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Court, others struggle to save Myers University
BY: MARILYN H. KARFELD Senior Staff Reporter
What happened to Myers University, a financially beleaguered downtown Cleveland business college now under the control of Common Pleas Court Judge Daniel Gaul, is complicated, messy and difficult to sort out.
Indeed, there are several Myers stories with competing claims to truth.
First, there’s the saga of a private university in grave financial trouble, whose administrators tried but ultimately failed to turn their institution around. Then, there’s the story of a hostile takeover by for-profit University of Northern Virginia (UNVA) or its principals, looking to snatch below market value Myers’s regional accreditation and reputation.
In yet another scenario, this same out-of-state suitor is a white knight bearing cash to rescue the bankrupt university. But apparently the knight doesn’t have the requisite funds.
However the plot plays out, Myers is unlikely to emerge from this imbroglio as the same school serving a low-income Cleveland population, say those close to the institution.
Several suitors are interested in Myers, says Mark Dottore, the independent receiver or special master appointed by Gaul to monitor the university and untangle its finances. He won’t name who they are, but insists, “My intention is to save the university, and as it looks now, we will be able to save it.”
But one option that Dottore called a “fantastic idea” is no longer on the table.
Eric Fingerhut, chancellor of the Ohio Board of Regents, vetoed a proposal from a consortium of county school boards and adult learning centers to refer their students to Myers and pay for instruction with state funds. The private university with small classes and the flexibility and expertise to educate nontraditional students would give them a ”jump start” on college, Dottore says.
“I am not investing public funds into a failing private institution that no private investor is willing or able to support,” says Fingerhut. “I am flatly unchangeably opposed to using public funds to bailout debts accumulated by a private institution.”
Gov. Ted Strickland and Susan Tave Zelman, Ohio superintendent of public instruction, share his position, Fingerhut notes.
However, “If they find a buyer, we will work with them hand-in-glove to keep Myers open, just as we did when UNVA invested money.”
County school boards and adult career centers get state funds to provide training to improve individuals’ career prospects, Fingerhut explains. But should Myers close, Cuyahoga Community College and Cleveland State University already stand ready to take any students. Smaller private institutions across Northeast Ohio are also ready to work with any Myers student who wants to transfer, he notes.
Fears that the closing of Myers will result in students losing credits are unfounded, Fingerhut maintains. “They will not lose a dollar of tuition or a single credit,” he says. “The judge is straying way way beyond what his responsibilities and mandate are here.”
Gaul sees it differently. Myers has an established record of educating a largely low-income population in need of bachelor’s degrees. If it shuts its doors, Myers will default on loans totaling $12.5 million from the Cleveland-Cuyahoga County Port Authority, the Cuyahoga County commissioners and the city of Cleveland, Gaul wrote in a Plain Dealer article last week.
There is no one currently interested in purchasing Myers, Gaul told the CJN. However, investors Daniel Ho and David Lee, who have pumped $2 million into Myers, are trying to implement a business plan to keep the university open, Gaul said.
Ho, vice chancellor, CEO, and major investor at the University of Northern Virginia, and David Lee, another UNVA director and investor named by the court as chief executive officer of Myers, did not return CJN phone calls requesting comment for this story.
Last year, UNVA Properties, a separate legal entity in which Ho is a major shareholder, infused $2 million into Myers, money Dottore characterized as a donation, not an investment. When Scaldini announced plans in mid-December to close the university at the end of the semester, UNVA Properties asked Gaul to stop the shuttering.
UNLV Properties did not at any time make a concrete offer to buy Myers, the judge says. “I believe the individuals from UNLV do not have resources at this time to purchase Myers.”
But Gaul does not characterize the current operation at Myers as a holding pattern. “The court is involved daily in Myers University. We are actively searching for organizations and entities that may want to partner, invest in or purchase Myers.”
“If you walk away, there’s no chance of recovering the money,” Dottore notes, “If we find a buyer, or in some fashion keep Myers open, there are buildings left. We can recover some of what is owed to government agencies.”
Furthermore, the intention to abruptly close the university at the end of December, which former Myers president Richard Scaldini announced that month, would have stranded a lot of students, Dottore says. “These are nontraditional students, who can’t just wake up one morning and go elsewhere.”
The closing also would have meant that the U.S. Department of Education would draw the $1.2 million in the letter of credit guaranteed by three Cleveland businessmen, Sam Miller, Albert Ratner, and Carl Glickman, adds Dottore. Without their guarantee, Myers and its students would have lost their Title IV eligibility for federal loans. In November, the government froze financial aid until it received a guarantee that there would be funds to continue educating students that semester if Myers collapsed.
Most of the suitors interested in Myers are for-profit entities, Dottore says. Currently, Myers is a nonprofit organization, accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, a regional accrediting body.
Investing in for-profit colleges apparently brings “a great return,” notes Dottore, and that’s not necessarily a bad thing. In Ohio, “with its less than stellar economy,” the need is great to educate more people and to keep them in the state, he says. “These for-profit (colleges) have ways to get people trained and for less than traditional universities.”
Saving Myers is important for Cleveland, says Robert Glickman, a former Common Pleas judge and attorney representing his father, Carl Glickman, Miller and Ratner. They have now sued Myers, alleging the university violated their contract by trying to close without obtaining a release of their guarantee.
Along with the likely downgrading of the county’s and port authority’s bond ratings, if Myers closes and defaults on its publicly financed loans, the region, which desperately needs a better-educated labor pool, loses a valuable asset, Glickman says.
“The fact that Myers is open and the students are attending classes n how could that be anything but a good thing?” Glickman asks. “Gaul’s actions to help the community were remarkable and courageous.”
But Scaldini, who became Myers president in summer 2006, sees the situation differently. The serious financial problems that began in 2005 under his predecessor worsened in 2006. The Myers board decided to sell the school about a year ago, Scaldini says.
Last spring, UNVA approached the university about a possible acquisition, initially pledging $2 million. While Scaldini says he and the board were advised not to “give” the school, worth an estimated $10 million, to UNVA, everyone felt the for-profit school offered the only viable lifeline.
UNVA has national accreditation, a less rigorous standard than that of regional accreditors such as the HLC. Furthermore, when its accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) tried to withdraw its accreditation last fall, UNVA took them to court. Sheryl Moody, ACICS executive director, would not comment further due to the court action. “UNVA is accredited pursuant to court order and they are on probation subject to all of our requirements.”
Selling Myers to the UNVA investors could result in Myers losing its accreditation and thus its seal of approval, Scaldini says. This would mean students’ credits would not be accepted for transfer and degrees would have no value.
Closing the school in an orderly way at the close of the semester would be less harmful to faculty and students than a chaotic shuttering in the middle of the term due to insufficient funds, Scaldini insists. His Myers team, Scaldini adds, formulated a detailed contingency plan, commended by their accrediting agency, which facilitated the transfer of Myers’ remaining students to 19 schools in Northeast Ohio.
A last-minute potential buyer, a private equity group that owns another for-profit university, was scared off by UNVA’s threat of litigation, Scaldini says.
While students are still attending class, Myers’s enrollment has not rebounded. Robert Appleson, associate director of accreditation of the HLC, says a sale of a college does not necessarily trigger an accreditation review, but it certainly could. A number of significant financial problems at Myers led an HLC review committee to hold a hearing Jan. 28 to consider the business school’s accreditation. The HLC board meets Feb. 27 to consider the review board’s recommendation, which is typically followed.
John Muffo, a monitor from the Ohio Board of Regent, spent time at Myers from July through December to determine if there had been a sale to UNVA. He concluded one did not take place. “In my opinion, Scaldini acted ethically and above board,” says Muffo. “I never saw him do anything that was not in the best interests of the institution.”
Vilified in the press for not “giving the school to UNVA,” Scaldini says his career, at least in Ohio, is in ruins. “One of the milder terms a headhunter used is I’m ‘radioactive.’” He’s also filed an appeal with the Ohio Court of Appeals challenging the jurisdiction of the Common Pleas court over Myers, hoping to set the record straight.
Despite his best efforts to turn Myers around, Scaldini admits that he failed. Still, his biggest struggle, he says, is to avoid saying that he should not have even tried “to do a mitzvah (of turning around Myers). It can all go south, and you end up being hurt.
“If the lesson here is not to try to do something good for the community, that would be a bad outcome for me as a Jew and for any citizen. It’s one of the reasons I went to jail. (Scaldini was jailed one day by Gaul for contempt of court for writing a letter to the Plain Dealer rebutting an editorial.) I had to make a statement to let people know something is more important here.”
It would take massive amounts of money “far beyond our capacity” to rescue Myers University, says S. Lee Kohrman, president of the David and Inez Myers Foundation. At one time, the foundation did look at helping out the university, the former Dyke College, renamed in honor of David N. Myers in 1995 after he authorized the foundation to give the school $2 million.
At the time of that gift, there were 800 full-time students, with 500 others attending part-time. At the beginning of the January 2008 term, about 420 in total were enrolled, Scaldini says. The school’s break-even point is over 900.
In part because the university carries the Myers name, the foundation did contribute over $200,000 several years ago to help finance the school’s new building on Chester Avenue, Kohrman says.
But in recent months, as enrollment dropped precipitously amidst news of continuing debt, the foundation concluded the university’s financial situation was so dire there was “nothing we could do to bring them around,” Kohrman adds.
With assets in excess of $200 million, Myers Foundation supports basic scientific research and the education of young people not performing up to standard, says Kohrman, “whether it’s Ethiopian kids in Israel or young kids here in difficult social and economic conditions.”
While the foundation was not asked recently to intervene, Kohrman estimates that Scaldini approached them for funds about a year ago. The request was turned down. “He inherited a bad situation. He did his level best. He walked into a situation financially beyond repair.”
mkarfeld@cjn.org
“I am not investing public funds into a failing private institution that no private investor is willing to support.”
Eric Fingerhut, chancellor, Ohio Board of Regents
Indeed, there are several Myers stories with competing claims to truth.
First, there’s the saga of a private university in grave financial trouble, whose administrators tried but ultimately failed to turn their institution around. Then, there’s the story of a hostile takeover by for-profit University of Northern Virginia (UNVA) or its principals, looking to snatch below market value Myers’s regional accreditation and reputation.
In yet another scenario, this same out-of-state suitor is a white knight bearing cash to rescue the bankrupt university. But apparently the knight doesn’t have the requisite funds.
However the plot plays out, Myers is unlikely to emerge from this imbroglio as the same school serving a low-income Cleveland population, say those close to the institution.
Several suitors are interested in Myers, says Mark Dottore, the independent receiver or special master appointed by Gaul to monitor the university and untangle its finances. He won’t name who they are, but insists, “My intention is to save the university, and as it looks now, we will be able to save it.”
But one option that Dottore called a “fantastic idea” is no longer on the table.
Eric Fingerhut, chancellor of the Ohio Board of Regents, vetoed a proposal from a consortium of county school boards and adult learning centers to refer their students to Myers and pay for instruction with state funds. The private university with small classes and the flexibility and expertise to educate nontraditional students would give them a ”jump start” on college, Dottore says.
“I am not investing public funds into a failing private institution that no private investor is willing or able to support,” says Fingerhut. “I am flatly unchangeably opposed to using public funds to bailout debts accumulated by a private institution.”
Gov. Ted Strickland and Susan Tave Zelman, Ohio superintendent of public instruction, share his position, Fingerhut notes.
However, “If they find a buyer, we will work with them hand-in-glove to keep Myers open, just as we did when UNVA invested money.”
County school boards and adult career centers get state funds to provide training to improve individuals’ career prospects, Fingerhut explains. But should Myers close, Cuyahoga Community College and Cleveland State University already stand ready to take any students. Smaller private institutions across Northeast Ohio are also ready to work with any Myers student who wants to transfer, he notes.
Fears that the closing of Myers will result in students losing credits are unfounded, Fingerhut maintains. “They will not lose a dollar of tuition or a single credit,” he says. “The judge is straying way way beyond what his responsibilities and mandate are here.”
Gaul sees it differently. Myers has an established record of educating a largely low-income population in need of bachelor’s degrees. If it shuts its doors, Myers will default on loans totaling $12.5 million from the Cleveland-Cuyahoga County Port Authority, the Cuyahoga County commissioners and the city of Cleveland, Gaul wrote in a Plain Dealer article last week.
There is no one currently interested in purchasing Myers, Gaul told the CJN. However, investors Daniel Ho and David Lee, who have pumped $2 million into Myers, are trying to implement a business plan to keep the university open, Gaul said.
Ho, vice chancellor, CEO, and major investor at the University of Northern Virginia, and David Lee, another UNVA director and investor named by the court as chief executive officer of Myers, did not return CJN phone calls requesting comment for this story.
Last year, UNVA Properties, a separate legal entity in which Ho is a major shareholder, infused $2 million into Myers, money Dottore characterized as a donation, not an investment. When Scaldini announced plans in mid-December to close the university at the end of the semester, UNVA Properties asked Gaul to stop the shuttering.
UNLV Properties did not at any time make a concrete offer to buy Myers, the judge says. “I believe the individuals from UNLV do not have resources at this time to purchase Myers.”
But Gaul does not characterize the current operation at Myers as a holding pattern. “The court is involved daily in Myers University. We are actively searching for organizations and entities that may want to partner, invest in or purchase Myers.”
“If you walk away, there’s no chance of recovering the money,” Dottore notes, “If we find a buyer, or in some fashion keep Myers open, there are buildings left. We can recover some of what is owed to government agencies.”
Furthermore, the intention to abruptly close the university at the end of December, which former Myers president Richard Scaldini announced that month, would have stranded a lot of students, Dottore says. “These are nontraditional students, who can’t just wake up one morning and go elsewhere.”
The closing also would have meant that the U.S. Department of Education would draw the $1.2 million in the letter of credit guaranteed by three Cleveland businessmen, Sam Miller, Albert Ratner, and Carl Glickman, adds Dottore. Without their guarantee, Myers and its students would have lost their Title IV eligibility for federal loans. In November, the government froze financial aid until it received a guarantee that there would be funds to continue educating students that semester if Myers collapsed.
Most of the suitors interested in Myers are for-profit entities, Dottore says. Currently, Myers is a nonprofit organization, accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, a regional accrediting body.
Investing in for-profit colleges apparently brings “a great return,” notes Dottore, and that’s not necessarily a bad thing. In Ohio, “with its less than stellar economy,” the need is great to educate more people and to keep them in the state, he says. “These for-profit (colleges) have ways to get people trained and for less than traditional universities.”
Saving Myers is important for Cleveland, says Robert Glickman, a former Common Pleas judge and attorney representing his father, Carl Glickman, Miller and Ratner. They have now sued Myers, alleging the university violated their contract by trying to close without obtaining a release of their guarantee.
Along with the likely downgrading of the county’s and port authority’s bond ratings, if Myers closes and defaults on its publicly financed loans, the region, which desperately needs a better-educated labor pool, loses a valuable asset, Glickman says.
“The fact that Myers is open and the students are attending classes n how could that be anything but a good thing?” Glickman asks. “Gaul’s actions to help the community were remarkable and courageous.”
But Scaldini, who became Myers president in summer 2006, sees the situation differently. The serious financial problems that began in 2005 under his predecessor worsened in 2006. The Myers board decided to sell the school about a year ago, Scaldini says.
Last spring, UNVA approached the university about a possible acquisition, initially pledging $2 million. While Scaldini says he and the board were advised not to “give” the school, worth an estimated $10 million, to UNVA, everyone felt the for-profit school offered the only viable lifeline.
UNVA has national accreditation, a less rigorous standard than that of regional accreditors such as the HLC. Furthermore, when its accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) tried to withdraw its accreditation last fall, UNVA took them to court. Sheryl Moody, ACICS executive director, would not comment further due to the court action. “UNVA is accredited pursuant to court order and they are on probation subject to all of our requirements.”
Selling Myers to the UNVA investors could result in Myers losing its accreditation and thus its seal of approval, Scaldini says. This would mean students’ credits would not be accepted for transfer and degrees would have no value.
Closing the school in an orderly way at the close of the semester would be less harmful to faculty and students than a chaotic shuttering in the middle of the term due to insufficient funds, Scaldini insists. His Myers team, Scaldini adds, formulated a detailed contingency plan, commended by their accrediting agency, which facilitated the transfer of Myers’ remaining students to 19 schools in Northeast Ohio.
A last-minute potential buyer, a private equity group that owns another for-profit university, was scared off by UNVA’s threat of litigation, Scaldini says.
While students are still attending class, Myers’s enrollment has not rebounded. Robert Appleson, associate director of accreditation of the HLC, says a sale of a college does not necessarily trigger an accreditation review, but it certainly could. A number of significant financial problems at Myers led an HLC review committee to hold a hearing Jan. 28 to consider the business school’s accreditation. The HLC board meets Feb. 27 to consider the review board’s recommendation, which is typically followed.
John Muffo, a monitor from the Ohio Board of Regent, spent time at Myers from July through December to determine if there had been a sale to UNVA. He concluded one did not take place. “In my opinion, Scaldini acted ethically and above board,” says Muffo. “I never saw him do anything that was not in the best interests of the institution.”
Vilified in the press for not “giving the school to UNVA,” Scaldini says his career, at least in Ohio, is in ruins. “One of the milder terms a headhunter used is I’m ‘radioactive.’” He’s also filed an appeal with the Ohio Court of Appeals challenging the jurisdiction of the Common Pleas court over Myers, hoping to set the record straight.
Despite his best efforts to turn Myers around, Scaldini admits that he failed. Still, his biggest struggle, he says, is to avoid saying that he should not have even tried “to do a mitzvah (of turning around Myers). It can all go south, and you end up being hurt.
“If the lesson here is not to try to do something good for the community, that would be a bad outcome for me as a Jew and for any citizen. It’s one of the reasons I went to jail. (Scaldini was jailed one day by Gaul for contempt of court for writing a letter to the Plain Dealer rebutting an editorial.) I had to make a statement to let people know something is more important here.”
It would take massive amounts of money “far beyond our capacity” to rescue Myers University, says S. Lee Kohrman, president of the David and Inez Myers Foundation. At one time, the foundation did look at helping out the university, the former Dyke College, renamed in honor of David N. Myers in 1995 after he authorized the foundation to give the school $2 million.
At the time of that gift, there were 800 full-time students, with 500 others attending part-time. At the beginning of the January 2008 term, about 420 in total were enrolled, Scaldini says. The school’s break-even point is over 900.
In part because the university carries the Myers name, the foundation did contribute over $200,000 several years ago to help finance the school’s new building on Chester Avenue, Kohrman says.
But in recent months, as enrollment dropped precipitously amidst news of continuing debt, the foundation concluded the university’s financial situation was so dire there was “nothing we could do to bring them around,” Kohrman adds.
With assets in excess of $200 million, Myers Foundation supports basic scientific research and the education of young people not performing up to standard, says Kohrman, “whether it’s Ethiopian kids in Israel or young kids here in difficult social and economic conditions.”
While the foundation was not asked recently to intervene, Kohrman estimates that Scaldini approached them for funds about a year ago. The request was turned down. “He inherited a bad situation. He did his level best. He walked into a situation financially beyond repair.”
mkarfeld@cjn.org
“I am not investing public funds into a failing private institution that no private investor is willing to support.”
Eric Fingerhut, chancellor, Ohio Board of Regents
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