UA President Robbins OK'd online school deal despite red flags. It's costing the university $265M

When the University of Arizona announced its acquisition of Ashford University, a for-profit online college with a history of fraudulent marketing practices that saddled students with debt and questionable degrees, administrators assuaged dissenters with a promise: The beleaguered school would increase student diversity and provide a guaranteed source of revenue.

But less than four years later, as the public university stares down the barrel of a multimillion-dollar budget shortfall, the merger is coming into focus as a significant contributor to the university's financial instability.

The online university — rebranded as the University of Arizona Global Campus, or UAGC — has yet to turn a profit for UA. Instead, it has added hundreds of millions of dollars to the university’s costs after Zovio, the educational technology company that ran UAGC's operations, shut down last year.

Meanwhile, enrollment in the online university has plummeted since the start of the acquisition, with the online school hemorrhaging about a third of its student body in less than four years. Still, UA and UAGC officials both say they are betting on an enrollment boom.

A trove of public records surrounding the initial merger in 2020 obtained by The Arizona Republic shows UA President Robert Robbins and top university officials were aware of the online school’s concerning trajectory, including a downward enrollment spiral that began years before and dismal graduation and retention rates.

But they instead focused on creating a public relations campaign that would obscure the deal’s risks and make the merger palatable to faculty members. Months before it was announced, Robbins was making plans for dinner at his home to discuss the deal with executives of the online university's managing company, one of several overtures between the leaders.

Early on, those pushing for the deal knew it would face tough questions.

“Do you know the current retention and graduation rate at Ashford?” Brent White, one of the university officials responsible for the merger, wrote to another university official in a May 29, 2020, email. At the time, the six-year graduation rate was 9%.

“The Wikipedia page on Ashford reads like a hit job ... We really do need a PR firm immediately.”

The acquisition that was finally completed last year added $265.5 million in operating costs to the university’s budget in 2023, moving the school’s acceptable level of working capital squarely into the red, according to UA’s November presentation to the Arizona Board of Regents, the governing body that oversees the state’s public university system.

But school officials and members of the Arizona Board of Regents — the public entity tasked with vetting the deal — defend the deal as a boon for UA’s finances, even going so far as to question the relevance of the metric the board itself designated to determine the financial health of a public university.

John Arnold serves as both executive director of the Arizona Board of Regents and as UA’s interim CFO; he was appointed to the temporary position in December after the board determined the university’s financial health had fallen below an acceptable threshold.

But in an interview with The Arizona Republic, he seemed to question the premise for his appointment.

“What's more important — days cash on hand or total cash and the direction of your cash balance?” Arnold said.

He said the influx of cash UAGC provided when acquired outweighed the strain the deal placed on the university's overall financial health. UA received a one-time payment of $47 million when the deal was finalized last June. Before that, the university received $20 million from the contract in fiscal year 2021.

“To date, UAGC has been nothing but a positive financial impact on the university,” Arnold said.

In November, UAGC predicted an operating deficit of $18.3 million, according to the most recently available data. Arnold said that predictions for the 2024 fiscal year now leave the online school operating at only a $2.5 million deficit. University officials promise to make the operation profitable again by 2025, while pointing to significant cost-cutting measures that UAGC will have to immediately implement.

The university addressed the online school in December when it proposed a plan to immediately correct its budget shortfall, saying officials were eliminating administrative and program redundancies at UAGC by folding it into the university’s operations.

But decreasing student numbers in the 2024 state enrollment report raise questions about the quick turnaround school officials promise. The school has dropped to 24,300 students from about 35,000 students in 2020, when the acquisition was announced.

University officials don't have a clear answer as to how UAGC will ramp up enrollment numbers while making major operating cuts, including a hiring freeze.

“There was a declining (enrollment) trend when this acquisition was made in 2020,” said Gary Packard, the interim senior vice provost of online initiatives, overseeing both UAGC and Arizona Online. “It was unrealistic to think that to change a brand, to change ownership would stem that.” 

As to why university officials would push to acquire an entity that had substantially declining enrollment numbers — while simultaneously promising faculty that the acquisition would financially revitalize the institution — Packard complimented the question before responding.

“It was purchased for its future potential,” he said.

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A reputation gamble for UA

Years before the merger, what was then Ashford University was an incredibly profitable enterprise. By 2012, the for-profit university was banking over $120 million a year with peak enrollment numbers of 80,000 online students, according to legal documents.

But what seemed like a no-fail operation came crashing down in 2017 when Ashford and its then-parent company, Zovio, came under the scrutiny of the California Attorney General’s Office for using fraudulent sales practices to rope in vulnerable students. In 2022, a San Diego County Superior Court judge fined the school $22 million for luring in students with false promises and illegal tactics.

Now — under pressure to correct the financial course for the university while making good on the 2020 promise to transform UAGC into an “engine of economic mobility” — UAGC faces increased scrutiny to turn a profit while not repeating the mistakes that led to Ashford’s downfall.

“The struggle this university is facing by trying to make this work has not gone unnoticed,” said Robert Shireman, an adviser to the United States Department of Education and senior fellow at The Century Foundation, a policy group that researches higher education.

“Other universities may not be as quick to close their eyes to the potential implications of purchasing a for-profit university and may be increasingly skeptical of claims that this type of operation will bring in a lot of revenue without strings attached. It’s not so easy to do this.”

Members of the university’s faculty — many of whom were staunchly opposed to the initial merger for both ethical and financial reasons — say department cuts and hiring freezes offered by university leadership as one way to remedy the multimillion-dollar shortfall effectivity punish the university’s academic departments for the administration's blunders.

“We, the academic units, are the ones subsidizing the administration’s mismanaged gambles and jaw-dropping incompetence,” said Leila Hudson, chair of the Faculty Senate. The group recently requested an external audit into the allocation of funds within the university.

“At this point, I would say our vote-of-no-confidence meter is off the charts.”

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Faculty advised administrators about troubling warning signs

Public records related to the merger show how university officials sought to focus on positive aspects of the deal while downplaying the online school’s deficiencies.

Robbins focused on building personal relationships with Zovio's top executives, according to multiple email threads, while other top leadership crafted a careful narrative about the merger and rebranding initiative. UA did not make Robbins available for an interview about his involvement with UAGC despite multiple requests.

“I think the best (maybe only) PR strategy is the following: Complete takeover and reorganization ... with a wholesale rebrand,” John Paul Jones, dean of the UA’s College of Social and Behavioral Sciences, wrote in a May 2020 email thread discussing the best way to disassociate UAGC from its tarnished predecessor, Ashford. “A clean break ... will smell better.”

“Thanks for thinking deeply about this. We all agree the comm strategy is key,” responded Jeff Goldberg, another university dean and special adviser to Robbins who was part of a select group of university leaders briefed about the then-secret plan to merge with Ashford.

The email thread was titled “antelope,” a code name for Ashford the internal group of university leadership had devised to add another layer of secrecy to early conversations. Those involved in early discussions of the acquisition signed nondisclosure agreements, which officials have since said were required to meet U.S. Securities and Exchange Commission rules to keep the deal private as Zovio was a publicly traded company.

“FWIW, I think we will get a S*storm from both faculties if they think we are going to merge them,” Liesl Folks, UA’s then-provost and one architect of the merger, added to the email thread about a public relations strategy that would be least likely to elicit resistance from the UA’s faculty.

Still, leadership privy to the secretive negotiations expressed serious reservations.

“Are [we] boarding a sinking ship?” Andrew Schulz, UA’s vice president for the arts, wrote to former provost Liesl and White in June 2020, two months before it was publicly announced.

Paulo Goes, a professor and dean of the Eller College of Management who was among a select group of faculty members consulted about the then-prospective merger during the summer of 2020, presented an analysis of the Ashford deal to university leadership. It described the online university’s revenue trajectory as “dismal.”

“It competes in the crowded market of low level, open access online education, and has not been innovative ... What makes us believe that the trend will be reverted by just associating with UA and keeping the same business model and practices?” Goes, now a professor emeritus, wrote in the seven-page analysis.

Goes — who explicitly sidestepped what he called Ashford’s “severe reputation issues” in his analysis to focus solely on the financial risks at stake — also pointed out the online school’s “abysmal retention and completion rates.”

Before UA acquired the online school, its retention rate was 23% among first-time full-time students. The six-year graduation rate was only 9%. UA officials have argued that the data is not indicative of the school’s true performance because the Department of Education excludes the majority of the school’s population in its data — transfer students.

“Ashford is not designed and operationalized to advance students towards success,” Goes wrote in his June 2020 analysis of the merger, adding there is “no evidence that the small percentage of students who graduate are equipped with knowledge and necessary certifications.”

Administrators orchestrating the deal thanked the faculty members for their feedback but continued a definitive countdown toward the merger, framing it as an “engine of economic mobility.”

“The only (way) we stay an R1 university is by expanding our revenue possibilities,” said Lynn Nadel, a regents professor emeritus who was involved in the decision-making process, using the designation that refers to UA’s status as a top-tier research university. “This is our attempt to do that on the cheap.”

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Part of UA’s motivation appears to come from the success of its rival in Tempe.

Since merger talks started, and even today, university officials have pointed to the success of Arizona State University’s online program as a hopeful precedent for what UAGC can become.

“Look at what Arizona State University has done with their online enterprise,” said Packard, who said the “scalability” of the online model has the potential to push student growth into the “six figures.”

ASU’s online programs serve 66,000 students, more than 40% of its enrollment. And ASU’s online presence has grown by nearly 50% since 2019, far outpacing UA’s online enrollment of about 9,000 students — excluding UAGC.

“That could never scale to what ASU has unless we did something dramatic like this,” Nadel said.

A ‘personal relationship’ as deal comes together

Ties between Robbins and the former CEO, president and founder of Zovio, Ashford’s defunct parent company, were at the heart of the merger’s inception, according to public records tracing the 2020 deal.

“I’d like to begin developing a personal relationship with you and understand your vision for online learning at UofA,” Andrew Clark, the former head of Zovio, wrote to Robbins in an April 2020 email exchange. Throughout their communications, Clark addressed Robbins as “Bobby.”

“I very much look forward to seeing you next week by Zoom,” Robbins responded. Over the next few months, Robbins followed up with a series of in-person and remote meetings with Clark, culminating in the blueprint for the UAGC merger.

In one particularly personal exchange, Robbins, Clark and White, then vice provost of UA and an architect of the merger, discussed menu preferences for an in-person dinner at Robbins' home in Tucson in April 2020 to talk about the deal.

“We could then meet at Bobby’s home at [redacted] for dinner,” White wrote in an April 28, 2020, email to both men to arrange the evening.

“Please let us know if you have any dietary restrictions,” White asked Clark on behalf of himself and Robbins.

“No restrictions! Not a fan of olives or beets. Other than that I’m good,” Clark emailed back.

“We’ll cancel the beet salad,” White responded.

Since 2020, UA faculty members have expressed discomfort with the “backroom deal” nature of the UAGC merger, criticizing university leadership, including Robbins, for what they viewed as a clandestine approach. Mistrust among faculty has only increased over the last few years, several faculty members told The Republic.

While Robbins has denied accepting any finder's fee for the Ashford merger and acquisition, he did receive a $45,000 bonus on top of his $816,000 salary from the Board of Regents for completing the UAGC transaction by June 20 of last year, according to public records from the board’s September meeting.

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Despite his instrumental role in initiating and completing the UAGC transaction, Robbins has largely avoided speaking publicly about the deal or his role in it, instead punting the topic to other university officials.

Sidelining Robbins from speaking about the merger seems an intentional part of the communication strategy around the deal.

In one email exchange from August 2020, after news of the merger went public, university officials, including White, criticized Robbins for a rare interview he gave a reporter about the merger.

“Bobby is Biden-like when he talks. I always hold my breath,” White emailed one of his colleagues about Robbins' use of a baseball analogy to explain the UAGC merger to the Wall Street Journal.

Officials have left UA as school faces financial crisis

While Robbins is not quick to speak about the merger, other officials who backed the deal — including White, who abruptly left his post at UA in December of 2021 and relocated to Hawaii — have readily defended the acquisition in public.

Arnold, the most recent university appointee to tackle media questions about the merger and UA’s current financial crisis, said the online school is on track to turn a profit of between $3 million and $5 million by 2025.

“We would be in a worse financial situation if not for UAGC,” Arnold told The Republic, pointing to the $47 million in cash the university received when it acquired the school from Zovio last year.

Since UA’s financial troubles came to light in November, multiple top officials have left their positions.

First, UAGC President Paul Pastorek stepped down, replaced by Packard, who oversees both UAGC and Arizona Online. Pastorek had also led UAGC throughout the merger as interim president.

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While Packard oversees both Arizona Online and UAGC, the university’s online program exists separately from UAGC, which officials have repeatedly assured does not create competition between the two. Graduates of UA’s online program receive a diploma from the University of Arizona. The Global Campus degrees come with a UAGC distinction.

The school’s website says Packard’s role ensures “consistent strategic oversight and coordination of the university’s online initiatives.”

The change comes as UA takes on some of the responsibilities once held by Zovio through a 15-year contract that promised a portion of tuition revenue from the school in exchange for technology services. Zovio provided support for schools like the University of San Diego and the University of Oklahoma before eventually shuttering in 2022 after it was successfully sued multiple times for deceptive marketing practices.

Later in December, Robbins announced he had accepted Chief Financial Officer Lisa Rulney’s resignation. A month later, The Arizona Daily Star reported that Rulney stayed on the university’s payroll in an advisory position.

University Athletic Director Dave Heeke will leave Feb. 2. Previously, the university defended giving $40 million to the athletic department, which it will have to pay back to the university for the next 15 years.

The Board of Regents will hear findings from Arnold on Thursday about what he has learned and how the school’s corrective financial plan is developing.

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Hannah Dreyfus is an investigative reporter for The Arizona Republic. You can reach her at hannah.dreyfus@arizonarepublic.com.

Helen Rummel covers higher education for The Arizona Republic. Reach her at hrummel@azcentral.com. Follow her on X, formerly Twitter: @helenrummel.

This article originally appeared on Arizona Republic: How University of Arizona Global Campus deal has affected UA finances