Dive Brief:
- Idaho lawmakers should “request or file appropriate legal action” against the state education board’s plan to acquire the University of Phoenix through a nonprofit corporation affiliated with the University of Idaho, a lawyer for the Legislature wrote in a memo released last week.
- Last May, the Idaho State Board of Education approved the University of Idaho’s request to form a nonprofit corporation, now called Four Three Education, to acquire the University of Phoenix’s assets for $550 million.
- But in a 10-page memo, legal counsel Elizabeth Bowen argued that the state’s education board lacks the power to pursue this type of deal. Bowen recommended legal action unless the board abandons the deal altogether or seeks lawmaker approval for a different kind of transaction.
Dive Insight:
The legal memo is the latest example of mounting opposition to the deal. Bowen contends that Idaho’s education board doesn’t have the legal authority to acquire or own a private institution like the University of Phoenix — even indirectly through a nonprofit corporation.
“While this transaction is being described by its proponents as a mere ‘affiliation’ between the University of Idaho and the University of Phoenix, the transaction is, in reality, an acquisition by the Board,” Bowen wrote in a Feb. 22 memo.
Moveover, Idaho cannot directly create corporations, and lawmakers haven’t enabled its state entities to do so either, she argued.
The memo also pointed out that some documents related to the transaction deal provide conflicting information.
The minutes and bylaws of Four Three Education say that the state board is its sole member, according to the memo, though its articles of incorporation say its sole member is the University of Idaho. The corporation’s sole member has the power to appoint and remove its board of directors.
“It is my opinion that Four Three Education is not a valid corporation under Idaho law and does not possess legal existence,” Bowen wrote.
Bowen argued that the deal could put the University of Idaho on the hook for its liabilities. Corporations usually shield their members from liability, but they can’t offer those protections if they don’t legally exist, Bowen wrote.
“I have discussed my concerns about Four Three Education's legal existence with the University of Idaho's general counsel as well as the University's government affairs liaison,” Bowen wrote. “The University cannot, at this point, claim that it is unaware of these concerns.”
Mike Keckler, a spokesperson for Idaho’s education board, said via email Tuesday that Bowen did not contact either the board or its staff regarding the letter. Keckler declined to further comment, saying it would be premature to do so before a legislative hearing over the deal scheduled for later this week.
Bowen also pointed to a recently proposed legislative resolution that would urge the state’s education board to reconsider its approval of the deal. The bipartisan resolution, introduced by state lawmakers earlier this month, would allow legislative leaders to take “appropriate legal action” against the transaction.
The University of Phoenix acquisition is facing other legal troubles. Earlier this month, Idaho Attorney General Raúl Labrador filed an appeal to a recent court decision, reviving his legal challenge against the state board’s closed-door discussions over the deal.
