Nov 29 2016
Washington, D.C. – U.S. Senator John McCain (R-AZ), Chairman of the Senate Armed Services Committee, delivered the following opening statement at a hearing on Department of Defense actions concerning voluntary education programs:
"The Committee meets this morning to review the Department of Defense’s (DoD) decision last year to put the University of Phoenix on probation, pending possible termination, with respect to its participation in its Voluntary Education Tuition Assistance Program.
"I welcome our witnesses and appreciate their appearance before the Committee today:
- "Peter Levine, Acting Undersecretary of Defense for Personnel and Readiness;
- "Stephanie Barna, Acting Principal Deputy Undersecretary of Defense for Personnel and Readiness; and
- "Dawn Bilodeau, Chief of Voluntary Education for the Department of Defense
"This hearing is about how the Department of Defense—consistent with the Obama administration’s ideological hostility to for-profit universities, under pressure from one member of Congress, and having performed very little due diligence of its own—placed on probation a reputable and fully accredited for-profit university that provides valuable educational programs to thousands of military service members. This probation decision, which constitutes nothing short of a gross abuse of power, resulted from a process that was fundamentally unfair and not supported by sufficient evidence. Indeed, the alleged violations that led to the probation decision were not substantively different than alleged violations by 15 other universities.
"While the probation decision was ultimately reversed, it was not before significant damage had already been done. The decision immediately impeded the university’s ability to provide educational programs to the military community. For the duration of the probation, countless veterans and active duty service members were prevented from enrolling in University of Phoenix courses. Not surprisingly, this also did significant harm to the university’s reputation and financial position. In 2009, the company’s stock reportedly traded at $86.54 per share. Prior to the release of the Reveal News ‘hit piece’ it was trading at around $16 per share and reached a low of around $6 a share shortly after DoD's unfair probation decision.
"Had this probation decision not been overturned—thanks to the intervention of the Chairmen of the Health, Education, Labor and Pensions Committee, the Veterans Affairs Committee, and the Permanent Subcommittee on Investigations, among others—the university would have been driven into financial ruin. Terminating the University’s participation in the TA program, as I believe the DoD had intended all along, would have left the over 9,000 service members attending it without a school to complete their education, effectively extinguishing the time and effort they had already invested in pursuit of a degree. It would also likely have resulted in decisions by the Department of Veterans Affairs (VA) to prohibit the University from participating in the Post 9/11 G.I. Bill and the Department of Education, regarding Title IV funding. And that would have most certainly devastated the University, just as the Administration did with ITT Tech in forcing it close or with DeVry, forcing it to sell-off its campuses.
"The purpose of this hearing, in short, is accountability—how such a misguided decision was made, the non-transparent and flawed ways in which it was made, why it was made, and who was responsible. In this way, today’s hearing is bigger than this one case, because if the University of Phoenix could be singled-out in this flawed and suspect way, that suggests a deeper failing at the Department of Defense that requires the continued oversight of this Committee.
"For the background of my colleagues, this Committee learned after the fact of the Department’s October 7, 2015 decision to place the University of Phoenix on probation. The stated reason for the decision was unauthorized base access and the improper use of ‘challenge coins.’ Shortly thereafter, I and other committee chairmen with jurisdictional interest in this case requested additional information on the decision, specifically the role played by the Department of Education’s interagency task force that had been established to enforce the President’s executive order on for-profit universities. What ensued was a meeting with these Senators and attended by representatives of some eight federal agencies, including the Department of Defense, the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC) and Securities and Exchange Commission (SEC)—literally dozens of executive branch personnel. Rather than providing responses to our concerns, this meeting raised additional troubling questions about the administration’s hostility toward for-profit education, including at the Department of Defense.
"For purposes of today’s hearing, the relevant sequence of events begins on June 30, 2015, when the Center for Investigative Reporting (CIR) published a report in Reveal News, entitled ‘[the] University of Phoenix sidesteps Obama order on recruiting veterans.’ Dawn Bilodeau, the DoD’s Chief of Voluntary Education, who recommended the probation decision and drafted and signed the probation letter against the University, participated in that article, acknowledging that the Department was “cracking down” on questionable recruiting practices among for-profits.
"That same day, the Ranking Member of the Defense Appropriations Subcommittee, Senator Dick Durbin, wrote Secretary of Defense Ashton Carter and urged the DoD, among other actions, to suspend the University from the DoD’s voluntary education programs, to investigate and prosecute the University for its use of challenge coins, and to bar it from any further access to military bases. It appears that this letter was enough to propel the DoD into action—for just two weeks later, Ms. Bilodeau reached out to military bases regarding the alleged access violations, stating that 'Congress has urged DoD to investigate the allegations cited in the Reveal article.'
"On July 15, 2015, in a letter from then-Acting Undersecretary of Defense for Personnel and Readiness Brad Carson to Ranking Member Durbin, Mr. Carson ‘confirmed … that DoD was completing a full review of University of Phoenix’s TA participation.’ This confirmation would serve as the basis for an increasingly hostile attack by Durbin and others against the University.
"On October 22, 2015, I sent a letter to Secretary Carter raising concerns about the decision to place the University of Phoenix on probation. This decision appeared to rely on questionable and overly technical interpretations of the Memorandum of Understanding that governed the interaction of for-profit schools with the Department of Defense. It failed to acknowledge the corrective actions that the University had immediately undertaken. And it was based, in part, on allegations made by a news article and other agencies that had been neither initiated nor confirmed by the DoD. Following additional correspondence and several meetings with Committee staff, the Department removed the University of Phoenix from probation in January 2016. By then, however, major damage had already been done to the university and its mission.
"For this reason, I directed staff to investigate, among other things, the facts and circumstances that led to the DoD’s decision to put the University of Phoenix on probation; the rules, processes, and procedures in place at the DoD that govern its administration of the tuition assistance program; and the interagency enforcement actions against for-profit educational institutions. The facts that have emerged suggest that that the reasons that the DoD provided in support of its decision are demonstrably specious. Let us review some of those key facts in greater detail.
"First, in its October 2015 probation letter, the DoD cited the allegations in the Reveal News article as a basis for apparent violations of the Memorandum of Understanding, specifically the University’s alleged failure to obtain approval for base access from DoD educational advisers.
"This was wrong.
"The fact is, the University acted in good faith regarding base access by obtaining approval from base commanders prior to taking any action. The DoD’s concerns about base access appear to reflect overly technical violations of the MOU that should not have warranted adverse action.
"It is also a fact that, throughout the relevant period, there was considerable confusion among the military services and participating educational institutions about the requirements of the MOU on base access. This arose from the lack of a process at DoD to implement base access compliance rules by the services themselves. In each incident of a perceived base access violation, DoD ultimately found that the base itself failed to comply with the MOU. So again, in this broader context of confusion, singling out the University of Phoenix was unfair. And while subsequent actions by the DoD to clarify proper compliance with the MOU may have been helpful to other universities, it did nothing for the University of Phoenix, which was already paying the price for actions that preceded this additional guidance and was being held to a standard that was shifting.
"Second, in its letter explaining its decision to place the University of Phoenix on probation, the DoD cites “transgression of Defense Department policies regarding use of its official seals and other trademark insignia” relative to challenge coins. This, too, was in error.
"In that very same letter, and in subsequent interviews with staff, Ms. Bilodeau stipulated that the University had already responded to these infractions with appropriate corrective action by the time the letter was sent, and that they were no longer a concern of the Department. Moreover, 15 other universities (9 public, 5 private, and 1 for-profit) were found to have violated the policies regarding the unauthorized use of challenge coins, but they were never placed on probation.
"Third, the Department cited civil investigative demands for documents by the Federal Trade Commission and the California State Attorney General as reason for its probation decision on the University of Phoenix. This was completely erroneous. A mere request for documents is hardly evidence of misconduct. Indeed, the fact is, the DoD never undertook its own, independent review of the allegations raised by the FTC or California Attorney General investigations. Rather, it merely reviewed their document requests and accepted that they were sufficiently related to the University of Phoenix case to be cited as a basis for the probation decision. As of today, neither of these investigations have found any wrongdoing by the University.
"So if the facts undercut the Department’s own case against the University of Phoenix, why did this happen? It was certainly true that the Department lacked uniform guidance to govern its own interaction with for-profit universities and alleged violations of the tuition assistance program. The Department also clear lines of authority, supervision, and accountability, as well as sufficient processes to review allegations of violations of the MOU. These circumstances created an opportunity for an abuse of discretion; led to the inconsistent and unfair enforcement of the DoD’s policies on institutions of higher education; and allowed for a single member of Congress to improperly influence adverse action against a reputable institution of higher education.
"The facts of this case also raise troubling questions about the abuse of executive orders to enact an ideological agenda, the role of the Department of Education’s unaccountable interagency task force in carrying out that agenda, and to what extent actions such as these usurp the legitimate role of the Congress.
"None of this should have ever been allowed to happen. And the purpose of this hearing is to ensure that a similar abuse of authority never happens again—for there is little reason to believe that the circumstances and events that led to the mistreatment of this one university could not be present, or could not manifest themselves, elsewhere in the Department of Defense.
"Finally, to our witnesses, I want to be clear that I do not take lightly requiring civil service employees, who are not confirmed by this body, to testify before this Committee. This is necessary, however, because of the extraordinary circumstances of this particular case, but also what it represents more broadly: a gross abuse of power, through a flawed and arbitrary process, with insufficient accountability.
"Indeed, the Department came perilously close to extinguishing one of its own valuable partners in voluntary education programs and the higher education option chosen by thousands of non-traditional students, especially active-duty service members. I shudder to think how a similar lack of transparency and accountability could manifest itself in other vital DoD missions. I truly hope that we will never see anything like this again at the Department of Defense. But, if we do, for as long as I am chairman of this Committee, there will be accountability.
"I look forward to hearing from the witnesses. And I thank them for their service to our nation.