From Committee Chair to Boardroom

John Kline, former Republican chair of the House education committee, served on ECA's board. He blames the Education Department for not doing enough to keep the for-profit chain afloat.

December 21, 2018
 
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Former representative John Kline

As the for-profit college chain Education Corporation of America navigated financial turmoil, accreditation challenges and federal sanctions during the past two years, it drew on the expertise of a board member with deep experience in federal higher education policy.

John Kline, chairman of the U.S. House of Representatives' education committee from 2011 through 2017, took a paid position on the company’s board shortly after retiring. Avy Stein, ECA's chairman, invited Kline onto the board.

In an interview, the former Republican congressman from Minnesota said the company's role was attractive -- he liked its efforts to get students through career education programs and into jobs, faster. But Kline was not happy with the demise of ECA, which shut down earlier this month. And he said the U.S. Department of Education deserves a good share of the blame for the closure of ECA’s 70 campuses.

Kline said he called lawmakers in the Senate and House to argue that Education Secretary Betsy DeVos should rescind a restriction placed on the chain's federal student aid money -- known as heightened cash monitoring two -- after it entered receivership due to a deteriorating financial situation. Some government watchdog groups questioned his role on the board, although Kline wasn't ultimately successful in getting the company get the relief from federal sanctions.

“I thought this was absolutely a no-brainer,” Kline said. “The HCM2 decision was an issue of secretarial discretion. All the secretary had to do was rescind the HCM2 requirement and the normal Title IV funds would flow.”

Kline said dysfunction at the Education Department was behind its inaction. If DeVos had acted, he said, nearly 20,000 students wouldn’t have seen their programs suddenly close.

“There was a failure to communicate between different offices of the department,” he said. “I don’t think some of the staff are serving the secretary well.”

After announcing in September that it would close about 30 campuses in a bid to stay afloat financially, ECA's situation continued to deteriorate. The company also filed a lawsuit against the department, which a federal judge eventually tossed, before entering court-approved receivership.

That move prompted ECA's accreditor to suspend its recognition and the department to place new restrictions on federal aid funds. That week the for-profit chain said it was out of money and would close its doors. Kline called the federal aid restrictions the “kiss of death.”

But the Education Department said the aid restrictions were triggered when the company entered receivership. And Liz Hill, a spokeswoman for the department, pushed back on Kline’s claims that dysfunction at the agency had anything to do with ECA’s collapse.

“The problem is that ECA is financially unstable and recently convinced a federal court to place it in receivership because it cannot meet its financial obligations,” she said. “Although Mr. Kline and others heavily lobbied the department to remove ECA from HCM2, the facts show that doing that would not be in the best interests of students or taxpayers. Once again, the secretary has promised a level playing field for schools, nothing more.”

Revolving-Door Concerns

Government watchdog groups took issue with Kline’s role. They said it raised questions about how a sector that’s received heavy scrutiny from Congress and multiple federal agencies seeks to wield influence in Washington.

“This is perfectly legal within our inadequate revolving-door policies, and it is in effect abuse of the revolving door,” said Craig Holman, the government affairs lobbyist at Public Citizen, where he advocates on campaign finance and government ethics.

The practice is also fairly common, Holman said, although it’s not clear how many former lawmakers join corporate boards after leaving Congress. Former lawmakers who lobby in D.C. must register as lobbyists and abide by a one-year “cooling-off” period before contacting former colleagues or staff on behalf of clients.

About 43 percent of former congressional lawmakers end up registering as lobbyists, Holman said, but numbers aren't available for those who serve on corporate boards. There are no reporting requirements for those positions.

Meredith McGehee, executive director of Issue One, said when a committee chairman takes a position on a corporate board, the arrangement is even more deserving of scrutiny.

“It raises the specter of someone using their public service to cash in,” she said.

But Kline rejected the notion that there was anything untoward about his role.

“If you take that kind of approach, nobody who has any experience in any field or endeavor would ever be put on any board of any kind,” he said. “That’s what that kind of thinking leads to. It makes no sense to me.”

Kline also said he hasn’t lobbied on ECA’s behalf because he’s never worked on any legislation.

“Talking to people who you know and trying to figure out what’s going on, that’s not lobbying,” he said. “That’s just doing my duty as a member of a board.”

Holman said that’s a distinction without a difference.

“Kline was employed by, or otherwise serving at the behest of, the Education Corporation of America and reached out to make lobbying contacts with numerous covered officials under [the Lobbying Disclosure Act] in pursuit of a policy change in the interest of the company,” he said. “That is lobbying.”

Steve Gunderson, president and CEO of Career Education Colleges and Universities, the top lobby group for the for-profit sector, said he didn’t see a problem with Kline's board position. Gunderson himself is a former lawmaker who served for 16 years in the House.

“I think if you would do the research, you would find that many members of Congress of both parties serve on various boards,” he said. “In this case, it was a labor of love certainly and not a labor of financial reward for John Kline.”

After ECA's collapse, Gunderson took the company to task for its shutdown. But he said rather than determine who was at fault, he wants to figure out how to make college closures work better for students, possibly through new legislation.

“I am hopeful that through reauthorization process the Congress will step back and say, ‘Look, nobody wants school closures. They're bad. We know that. But how do we fix this process?’” he said.

There was little indication before ECA filed its October lawsuit of how bad things had gotten. The chain said its decision to close about a third of its campuses by the end of next year would put it on more sound financial footing.

But Kline said the financial squeeze continued to tighten. And before attempting to downsize, the company was sinking money and resources into efforts to find a new accreditor. The Accrediting Council for Independent Colleges and Schools, which oversaw all but one ECA campus, had been on the ropes since 2016. The Obama administration that year withdrew the accreditor’s recognition in response to oversight failures involving Corinthian Colleges and ITT Technical Institute.

Like many other ACICS-accredited institutions, Virginia College, ECA’s biggest chain of campuses, earlier this year sought approval from another accreditor to maintain its access to federal student aid. But the chain's application was rejected in August by the Accrediting Council for Continuing Education and Training. That agency cited concerns about student outcomes, including poor graduation and job-placement rates. And those findings prompted ACICS to put Virginia College on show-cause status, a precursor to more serious sanctions.

ACICS suspended the accreditation of ECA colleges in December -- a decision it could have appealed. But that also meant forking over a $10,000 fee, and the company by then said it didn't have the money to keep campuses open past December.

Last month DeVos restored recognition for ACICS. But Kline said he was frustrated by the uncertainty over ECA's primary accreditor. Its accreditation status shouldn’t have been uncertain for so long, he said.

“ACICS should never have been hanging out there in limbo for months and months and months,” he said.

And Kline argued that accreditors have been pushed into policing federal aid, which he said shouldn't be their role.

“You’ve got these accreditors competing to see who can be the toughest,” he said. “That’s a bad place for anybody, any school to be in.”

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