the announcement. “Dr. Hart and Dr. Katehi have a history of driving strong student outcomes and a personal interest in maintaining access to quality educational programs for nontraditional students.”
DeVry board members earn $70,000 annually, as well as restricted stock units with an approximate value of $100,000, according to filings with the U.S. Securities and Exchange Commission. Katehi resigned before ever attending a meeting of the board, Delsohn said.
Katehi earns $424,360 a year as chancellor of UC Davis.
McCarty, in a letter addressed to University of California President Janet Napolitano and Monica Lozano, chair of the UC Board of Regents, expressed his concern with the appointment and requested that the UC system review its policies regarding outside professional activities for senior management.
“The DeVry Education Group is a publicly traded for-profit education institution that will always put its profits before its students,” McCarty wrote. “In the last few years, the state of California has enacted policies to protect students from predatory institutions such as DeVry. In fact, DeVry is ineligible to receive Cal Grants due to their graduation and cohort default rates.”
The DeVry appointment was in accordance with University of California policy, Delsohn said.
UC Office of the President spokeswoman Dianne Klein said the appointment was still under consideration by the UC system and had not yet been approved by Napolitano when DeVry announced that Katehi was on its board. She said appointments are “evaluated in a number of areas, including perceived conflict of interest.”
The federal suit against DeVry contends that the university made false and unsubstantiated claims when it began advertising around 2008 that 90 percent of its graduates obtain well-paying jobs in their fields within six months of graduation, according to the FTC suit. Federal officials also take issue with a 2013 claim that DeVry graduates earn more than graduates of other universities.
DeVry allegedly counted the jobs of students who were already employed before attending the university, as well as graduates who worked in other fields outside their area of study, including volunteer jobs and low-wage employment. The suit also contends that the university counted those seeking employment as inactive, although they were still seeking work.
Other for-profit universities have faced scrutiny and penalties in recent years. Corinthian Colleges, which operated Heald College and others, closed last year after a series of government sanctions undermined the company’s financial model. Federal and state officials had accused Corinthian of exaggerating job placement outcomes and manipulating transcripts, and the company faced the loss of financial aid for its students, upon which it relied heavily.
Howard said the public advocacy groups that signed the letter will work with McCarty and other legislators to examine and possibly change UC policy about which boards campus leaders can sit on.
“While the right decision, the chancellor’s laudable about-face raises a host of planet-sized questions,” he said. “Did DeVry wine and dine her to persuade her to join? How could she not have known about the prior state attorney general investigations or be unaware of the FTC’s lawsuit? What due diligence did she do, if any? And, can it really be that the regents don’t have any policies at all that would have prevented this embarrassing fiasco caused by a state employee?”
McCarty wants a list of all boards UC chancellors sit on and plans to review the university’s policy on board appointments.
“I’m glad she pulled the plug,” he said. “I think it’s obviously the right call. It begs the question: What makes her think this is a good idea? It’s jaw-dropping to think this has any benefit to California or to the university system.”