Meeting of the Board of Regents | January 2009

THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

 

TO:
FROM:	Johanna Duncan-Poitier
SUBJECT:	Globe Institute of Technology: Authority to Confer Degrees
DATE:	December 30, 2008
STRATEGIC GOAL:	Goals 2 and 4
AUTHORIZATION(S):

 

SUMMARY

 

Issue for Decision

 

Should the Board of Regents extend Globe Institute of Technology’s temporary authority to confer degrees?

 

Reason for Consideration

 

Required by State Regulation

 

Proposed Handling

 

This question will come before the Higher Education Committee at its January 2009 meeting, where it will be voted on and action taken.  It will then come before the full Board at its January 2009 meeting for final action.

 

Procedural History

 

At its December 2008 meeting, the Board of Regents extended Globe Institute of Technology’s temporary authority to confer degrees for sixty (60) days.

 

At the December meeting of the Committee on Higher Education, the Regents requested that the Department examine the financial viability of the parent corporation that owns Globe Institute of Technology. Concern was expressed that the severe financial crisis may negatively impact the ability of the parent corporation to adequately support the college due to a loss of corporate assets or because other businesses owned by the parent corporation could create a financial strain on the parent corporation. 

 

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. 

 

In November 2007, the Department  reviewed Marev Holdings’ federal corporate income tax returns for 2004, 2005, and 2006. It was determined that Marev had substantial net assets available to support the acquisition of Globe.  Marev Holdings does not have a current corporate credit rating since they do not borrow funds to support their businesses. On the basis of that review, it was determined that the parent corporation (Marev Holdings) could support the operation of Globe Institute of Technology.  In addition, the financial resources of the parent corporation are sufficient to settle any federal or State student financial aid disallowances incurred under the previous ownership of Globe.

 

In December 2008, the Department’s Office of Audit Services reviewed the December 31, 2007 financial statement of Marev Holding Inc. and Subsidiaries. As of that date, the Company was in a very strong financial position with significant assets and very limited liabilities in relation to its assets. The make up of the assets were primarily cash and cash equivalents.  In addition, the Department has also received a letter from the accountants for Marev asserting that, based on information provided by management, there have been no material changes in the composition of the assets and liabilities from December 31, 2007 until December 16, 2008.  The Company is not reliant upon borrowing to operate Globe or its other businesses. As such the tightening of the credit market will not have a material impact on the ability of the parent corporation to support Globe Institute of Technology.

 

Background Information

 

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 an application for consent to a temporary transfer of degree-conferring authority, as well as the Application by a Prospective Owner for Authority to Award Degrees. 

 

At the December 2007 meeting, the Board of Regents found that good cause existed and authorized the Institute under its new owners 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 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.  In May 2008, the Board of Regents voted to extend Globe Institute of Technology’s temporary authorization to award degrees until June 24, 2008 to allow staff to finish its review and prepare a recommendation to the Board.  In June 2008, the Board of Regents voted to further extend Globe’s temporary authorization to December 2008 to coincide with the accreditation action when staff will report on the continued strengthening of the institution under the new owner and the results of any other matters in process.

 

On March 5-6, 2008, the Department made a site visit to Globe to determine whether it meets (1) the standards for program registration in the Commissioner’s Regulations; (2) the standards in Section 3.58 of the Regents Rules for Interim Guidelines for the Consent by the Board of Regents to the Transfer of Authority to Confer Degrees upon the Change of Ownership of a Proprietary College; and (3) the requirements in Part 4 of the Rules of the Board of Regents for institutional accreditation which expired December 31, 2008. At its December 2008 meeting, the Board of Regents extended Globe Institute of Technology’s temporary authority to confer degrees for sixty (60) days.

 

The scope of this action is limited to the new owner’s compliance with Section 3.58 and Globe Institute of Technology’s compliance with the Program Registration Standards for the purposes of the Board of Regents granting permanent authority to Globe’s new owner to award degrees. The accreditation review is completed. In December 2008, the results of the review will come before the Board of Regents with a recommendation regarding the renewal of Globe’s institutional accreditation.

 

The report of the Department’s findings about the new owner and its ability to meet the requirements of Section 3.58 and Globe Institute of Technology’s compliance with Part 52 was submitted to the Board in June 2008 [Item HE (A) 6].

 

The following recommendation to extend Globe Institute of Technology’s temporary authority to confer degrees is based on the findings and recommendations of the expert peer reviewers who visited Globe in March 2008 and staff.  Key findings include the following:

 

• The institution’s mission is clear and implemented throughout the organization, with a focus on providing career skills to students from diverse backgrounds who have been traditionally underrepresented in higher education.

 

• Faculty are sufficient in number and possess training and professional experience necessary to carry out teaching and other responsibilities.  They are deeply involved in and supportive of student advising.

 

• The curriculum is appropriate and at college level.

 

• Classrooms, laboratory spaces and equipment, and administrative and faculty office space and equipment are satisfactory.

 

 

• The new owner has invested substantial resources that are strengthening the institution.

 

• The new owner is committed to covering any disallowances that may result from ongoing federal and State financial aid audits initiated as a result of actions taken under the previous owner.

 

• By word and action, the institution appears committed to continuing refinements to ensure student success and the sound administration of all functions.

 

The current rules for transfer of degree authority for proprietary colleges empower the Board of Regents to authorize temporary degree authority for any specified period.  This recommendation is consistent with both the provisional degree powers for new for-profit colleges and the provisional charters of new independent colleges.  Authorizing the temporary transfer of degree authority for four years to Globe Institute of Technology would provide the institution the opportunity to demonstrate the ability to sustain progress and create stability. Staff would monitor Globe’s progress through the thorough review of all required reports submitted annually to the Department with site visits as necessary.

 

Regulatory Provisions 

 

Education Law §224(1)(b) specifies that degree-granting authority cannot be transferred via the sale of a proprietary college without consent of the Board of Regents.  To implement that statutory restriction, §3.58 of the Rules of the Board of Regents includes provisions requiring that the Board consent to the transfer of degree powers to a prospective owner of a degree-granting proprietary college prior to the purchase and following demonstration to the Department of the new owner’s capacity to ensure the satisfactory conduct of its degree programs and achievement of its stated educational goals before ownership is established. 

 

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.”  Section 3.58(7)(iv) further allows the Board of Regents to extend consent for the temporary transfer for such additional periods as determined by the Board of Regents.

 

Recommendation

 

It is recommended that the Board of Regents extend Globe Institute of Technology’s temporary authority to confer degrees until January 31, 2013.

 

Timetable for Implementation

 

If the Board extends Globe’s authority to confer degrees, the new owner will continue to award degrees until January 31, 2013.

 

Attachment

Globe Institute of Technology

Transfer of Authority to Confer Degrees Report

 

Background Information

 

Globe Institute of Technology is a New York business corporation located in Manhattan.  Established in 1994 as a non-degree school, in 1996, it received from the Board of Regents 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 which was closed at the end of the fall 2007 semester, along with all of its extension sites and centers. Globe is currently only operating at its Manhattan location.

 

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 has declined to 542 students for fall 2008 of which 532 full-time. About 30 percent of the full-time students are Black or Hispanic.  On average, Globe, with an open admissions policy, accepts over 80 percent of its applicants.  In the Graduation Rate Action Plan, Globe describes its students, notwithstanding their ambitions and positive approach, as at risk for several reasons including English being their second language, financial difficulties, outside job obligations, the challenges of single parenthood and having limited prior academic preparation or few college level skills. 

 

Since 2004, Globe’s tuition and fees for full-time, matriculated students has been $9,136 per academic year.  The five-year financial plan projects average tuition and fees per full-time student to be $16,425 in 2008 and 2009, and to increase by 5 percent annually, for a projected full-time tuition of $19,014 in 2012.

 

Findings

 

              On March 5-6, 2008, an evaluation team assembled by the Department visited the Institute.  In preparation for the visit Globe prepared a self-study.  The team examined the self-study and supporting materials; met with faculty, students, the president, the dean and other administrators; and examined the facilities and other academic resources. The team found that Globe met the standards for program registration as reported in June 2008.  There have been no substantive changes since that report. Please refer to the report submitted as a separate item for Regents action on the Renewal of Institutional Accreditation for any additional information.

 

 

General and Financial Information: 878 Education, LLC.

 

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 Delaware limited liability company created for the purpose of purchasing Globe Institute of Technology.  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.  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 has 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.

 

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.

 

              A review of Marev Holdings’ federal corporate income tax returns for 2004, 2005, and 2006 indicate that it has substantial net assets available to support the acquisition of Globe.  Globe’s fiscal year ends in December.  A regular financial review will be conducted when the audited financial statements, which are due 120 days after the end of the fiscal year, have been submitted.

 

              There are two ongoing financial aid audits in the field work stage being conducted by USDE and the Office of the State Comptroller.  It is anticipated that the audits will be finalized within the next 12 months. Once these audits are completed, the Department will conduct a financial review to determine if there is evidence that the owners continue to have sufficient resources to ensure the satisfactory conduct of its degree programs and achievement of its stated educational goals.

 

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.

 

Neither Mr. nor Mrs. Oliner has past 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, they expanded the number of directors of 878 Education, LLC by adding persons experienced in higher education. Mr. Oliner has served as President and Chief Executive Officer since taking over the operation of Globe.  The academic leadership at Globe has continued under the new owner.  The team found the administration dedicated, actively engaged, proud of Globe’s mission and willing to extend themselves to their students.  However, the recent change in ownership has created a knowledge vacuum in senior-level administration.  At the time of the visit, Globe’s new owners were taking steps to address their inexperience by expanding the number of directors by adding persons experienced in higher education, employing field experts and actively recruiting professional leadership.

                                                                                                                                      

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.

 

              As noted, neither Mr. nor Mrs. Oliner has owned higher education institutions.

 

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, LLC, Marev Holdings, or Mr. and Mrs. Oliner.  The site visit team did not observe any evidence of fraudulent or deceptive practices.