Green: UI outbid multiple suitors

The University of Phoenix’s brokers made two things clear from the outset, C. Scott Green said Wednesday.

First, the for-profit online giant wanted to affiliate with a public university. Second, the University of Idaho was in competition with other unidentified bidders.

“They always used plurals,” Green, the UI president, said in an Ada County courtroom Wednesday morning.

And Green went on to explain that he didn’t press for names, for tactical reasons. Brokers like Tyton Partners, Phoenix’s financial advisers, work for a seller, trying to drive up competition, and they’re not in the business of divulging names to prospective buyers. Saying he didn’t want to look like he’d “just fallen off the turnip truck,” Green took Tyton at its word.

In nearly two hours of testimony, Green offered new insights into the Phoenix purchase — a polarizing $685 million deal that he says could transform rural online education and provide UI millions of dollars in annual revenue. But the deal would also align UI with a partner with a half century of reputational baggage, and potentially leave UI on the hook for up to $10 million a year in financing costs.

Green is at once a peripheral and pivotal figure in the civil trial unfolding in district court this week.

Green is not a defendant, and nor is UI. Attorney General Raúl Labrador is suing the State Board of Education over the closed-door meetings that led up to their May 18 public vote endorsing the Phoenix purchase.

But Green plays a central role, because the State Board took much of its direction from him. The board held its contested closed meetings based on Green’s assertion that UI was in a high-speed, high-stakes competitive bidding process.

Green also is a central player in Labrador’s lawsuit. Over two days in court, deputy attorney general Gregory Woodard has implied that the State Board trusted Green and demanded no details about UI’s unidentified competitors. Woodard has also tried to discredit Green — since most of Green’s information came from Tyton, which had a vested interest in creating an air of competition.

On the witness stand Wednesday, Green talked at greater length and in greater detail than ever before about UI’s pursuit of Phoenix. His testimony offered brand new information and behind-the-scenes details:

The first overture

Green said he first heard that Phoenix was on the market on Jan. 27 — but not from the university or Tyton. He said he first heard about the possibility from a contact with Wells Fargo, a bank that helped UI finance a 2020 plan to outsource operations of its steam plant. Green said he began talking to Tyton on Feb. 1. The Jan. 27 conversation is a new wrinkle in UI’s public stated timeline, which it had already rewritten after an Idaho Education News story called its original narrative into question.

A newly identified bidder

On Wednesday, the name of another suitor finally came to light: UMass Global, a nonprofit affiliated with the University of Massachusetts. A March 16 internal email from Tyton managing director Greg Finkelstein named UMass Global, UI and the University of Arkansas as would-be buyers.

Woodard used Finkelstein’s email as an exhibit. And while the email supports the narrative about competition, Woodard also appears to be using the document to challenge the board’s knowledge of the marketplace. Woodard has asked board members about UMass Global, and no board member has said they’d heard of the nonprofit.

‘Project Neptune’ PowerPoints

Woodard also introduced PowerPoint presentations UI created for closed-door State Board meetings on March 22 and April 25. The presentations were titled “Project Neptune,” a code name for Phoenix, frequently used by Tyton and UI officials.

The PowerPoints say little about competition. But under questioning from Woodard, Green said there really wasn’t much to say about competition — except that it existed. But Green said he and the board discussed competition in these meetings.

The Arkansas vote

On April 24, the University of Arkansas’ board of regents narrowly voted to reject a Phoenix purchase. That public vote was covered locally and nationally, and was well-known to State Board members when they again met behind closed doors the following day. On Wednesday, Green testified that he still considered Arkansas a rival. “I was pleased with the vote,” Green said, “but they were clearly going to try to move forward. … They had a head start on us.”

State Board members have repeatedly said they considered Arkansas a competitor, even into May. The evidence is mixed. University of Arkansas President Donald Bobbitt has said he thought he could pursue a purchase without trustee support — and he did just that, according to a court statement from Finkelstein. But through a spokesperson, Bobbitt had also said it would be difficult to proceed without the board’s backing.

A bid for exclusivity

At some point in the April executive session, a State Board member suggested that Green approach Tyton about negotiating exclusively with Phoenix. Green liked the idea, he said, “(because) we were about to spend a lot of money on due diligence.” Not surprisingly, Tyton said he wanted to keep as many bidders as possible in the mix. “To this day, we’re not exclusive, although we think we’re in a pretty good position,” Green said Wednesday.

The trial is crucial to UI’s buying position. Labrador wants District Judge Jason Scott to throw out the State Board’s May 18 vote supporting the Phoenix purchase — a ruling that could stymie the sale. And even if the State Board prevails in court, UI still needs approval from its accreditors, and a UI-affiliated nonprofit must secure financing for the purchase.

UI hopes to close the deal early this year.

Other Wednesday developments

Other testimony Wednesday focused on the crux of the lawsuit, and the three closed State Board meetings. The board held closed executive sessions under a section of state law that covers purchases that pit a state agency against other public bidders, from another state or another nation.

That’s why the case centers on competition — and whether UI was vying with other public bidders.

Some other developments from Wednesday:

Kent Nelson — UI’s special counsel, working on the Phoenix sale — said he engineered the closed meetings. Nelson said he knew of other Phoenix bidders, namely Arkansas. He requested the State Board use the exemption covering competitive negotiations. Nelson, who has worked on state education legal issues since 1998, said he could not recall any similar closed meetings invoking this section of law.

State Board President Linda Clark also discussed the process surrounding closed meetings. As in this case, a college or university requests a closed meeting, and works with the State Board’s staff and in-house deputy attorney general to iron out the details. “I’ve been on the board for eight years and this process has served us well.”

State Board member Cally Roach pushed back against one of Woodard’s recurring arguments — that board members should have done their own research about other Phoenix bidders, and the need for closed meetings. “That would be a hindrance to the whole state governance system. … It wouldn’t be very productive.”

Senior reporter and blogger Kevin Richert specializes in education politics and education policy. Follow Kevin on Twitter: @KevinRichert. He can be reached at krichert@idahoednews.org