Legal counsel: Phoenix deal is ‘dangerous’

BOISE — A legal opinion released Friday on the University of Idaho’s actions to purchase the University of Phoenix found it set a “dangerous precedent.”

Lawmakers requested that Legislative Legal Counsel Elizabeth Bowen review the State Board of Education’s actions last May, when the board voted unanimously to create a not-for-profit corporation for the purpose of purchasing the controversial online higher education institution.

“Although my concerns are many, my primary concern is this: The Board is attempting to escape its constitutional and statutory limitations by recreating itself as a private corporation,” Bowen wrote in a letter to lawmakers detailing her opinion. “If the Board’s conduct is allowed to stand, an incredibly dangerous precedent would be set, perhaps inspiring other state agencies impatient with their constitutional and statutory restrictions to follow suit.”

Bowen recommended that the Legislature seek legal action against the deal, as it’s currently structured.

The deal, which would cost a total of more than $600 million, has been lauded by UI President C. Scott Green as a solution to an impending “enrollment cliff” and another source of income. The move has also faced pointed questions from lawmakers and Idaho Attorney General Raúl Labrador, who filed a lawsuit over alleged Open Public Meetings violations regarding the closed-door meetings held in advance of the public vote May 18. The judge eventually ruled against Labrador after a drawn-out legal process.

Bowen said that if the State Board of Education doesn’t abandon the purchase, the Legislature should file a lawsuit. She said this legal action could be prevented if the board “Repairs its encroachment of the legislative power by seeking legislative approval” and restructures the deal so it doesn’t “involve creating a corporation and so that it doesn’t involve state ownership and operation of a private institution.”

Asked for a response to the letter, State Board of Education spokesperson Mike Keckler said in an email, “Neither the Board nor its staff have been contacted by the Legislature’s attorney regarding her letter. We are reviewing the letter, and we are not able to comment on it at this time.”

UI did not respond to a request for comment by press time.

Bowen wrote in a nine-page letter that the board had no constitutional or statutory authority to acquire, own and operate a private institution.

The letter was sent to Reps. Brent Crane, R-Nampa, John Gannon, D-Boise, Bruce Skaug, R-Nampa, House Speaker Mike Moyle, and budget-writing co-Chairpersons Rep. Wendy Horman and Scott Grow; and Senate Minority Leader Melissa Wintrow, D-Boise.

Crane and Gannon have co-sponsored a concurrent resolution that requests that the board reconsider any actions that would affiliate it with the University of Phoenix and authorizes the House speaker and Senate pro tempore to seek legal action if it doesn’t. The hearing on the resolution is scheduled for Thursday in the House State Affairs Committee, Crane said.

He shared the opinion with all the other members of both the House and Senate on Friday. Crane said he wanted make sure everyone’s questions could get asked and answered.

Crane chairs the House State Affairs Committee and said he was looking forward to the hearing.

“We’re a committee that asks a lot of questions and we’re not afraid to ask tough questions,” he said. “... We look forward to hearing what they have to say.”

The deal had faced questions about the board’s and university’s authority from lawmakers, many of whom were concerned about the Legislature’s exclusion from the negotiations and actions.

“Process matters to me,” Crane said, “and the fact of the matter is, the Legislature has not been involved in the processes, and yet we’re the ones responsible for the expenditure of funds as well as making sure we don’t go into debt.”

Horman said that the deal “seemed structured in a way to intentionally exclude the Legislature.”

She said she had wondered since the beginning how the board was able to create a new entity as well as make such a large purchase under the existing constitution and statute.

“That never made sense to me,” Horman said. “... it answers questions I’ve had for many months.”

In the letter, the legal counsel for the Legislature outlines her concerns over the lack of legal standing for the actions of the board and UI, citing code, the state constitution and case law.

She also wrote that it may create significant financial exposure.

The University of Phoenix (UoPx) has been subject to a number of lawsuits and settlements stemming from accusations that it misled and defrauded students. The Federal Trade Commission said in 2023 that it has refunded former UoPX students more than $47 million.

Green has said in the past that the risk to the university is expected to be $7 million a year. Claims against UoPX may still be filed.

Bowen wrote that the “lack of transparency” about the deal made it difficult to determine the level of risk to the university and state. Negotiations prior to the May 18 public vote were held under strict nondisclosure agreements and much of the public, including lawmakers, were unaware it was on the table until the day before the vote took place.

It’s unclear if the Legislature will seek legal action yet.

Moyle said Friday that he would wait to see what happens with the resolution as it makes its way through the Legislature.

If it didn’t pass, the letter highlighted enough concerns that he would want to work with Senate Pro Tem Chuck Winder to seek another way to ask the courts to weigh in.

Moyle also echoed concerns about transparency that other lawmakers have made.

“I think if they hadn’t have done this in the dark of night and instead done it in the light of day, where people had the chance to ask questions and see whether or not this is legal and constitutional, and could’ve answered those questions, it would have been a lot better for all of us,” he said.

Bowen ultimately recommended that the attorney general file action against the State Board of Education, for acting what she believes is outside its scope of authority, as well as against the newly established not-for-profit to nullify its incorporation.

“The most solemn obligation of any public entity is to serve to the public interest,” Bowen wrote. “If the State Board of Education and University of Idaho have forgotten that — if, indeed, they have forgotten that they exist only by leave of the people, to perform duties for and on behalf of the people, using powers conferred on them by the people — they should be reminded.”

Guido covers Idaho politics for the Lewiston Tribune, Moscow-Pullman Daily News and Idaho Press of Nampa. She may be contacted at lguido@idahopress.com and can be found on X, formerly Twitter, @EyeOnBoiseGuido.