From NY Post: A close pal of President Obama will be able to buy the for-profit parent of the University of Phoenix after federal regulators cut him and other buyers a major break, The Post has learned.
Marty Nesbitt — a Chicago business mogul who is widely considered Obama’s best friend — has won a loosening of stiff capital requirements that had threatened to derail the $1.1 billion deal for him and his partners, according to public filings reviewed by The Post.
The lowered capital strictures, quietly eased by the Department of Education in an unusual regulatory move last month, effectively seal the pending agreement by Nesbitt’s private equity firm, Vistria Group, to buy University of Phoenix owner Apollo Education at a fire-sale price, critics charge.
“I think every way you look at this transaction is questionable and suspicious,” said Diane Jones, the former assistant secretary for post-secondary education at the Education Department under President George W. Bush. Jones said the DOE typically does not change terms after making a public recommendation.
Adding to the potential controversy surrounding the DoE’s rare move to lower capital requirements, former Deputy Education Secretary Tony Miller — formerly a tough regulator of for-profit schools — is now a partner at Vistria Group.
On Dec. 20, the DoE lowered to 10 percent of the school’s Title IV federal student-aid funding from 25 percent the capital Apollo had to keep in a letter of credit, according to public filings. The other 15 percent can be put in escrow. The higher capital requirements were handed down just two weeks before the cut.
The lightened restrictions will allow Nesbitt to avoid triggering a provision that would allow the school’s owner to walk away from the deal if the DoE requires a letter of credit greater than 10 percent, the documents show. “I do believe the restrictions were going to kill the deal,” Mark Schneider, a former education official under President George W. Bush, told The Post. “I think there is a cloud of ethical fog.”
The for-profit college’s value could soar under Nesbitt’s ownership, critics say, as President-elect Donald Trump is expected to lighten rules that govern such schools after years of tough regulation by Obama administration officials.
Rival DeVry Education’s shares have risen by more than a third since the election, recently trading above $31 a share.
Obama had been on a crusade against for-profit schools, cracking down on predatory practices and blasting some colleges for “making out like a bandit” while their debt-riddled students struggled to find good jobs. He didn’t name any schools specifically.
Other curbs imposed on the deal Dec. 7 have remained, such as barring Apollo from adding any new programs or locations and capping enrollment at current levels. “The final terms, developed by legal and financial aid professionals, were not loosened,” a DoE spokeswoman insisted to The Post.
A Vistria spokeswoman said, “No one at Vistria has contacted the White House to advocate for an outcome of this transaction.”
Apollo Education declined comment beyond saying the deal was expected to close by February 1.