Month: June 2024

A 71.6 Million Dollar Question and More

US-based film and TV courtroom dramas have been beloved by the British for many decades.  From 12 Angry Men and My Cousin Vinny to The Lincoln Lawyer and Goliath they all seem so much more glamorous and edgy than Kavanagh QC and Rumpole of the Bailey.  But for organizations in the UK higher education sector, closer encounters with US law can be costly in financial or reputational terms, in a land where being separated by the same language may be just one of the problems.

The court case between INTO University Partnerships (INTO) and the University of South Florida (USF) began in 2022 and shows no sign of concluding any time soon.  Court filings have now given some insight into the amount of damages that INTO may be seeking.  Set alongside the legal costs, some of which will be considered at a hearing on July 161, there is a lot at stake.

Nearly 30 British universities have been listed as clients in a case bought by the United States of America ex rel HITROST LLC against Study Across the Pond, LLC and John Borhaug last month2.  The allegation is that their arrangements flouted a ban on incentive-based payments and that the defendants “knowingly caused” the universities to make false claims for federal student aid.  While the universities are not listed as defendants there are several issues they might want to consider about contractual arrangements and internal controls, if the Complaint is accurate.

It’s all the more important when the relationship between universities and agents is under closer Government scrutiny. While the sector is trumpeting its Agent Quality Framework (AQF) the concept of self-regulation may not be enough to prevent firmer regulatory oversight. Some issues around the AQF are considered in this blog.

The summaries and comments below should not be taken to imply any views on the merits of the cases or the legal issues involved. These are complex issues so references and links are given for those who wish to delve deeper.  Material is provided in good faith and will be amended if an authoritative source provides more accurate information.          

Runnin’ Down A Dream

The court case between INTO and USF3 has rumbled on since my last update in January 2024 and looks set to run for most of the rest of the year.  The foundations of this dispute were covered in my  first blog on the matter in August 2022. The case is still in the discovery phase and there are regular filings with arguments and counter-arguments from both sides.       

Perhaps the most interesting point is that there is now a dollar amount on the size of damages INTO may be seeking.  A filing by USF on 31 May4 notes “INTO’s damages report, by which it seeks $71.6m in damages…”.  This report is one of two produced by INTO experts, with the other considering the solvency of the joint venture.  USF has served its own expert report “related to damages it has suffered with respect to its counterclaim..”.

One impact of the expert reports is that there has been a request to extend the time for “rebuttal expert reports” from June 17 to July 11 with the 24-day extension then rippling through all other deadlines in the Discovery Schedule.  If agreed, that would lead to a deadline of October 31 for the completion of serving and  rebutting expert reports then filing and hearing dispositive and Daubert motions.  The motion notes that the extended time would also “facilitate the parties’ ability to resolve any open discovery issues..”.

While this continues, INTO is appealing5 against the summary judgement6 of the Court in favour of USF that “the SHA [Stockholder Agreement] terminated once USF sent the letter stating that it terminated the USA [University Services Agreement], a Project Agreement.”  In this judgement the Court made it clear that it was not deciding “..whether USF breached the USA or the duty of good faith and fair dealing when it terminated the USA in April 2022.  Counts II, III, IV, VII, VIII, IX, XII and XIII against USF remain for further disposition.” There seems to be a long way to go.

Do You Want To Know A Secret?

Before getting into some of the lessons and thoughts for universities raised in the Study Across the Pond (SATP) case there are some general and contextual points. The company filed a Certificate of Cancellation with the Secretary of the Commonwealth of Massachusetts in January 2024, citing the termination of business operations as the reason for cancellation. Across the Pond – Study in Britain Limited remains listed at Companies House in the UK with John Borhaug as a director and its website lists 86 UK universities.

The UK listed company is on the British Council Certified Agent database where it is noted “Education providers should seek appropriate legal advice on contracts” which may have some resonance for universities listed in the US proceedings. The database links back to the British Universities International Universities Association (BUILA) who worked with the British Council, Universities UK and UKCISA to establish the UK Agent Quality Framework (AQF). Unofrtunately, but perhaps symbolically, The Good Practice Guide for Providers Using Education Agents, link on the BUILA site leads to a 404 error page.

It is claimed that “Nearly all universities in the UK have now signed up..” for the AQF but as far as I am able to find no list of signatories exists which is hardly an aid to transparency for students. We know from Enroly that their partner Bangor University is one of them (more on that below) but this should be well-signposted information that is freely available. There are the usual signs here of a sector that would like to be left to self-regulate but which is less than well organized or communicative once the initial excitement and headlines caused by the announcement of a new initiative have passed.

Money Changes Everything

The Study Across the Pond (SATP) and John Borhaug case was covered by The PIE in early May and lists UK universities7 who were clients of SATP and “participated in federal student aid programs under Title IV of the Higher Education Act, and presented at least one claim for payment from those programs to the Department of Education between January 1, 2015, and the present.” Essentially, incentive/commission payments to agents are not allowed if a student is receiving federal student aid. While the universities are not defendants the allegations contain several pointers towards potential gaps in university processes, checks and balances.

Any case where there is a suspicion that universities “made false statements” or “withheld information” to independent auditors must be taken seriously.  Assertions that the institutions were submitting “false and fraudulent” claims to the US Department of Education which were “actively violating the Incentive Compensation Ban” should be ringing alarm bells at the most senior levels. Issues around internal financial controls, fake contracts and purchasing disciplines are at stake even before you get to potential reputational damage.

One of the more detailed examples involves Bangor University.  The Complaint suggests that in February 2019 the university agreed to pay commission to SATP for recruiting students, including those from the United States.  It is alleged that in early 2020 the University asked if it could put a ‘Marketing Agreement’ in place for the US “in case of audit by [the Department of Education]” with the agreement presented as being a flat rate while accepting that the amount payed would be “the equivalent of what commission would have been.” 

In March 2022 the university was considering what material to provide the Department of Education as part of its re-certification application.  The Complaint asserts that “Bangor University’s Head of International Recruitment told that employee not to send the Department the original 2019 tuition-sharing contract with defendant Study Across the Pond.”  It is claimed that this document was not sent, “effectively hiding its incentive compensation arrangement with the Defendants from the Department of Education.”

While several universities appear to have queried the legality of commission payments in the context of the Incentive Compensation Ban they seem to have accepted the word of SATP who, “consistently advised foreign schools, including the Defendants’ Clients, that their activities were not subject to the Incentive Compensation Ban.” However, the universities with concerns were invited to enter into “sham contracts” that purported to provide an annual fee for general marketing and promotion with the proviso that “the annual fee happens to be the equivalent of ‘commission’ on any students on the lists who actually enrolled.”  Phrases like “play it safe”, “in case of audit” and “..as long as we (university and [S]ATP) understand how the annual amount is calculated then that’s all that matters, since it won’t be written into a contract of any kind” were allegedly used in communications.  

This type of language should have been troubling for the international office teams and any senior university officials they discussed contracts with. If the universities were acting in good faith in accepting SATP’s advice about their status as not being subject to the Ban there would seem to be no reason for changing the contract. Changing the contract to deliberately obscure the basis of the payments seems a slippery slope which seems difficult to justify.

Finance Directors in the institution may be asking how payment was being signed off and by who when a “fixed fee” contractual sum became a different amount to match the unwritten commission payment.  This seems an inevitable consequence of the arrangements put in place.  It may also be interesting to watch whether the US Department of Education allows universities that, it is alleged, participated in this behaviour to continue to be certified in the context of the Direct Loan Program.

NOTES

All the sub-headings are song titles from songs. Sequentially, the original artists were Tom Petty (as a solo artist), the Beatles (written by Lennon and McCartney but sung by George Harrison), and The Brains (although probably better known for the cover version by Cyndi Lauper).

  1. Filing # 198160868 E-Filed 05/13/2024 12:07:44 PM
  2. Case 1:21-cv-10274-ADB in the United States District Court for the District of Massachussets
  3. The terms INTO and University of South Florida are used as short forms for the range of corporate plaintiffs and defendants. Full details and all public documents reference in this blog can be found through https://hover.hillsclerk.com/html/case/caseSearch.html the Hillsborough County Clerk of Courts search facility. Insert 22 for the year, CA-Circuit Civil for the Court type and 006001 for the case number.
  4. Filing # 199628319 E-Filed 05/31/2024 05:41:44 PM
  5. Filing # 198701412 E-Filed 05/20/2024 02:01:54 PM
  6. Order Granting Summary Judgement. January 31, 2024
  7. The full list is Aberystwyth University, Bangor University, University of Brighton, Cardiff University, University of Chester, University of East Anglia, Edinburgh Napier University, University of Essex, University of Exeter, University of Greenwich, University of Hertfordshire, University of Kent, Kingston University, University of Lancaster, University of Leeds, University of Leicester, University of Lincoln, University of Liverpool, Loughborough University, Oxford Brookes University, University of Reading, University of Sheffield, University of Southampton, University of Stirling, University of Strathclyde, Swansea University, University of Winchester, and University of York.  

Image by Gerd Altmann from Pixabay

Roll on up for the greatest show in UK higher education

Text first published in University World News (08 June 2024)

The roller coaster ride of political fortune and its impact on international student recruitment continues to create a feeling of instability in higher education sectors across the globe. With talk of banning ‘Mickey Mouse degrees’ a feature of United Kingdom Prime Minister Rishi Sunak’s opening week of pre-election policy statements, the amusement park comparisons seem increasingly apt.

Particularly so when universities around the world seem addicted to pursuing gravity-defying, adrenaline-fuelled recruitment targets where the risks may increasingly outweigh the benefits.

More troubling is the possibility that the failure of universities to engage sufficiently to gain widespread public support has left them open to increasing levels of political game-playing and interference.

In several countries the fundamental value of universities and degree-level education is being questioned as never before and the intersection with immigration policy has become a toxic mix.

Where these problems are compounded by economic difficulties and a disinterested or increasingly hostile public, there is a real need for institutions to avoid being seen as theme parks run by the aloof, rich and privileged.

A Very British problem?

Universities around the UK have been finding it difficult to know whether to groan about the ending of dependant visas for postgraduate students or cheer as the Migration Advisory Committee and government confirmed that the Graduate Route to post-study work remained
open.

Politicians are sending conflicting messages, with Lord Cameron, the foreign secretary, saying: “There’s no limit on the number that can come” and aligning with Lord Bilimoria who called for ‘one million [international] students’.

Meanwhile, Lord Jo Johnson, an ex-education secretary and chair of FutureLearn whose seat on the Apply Board advisory board gives him a wider range of perspectives, cautioned: “The economic benefits are not enough to offset wider political concerns.”

In a recent blog, I drew several comparisons between the current dynamics in the UK and the themes of the 1987 British cult classic film Withnail and I. Critically, one character says: “Politics, man. If you’re hanging onto a rising balloon, you’re presented with a difficult decision. Let go before it’s too late or hang on and keep getting higher, posing the question: how long can you keep a grip on the rope?”

Some institutions are a long way from the ground, with the University of Hull, as just one example, registering a year-on-year increase of 1,207% (from 70 to 915) in students from Nigeria in 2021-22.

The folly of relying on continued growth at such pace is clear. Even before the restrictions on dependant visas, it was evident that some Russell Group institutions could not compete for recruitment from key markets with their better-placed peers in the group. They will be forced to hunt further afield for students and their presence will bring harsh competition for universities further down the feeding chain.

This comes at a time when recent agent surveys by INTO have indicated that the UK’s relative attractiveness, compared to the United States and Australia, has declined substantially since 2021.

The 65% year-on-year decline in the Nigerian naira against the UK pound has put a far more serious dent in recruitment than the loss of dependant visas.

A growing propensity for students from China to consider alternative countries and the affordability advantages of nations outside the big four recruiting countries are a growing drain on valuable sources of student interest.

Successive generations of international officers have found that economic swings are par for the course. The decline of the Tiger Economies in the late 1990s was a significant factor and there have always been ebbs and flows in national currencies, government sponsorship and other factors.

It seems possible, however, that we are now seeing more fundamental and long-lasting change and that the era of, what some consider, academic imperialism is in an accelerating doom loop.

Sticking plasters for structural failures

A subplot, as reported in University World News in March, has been the announcement by over 50 British universities of cutbacks and redundancies, which created an unlikely alliance between unions and university bosses seeking additional government funding.

However, the BBC noted this week that “universities in Yorkshire and Lincolnshire have spent over £100 million [US$128 million] making more than 6,000 staff redundant since 2015”. That raises the reasonable question as to whether some institutions with long-term declines in attracting domestic students because of courses, locations and-or poor management, have used international fees as a sticking plaster to cover wounds requiring surgery.

It’s a complex situation where the fundamental structure of UK higher education and its funding are coming under closer scrutiny. With political and public support far from guaranteed, this has led some voices in the sector to suggest that a more constructive approach would be to recognise and respond to broader concerns and constraints.

Professor Wendy Alexander, vice-principal (international) at the University of Dundee, suggested a need to be more “self-reflective”; David Pilsbury of Oxford International Education Group has said that “we still talk to ourselves too much”; and Chris Husbands, former vice-chancellor of Sheffield Hallam University has cautioned that “we can’t expect to be given more simply to carry on doing the things we are doing”.

Before the announcement of an election and the removal of a threat to the Graduate Route, the sector seemed willing to consider these points. Subsequently, it has gone very quiet on issues such as data transparency, grade inflation and preferential treatment for international students with lower A-level grades or equivalents.

This seems a retrograde step at a point when the Conservative Party is campaigning on a platform that could close down one in eight university courses and the Labour leader has clarified a political choice to fund the NHS rather than reduce or eliminate tuition fees.

It Could Be Worse

Despite all of the above, it seems possible that the relief provided by an intact Graduate Route combined with visa issues and poor publicity in Australia and Canada could come to the rescue of the UK.

Research has shown that students are applying to more countries and it is likely that they are willing to hold out on decision-making until the last possible minute.

The US stepping up its game in terms of visa meetings in India may be another fly in the ointment for competitor countries, although there are late-breaking rumours of a deterioration in recruitment from India that will be bad news for everyone.

If the UK sector has been on a roller coaster ride, both Australian and Canadian institutions could probably make a case that they have whiplash from hastily introduced and poorly considered policies. It all seemed so promising for Australia when the Universities Accord report was produced in February 2024 and seemed to produce exactly the sort of long-term framework universities would prefer to guide decision-making.

However, Mark Scott, vice-chancellor of the University of Sydney, immediately noted that, despite underfunding being acknowledged, “it is perplexing that the only revenue-raising measure proposed is a tax on universities themselves”.

Since then, the destabilising Draft International Education and Skills Strategic Framework, with a cap on international enrolments from January 2025, has drawn strong criticism and both major parties have been competing in their anti-immigration rhetoric, with international student recruitment caught in the crossfire.

Actions on “non-genuine students”, spikes in visa rejections, changes to students’ proof of savings, threats of “significant” rises in visa fees and arguments over the impact of international students on housing availability are just some of the issues. It’s a potent cocktail that can be nothing but damaging for recruitment.

In Canada, the January 2024 federal government announcement of a two-year intake cap on international student recruitment was balanced by the exclusion of postgraduate students and the availability of an extended three-year post-graduation work permit.

There seemed little doubt that the changes mitigated against private colleges and the doubling of the cost of living requirement for students was an overdue but unwelcome addition. Had it ended there it seems possible that the storm may have blown over.

But the underlying tensions about routes to permanent residency flared again in May, with Prince Edward Island’s changes to the process leading to protests and even hunger strikes.

As with Australia, there have been, at federal and provincial level, assertions about rapid international student growth bringing “… pressure on housing, health care and other services”.

Little wonder that IDP’s Emerging Futures research from March 2024 suggested that Canada had suffered most in terms of student popularity at that time.

IDP’s research also pointed to the US becoming the top-choice destination for the first time and being the top choice for prospective students considering changing their choice of study destination.

After issuing more student visas in India in 2023 than ever before, the US embassy in India started two weeks earlier this year and increased capacity to meet demand. The US for Success Coalition is mounting a letter writing campaign urging Congress to “improve student visa processing delays and high denial rate in the Global South”.

Castles in the air or feet on the ground?

The three recruiting countries reaching levels of international student intake that are a material percentage of overall recruitment and tuition fee income seem to have reached a tipping point where government attention is increasingly focused on economic, social and political consequences.

Anti-immigration rhetoric, perhaps driven by genuine public concern, is one aspect of this, but there is a broader sense that the role of higher education in a country’s broader economic and workforce planning cannot be left to an untidy aggregation of autonomous, self-governing organisations.

Institutions must take care not to allow themselves to be positioned as educational amusement parks where ivory towers have replaced magic castles and attracting more, higher-paying customers has become more important than their domestic stakeholders.

Alan Preece is an expert in global education, business transformation and operational management and runs the blogging site View from a Bridge.

Image by Pasi Mämmelä from Pixabay