Meeting of the Board of Regents | December 2007
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THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234 |
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TO: |
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FROM: |
Johanna Duncan-Poitier
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SUBJECT: |
Globe Institute of Technology: Temporary Authorization of Degree Powers Upon a Change of Ownership
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DATE: |
November 16, 2007 |
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STRATEGIC GOAL: |
Goals 2 and 4 |
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AUTHORIZATION(S): |
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SUMMARY
Issue for Decision
Should the Board of Regents authorize Globe Institute of Technology to award degrees temporarily under a new ownership arrangement?
Reason for Consideration
Required by State Regulation.
Proposed Handling
This question will come before the Higher Education and Professional Practice Committee at its December 2007 meeting, where it will be voted on and action taken. It then will come before the full Board at its December 2007 meeting for final action.
Procedural History
On October 28, 2007, the former owners of Globe Institute of Technology sold the corporation to 878 Education, LLC. On November 8, 2007, the new owner submitted a proposal for a temporary transfer of degree-conferring authority. Section 3.58 provides that the Regents “may consent to a temporary transfer of degree-conferring authority after the change of ownership or control of the institution already has been made, upon an adequate showing of good cause by the institution.” In this case, the good cause is the inability of the former owners to qualify for Globe’s participation in HEA Title IV programs and the loss of State and federal aid to its students.
Background Information
Globe Institute of Technology. Founded in 1994 under the Business Corporation Law as a non-degree school, Globe Institute of Technology, Manhattan, received authorization from the Board of Regents in November 1996 to award the Associate in Occupational Studies (A.O.S.) degree and to offer programs leading to it. In April 2000, the Board authorized Globe to award the Bachelor of Technology (B.Tech.) degree and to offer B.Tech. programs in the physical sciences. In September 2002, the Board authorized the Institute to award the Bachelor of Business Administration (B.B.A.) degree and to offer B.B.A. programs in business. In February 2007, the Board authorized Globe to award the Associate in Applied Science (A.A.S.) degree and to offer associate degree programs in the health professions.
Today, Globe offers certificate and associate degree programs in business, the health professions, and the physical sciences, and baccalaureate programs in business, and the physical sciences. In the fall of 2006, it enrolled 1,257 students. The Board of Regents is Globe’s institutional accreditor.
On June 19, 2007, the U.S. Department of Education denied Globe’s application for renewal of participation in HEA Title IV student aid programs, including the Pell Grant and Federal Family Educational Loan programs. On September 10, 2007, it denied Globe’s request for rescission of that determination. Beginning in the spring of 2007, the Department raised questions about Globe’s compliance with the Regents standards for institutional accreditation and the standards for program registration and off-campus instruction in the Commissioner’s Regulations. Globe is currently not receiving either Title IV funds or aid under the Tuition Assistance Program.
In response to the Department’s requirement, Globe concluded a teach-out agreement with Mercy College to provide for its current students should the institution close. The Department has found the agreement acceptable and has notified both institutions that it is approved. The new owner will honor that agreement (see attached letter from the new owner).
Globe’s New Owner. Globe’s purchaser is 878 Education, LLC, a Delaware limited liability company created for this purpose. It is wholly owned by Marev Holdings, Inc., a Delaware corporation. In turn, 81.45 percent of Marev Holdings is owned by Martin Oliner, Esq. and the balance is owned by the Oliner Family Trust, of which Mr. Oliner’s wife is the trustee. Mr. and Mrs. Oliner are the directors of 878 Education. Neither has experience owning a higher education institution. However, Mr. Oliner has experience with not-for-profit institutions of higher education, both as a founder of the San Francisco School of Osteopathic Medicine and as a trustee of Touro College for over 15 years. In addition, the application states that they intend to expand the number of directors of 878 Education, LLC by adding persons experienced in higher education.
Mr. Oliner has indicated that 878 Education, LLC intends to maintain ownership of Globe on a long-term basis (see attached letter).
Regulatory Provisions. The purchase of a proprietary college does not automatically include a transfer of degree-conferring powers. Pursuant to §224 of the Education Law, the consent of the Board of Regents is required before a proprietary college, operating under a new owner, can award degrees. Section 3.58 of the Regents Rules includes the standards, requirements, and procedures the Department shall use in determining whether to recommend to the Board that it grant such authority to the new owner of a proprietary college. Following promulgation of §3.58, the Department developed Interim Guidelines for the Grant of Authority to Confer Degrees Upon the Change of Ownership of a Proprietary College in consultation with the field. Generally, Section 3.58 requires that the Regents consent to the transfer of degree-conferring authority prior to a sale.
However, Section 3.58 provides that the Regents “may consent to a temporary transfer of degree-conferring authority after the change of ownership or control of the institution already has been made, upon an adequate showing of good cause by the institution.” In this case, the good cause is the inability of the former owners to qualify for Globe’s participation in HEA Title IV programs and the loss of State and federal aid to its students. In July 2007, Globe’s representative stated that, without participation in Title IV, “Globe has only a few months, if not weeks, before it will cease operation and close its doors.” This would not be in the best interest of students. The new owner has taken steps to meet payroll and pay the Institute’s current bills and will have the Institute prepare a new application to participate in Title IV programs. It has submitted an application for authority to award degrees, including the information required for a temporary grant of degree powers.
A report of the Department’s findings, below, provides information about the new owner and its ability to meet the requirements of §3.58.
Recommendation
Because the Department has found that it would be in the best interest of Globe’s students to do so, it is recommended that the Board of Regents authorize Globe Institute of Technology, under its new owner, 878 Education, LLC, to award the Associate in Applied Science (A.A.S.), Associate in Occupational Studies (A.O.S.), Bachelor of Business Administration (B.B.A.), and Bachelor of Technology (B.Tech.) degrees on duly qualified students successfully completing registered programs for a period beginning immediately and ending on June 14, 2008, with the condition that, by January 14, 2008, it demonstrate to the Commissioner’s satisfaction its financial viability should it not be approved to participate in Title IV programs and the Tuition Assistance Program. Should Globe fail to satisfactorily demonstrate financial viability, the Commissioner shall recommend that the Regents terminate this grant of authority to award degrees.
Timetable for Implementation
If the Board of Regents authorizes Globe to award degrees under its new owner, the authorization will take place immediately. During the six-month temporary transfer period, the Department will complete its evaluation of the new owner’s application and its operation of the Institute, including a site visit. If the Department finds that Globe is “in compliance with the Education Law, program registration standards set forth in Part 52 . . . , other Rules of the Board of Regents and Regulations of the Commissioner of Education, other State statutes and regulations, and federal statutes and regulations, relevant to the operation of degree-granting institutions,” it will prepare a recommendation to the Board to grant that authority without term and with any condition that the Department may find necessary. If the Department finds the Institute significantly out of compliance, the authorization may be allowed to expire or, if necessary, revoked before the expiration date.
Findings
The findings below relate to (I) general and financial information about 878 Education, LLC, the purchaser of Globe Institute of Technology, and (II) its Plan for Operation of the College. A description of Globe’s present status is Appendix A.
I. General and Financial Information: 878 Education, LLC
878 Education, LLC is a Delaware limited liability company created for the purpose of purchasing Globe Institute of Technology. The findings about it are organized under the five standards set forth in §3.58(e)(6)(ii) of Regents Rules.
Standard (a) in §3.58 (e)(6)(ii)
: Evidence confirming the prospective owner’s capacity to operate the institution in compliance with the Education Law, program registration standards set forth in Part 52 of this Title, other Rules of the Board of Regents and Regulations of the Commissioner of Education, other State statutes and regulations, and Federal statutes and regulations, relevant to the operation of degree-granting institutions.
878 Education, LLC is a new company formed for the purpose of purchasing Globe. It is wholly owned by Marev Holdings, Inc., a Delaware corporation formed in 2000 as a private investment and management firm. Martin Oliner, Esq., owns 81.45 percent of Marev Holdings; the balance is owned by the Oliner Family Trust, of which Mr. Oliner’s wife, Reva, is the trustee. An organization chart appears as Appendix B. Mr. and Mrs. Oliner are the directors of 878 Education. They reside in Lawrence, Nassau County.
Martin Oliner is an attorney in practice in New York State. He holds J.D. and LL.M. degrees from New York University. Mr. Oliner is the chief executive officer of First Lincoln Holdings, a real estate, insurance, and investment firm. He was a founder of the San Francisco School of Osteopathic Medicine, which now is the Touro University College of Osteopathic Medicine. He has taught at the NYU Law School, New York Law School, and the Touro College School of Law. He has been a member of the Board of Trustees of Touro College for more than 15 years.
Reva Oliner has a B.A. degree and a master’s degree in education from Brooklyn College and was a doctoral student in education at Fordham University. She taught in the New York City public schools and at Brooklyn College. She is a trustee of the development board of St. John’s Episcopal Hospital, Far Rockaway, Queens.
Neither Mr. nor Mrs. Oliner has experience owning a higher education institution. However, Mr. Oliner has experience with not-for-profit institutions of higher education, both as a founder of the San Francisco School of Osteopathic Medicine and as a trustee of Touro College for over 15 years. In addition, the application states that the directors of 878 Education, LLC intend to expand the number of directors by adding persons experienced in higher education.
Mr. Oliner has indicated that 878 Education, LLC intends to maintain ownership of Globe on a long-term basis.
Standard (b) in §3.58(e)(6)(ii)
: Evidence confirming that the prospective owner has sufficient financial resources to ensure satisfactory conduct of degree programs and achievement of the institution’s stated educational goals.
As a new entity, 878 Education, LLC has no financial history. However, a review of Marev Holdings’ federal corporate income tax returns for 2004, 2005, and 2006 indicate that Marev has substantial net assets available to support the acquisition of Globe. Neither 878 Education, LLC nor Marev Holdings has a current corporate credit rating.
Standard (c) in §3.58(e)(6)(ii)
: Evidence of the prospective owner’s experience operating an educational institution or other business or enterprise in an effective manner which demonstrates the prospective owner’s capacity to operate a degree-granting institution.
As noted above, neither Mr. nor Mrs. Oliner has experience owning a higher education institution. However, Mr. Oliner has experience with not-for-profit institutions of higher education, both as a founder of the San Francisco School of Osteopathic Medicine and as a trustee of Touro College for over 15 years. In addition, the application states that the directors of 878 Education, LLC intend to expand the number of directors by adding persons experienced in higher education. The new owner has also agreed to retain the academic leadership at Globe. This academic team is acceptable to the Department.
Standard (d) in §3.58(e)(6)(ii)
: Evidence that postsecondary education institutions that the prospective owner operates in New York State or elsewhere, if any, are in compliance with Federal and state statutes and regulations and accreditation requirements relevant to the operation of such institutions.
The standard is not applicable. Neither Mr. nor Mrs. Oliner owns postsecondary institutions. However, Mr. Oliner is a trustee of Touro College, which is operating in compliance with federal and State statutes and regulations and is accredited by the Middle States Association of Colleges and Schools.
Standard (e) in §3.58(e)(6)(ii)
: Evidence that the prospective owner has not engaged in fraudulent or deceptive practices.
The Department’s review revealed no evidence of fraudulent or deceptive practices by 878 Education, Marev Holdings, or Mr. and Mrs. Oliner.
II. Owner’s Plan for Operation
878 Education, LLC plans no major changes to Globe Institute of Technology. According to the application, Globe’s mission will be to continue to “provide an education to students from diverse backgrounds, including those who have traditionally been underrepresented in higher education and to provide students with market-ready skills necessary for successful career entry, development and advancement.”
Globe’s November 2007 five-year financial plan projects full-time enrollment growing by an average of about 76 students per year, from 930 in 2008 to 1,235 in 2012. Globe uses a wide range of recruitment methods to reach potential applicants from area high schools and communities, as well as from European, Asian, and South American countries. Applicants must submit complete applications including all appropriate documentation. Students without a high school diploma or GED must take and pass the COMPASS or, if English is not their native language, the CELSA. These exams also are used for placement purposes. Once admitted, students are tested for placement unless they received a 550 on the SAT verbal and math or comparable scores on the ACT. Students with 15 or more credits with a 2.0 GPA from an accredited college are also exempt. Students are placed in math, reading, writing, or ESL based on the results of their placement exam results.
The new owner plans to continue to operate in Globe’s current approved locations in Manhattan and Monsey, as well as its extension sites in the Bronx, Brooklyn, and Queens. The Dean of Academic Affairs will supervise and monitor all extension site activities to assure compliance with the Commissioner’s Regulations.
While a President’s Council (consisting of the President, Academic Dean, Dean of Administrative Services, and Dean of Student Services) will be responsible for final policy determinations, Globe is committed to the full participation of faculty in the governance of the college. Under the Academic Dean’s leadership, the faculty is the professional body charged with devising, developing, and evaluating all academic programs. All full-time and part-time faculty attend the general faculty meeting at least once a semester. The Curriculum and Faculty Affairs Committee meets at least once a semester and more often as necessary to consider all matters relating to academic programs and the faculty. Assessment of faculty and student learning, achievement and skills will occur regularly. Globe will be continuing the implementation of the Institutional Effectiveness Plan to promote the quality of student achievement. The Institutional Effectiveness Plan describes the assessment measures and methodologies to be used through the annual Outcomes Assessment process. An area of assessment resulting in course revisions to strengthen student achievement was review of student performance in a sample of introductory and intermediate level courses offered sequentially in a specific subject area.
At the time of the institutional accreditation review in December 2004, the curricular objectives and student expectations were stated in the catalog, printed materials, and online. The syllabi and curricular materials that were supplied were standard curriculum materials expected from college programs. Globe has implemented an external review practice which is now part of the Institutional Effectiveness Plan.
At the time of the institutional accreditation review in December 2004, the faculty credentials were consistent with the disciplines faculty are teaching. There are no plans for any immediate faculty changes. When making hiring decisions, Globe will recruit, evaluate and hire based on educational and professional experience which will include a combination of an advanced degree in the appropriate field and years of both relevant teaching and professional experience. There are no planned curricular changes until 2011, when Globe will consider expanding its baccalaureate degree programs to include Sports Science Management, Legal Office Management, and Hospitality Management.
Appendix A
Globe Institute of Technology
A. Institutional Information. Globe Institute of Technology is a New York business corporation located in Manhattan. Established in 1994 as a non-degree school, it received from the Board of Regents in 1996 authority to award Associate in Occupational Studies (A.O.S.) degrees and to offer programs leading to that degree. In 2000, the Regents authorized it to award Bachelor of Technology (B.Tech.) degrees and to offer B.Tech. programs in the physical sciences. In 2002, the Board authorized it to award Bachelor of Business Administration (B.B.A.) degrees and to offer B.B.A. programs in business. In February 2007, the Regents authorized Globe to award Associate in Applied Science (A.A.S.) degrees and to offer associate degree programs in the health professions. The Commissioner has authorized Globe to operate an extension center in Monsey, Rockland County; it also operates extension sites in the Bronx, Brooklyn, and Queens.
Globe offers associate degree programs in business, the health professions, and the physical sciences and baccalaureate programs in business and the physical sciences. Between 1998 (when Globe received degree powers) and 2005, enrollment grew by 145.4 percent, from 681 students in the fall of 1998 to 1,671 in the fall of 2005. Enrollment declined to 1,238 in the fall of 2006. The preliminary report of enrollment for this fall (2007) is 997 students, of whom 975 (97.8 percent) are full-time. About 30 percent of the full-time students are Black or Hispanic. On average, Globe accepts about 95 percent of its applicants. Since 1998, it enrolled an average of 287 first-time students each year. The fall 2007 enrollment includes 251 first-time students.
B. Academic Information. It has a well qualified faculty that offers sound programs of study. It provides appropriate academic services to support the students it enrolls. Nearly all first-time students take at least one remedial course. However, the Department has begun a review of apparent violations of the Commissioner’s Regulations relating to off-campus instruction and program registration, especially with regard to its approved extension center in Monsey. A letter from the U.S. Department of Education (USDE) to Globe stated that “Information obtained from the students establishes that they were provided all of their courses for the associate degree program in Monsey. The students did not attend any classes in Manhattan.” If correct, this means that Globe operated a branch campus in Monsey in violation of the Commissioner’s Regulations. In addition, if USDE is correct, Globe has been offering an unregistered program in Monsey, the Regulations provide that “Curricula offered at each branch campus shall be registered separately from curricula at an institution’s principal center.”
The Department has required Globe to cease immediately offering full programs in Monsey. It has informed Martin Oliner of this action and Mr. Oliner has assured the Department that Globe is not currently offering full programs there.
The Board of Regents is Globe’s institutional accreditor; the present term of accreditation ends on May 17, 2008. Under the previous ownership, the Department has found that Globe did not meet graduation rate standards in 2005 and has directed Globe to prepare a corrective action plan. In addition, on the basis of USDE’s letter, the Department began a review of Globe’s compliance with the standards for institutional accreditation. It has informed Mr. Oliner of these actions. The results of the compliance review including the corrective action plan will be brought to the Board for a determination regarding Globe’s accreditation.
C. Financial Information. Since 2004, Globe’s tuition and fees for full-time students has been $9,136 per year. The five-year financial plan projects average tuition per student to be $16,425 in 2008 and to increase to $19,014 in 2012.
Prior to the USDE program review, Globe appeared to be in good financial condition. In 2005-06, it earned $3.3 million in net income on total revenue of $15.9 million, a 21 percent net income ratio. It had a strong 3.0 federal composite score for the last three fiscal periods, which is interpreted as financially responsible.
However, in 2005-06, Globe received 40 percent of its revenue through Title IV programs. USDE has directed it to provide a “closeout audit report” prepared by an independent auditor within 90 days of the determination letter. It appears this report must indicate all funds the college received through Title IV. It is uncertain what amounts and for how many fiscal periods will be included in their final disallowance. Because the Education Law limits participation in the Tuition Assistance Program (TAP) to institutions participating in the Title IV program, the New York State Higher Education Services Corporation has taken action against Globe regarding a potential TAP disallowance. TAP payments are currently being withheld.