For-Profit College Investor Now Owns Controlling Share of Leading Education Trade Publication

There has been no public announcement, but the Quad Partners website now listsas one of its investments, among a range of education-related companies, including for-profit trade schools.
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Quad Partners, a New York private equity firm that is invested heavily in the for-profit college industry, and whose founder has aggressively opposed regulation of that troubled industry, has acquired a controlling stake in the respected trade publication Inside Higher Ed (IHE), which often reports on for-profit colleges and the policy disputes surrounding them. There has been no public announcement, but the Quad Partners website now lists Inside Higher Ed as one of its investments, among a range of education-related companies, including for-profit trade schools Beckfield College, Blue Cliff College, Dorsey Schools, Pacific College of Oriental Medicine, and Marinello Schools of Beauty.

Doug Lederman, one of IHE's two top editors, confirmed to me that Quad purchased a majority interest in IHE in November.

Quad Partner James Tieng is now an IHE board member. Quad also owns the influential college admissions management company Noel-Levitz and other education technology companies that contract with colleges and universities -- another sector that IHE covers.

Lederman notes that Quad's for-profit college investments are in relatively small college chains, not in the major publicly-traded companies that have dominated the industry in the past decade.

But Quad Partners founder Lincoln Frank was one of two co-chairmen (with Avy Stein) of the Coalition for Educational Success, a trade group aimed at curbing the Obama Administration's gainful employment rule and other oversight of for-profit college abuses. The group, considered by some a more aggressive counterpart to the long-time trade association APSCU, included some of the biggest publicly-traded college companies -- ITT Tech and EDMC -- and the notorious, now-shuttered ATI, and it was headed, for a period, by relentless Washington lobbyist Lanny Davis. The group launched an offshoot called the Foundation for Educational Success, which was charged with creating a voluntary code of conduct for the industry as an alternative to government regulation. The foundation and code of conduct were trumpeted in a press release and in a Politico op-ed by two members of the foundation's new board of advisors, former governors Tom Kean (R-NJ) and Ed Rendell (D-PA) -- neither of which disclosed that the foundation was funded by for-profit colleges or that Kean is himself one of the Quad Partners. The code of conduct dissolved into mere public relations when the board of advisors and the entire Coalition for Educational Success, without explanation, simply ceased to exist.

The Coalition's work was covered by Inside Higher Ed.

In addition to using campaign contributions to acquire friendships with Members of Congress, and donations to curry favor with policy think-tanks and advocacy groups, the for-profit college industry has purchased ties to the news media. For example, in 2012, the Chronicle of Higher Education, IHE's older rival, allowed Career Education Corp., a giant for-profit college company with a high student loan default rate, not only to sponsor a Chronicle-hosted event on loan defaults but to select all the speakers. Meanwhile, the largest for-profit college, the University of Phoenix, has been the lead sponsor of NBC's Education Nation events, and also has sponsored education policy events held by The New Yorker.

There also is precedent -- very bad precedent -- for a single company owning both for-profit colleges and major media outlets: The former Washington Post Company, which until 2013 owned the Washington Post newspaper, as well as the troubled Kaplan college chain and a major stake in the even-worse Corinthian. Throughout the debate on Obama Administration regulation of for-profit colleges, company CEO Donald Graham has been perhaps the most influential lobbyist for the industry, while his paper consistently editorialized against new accountability measures.

Lederman said the situation was different from the Post Company owning Kaplan, because IHE and the for-profit colleges controlled by Quad would have only "a dotted line connection through the investor."

Lederman says that at the insistence of IHE, the purchase agreement includes a clause that precludes Quad Partners from any involvement in editorial operations. IHE was launched by Lederman and two co-founders in 2004, with a modest investment from three Washington DC-area venture funds, including the owners of the lead generation company Double Positive. Those three investors, who sold their shares to Quad in November, also had no role in editorial operations, says Lederman.

Lederman says that there were some prospective purchasers -- included investors in major for-profit colleges -- with whom the IHE founders were not comfortable, but that "we did our due diligence" about Quad and they were satisfied. "We were aware of potential conflicts of interest," he says. "It would have been pretty impossible for us to be owned by the Apollo Group," operator of the University of Phoenix, or the University of California pension fund. But Lederman says he and co-editor / co-founder Scott Jaschik "were comfortable as editors ... that this investor [Quad] would not compromise our journalism."

Lederman notes, correctly, that a trade publication always faces issues regarding financial interactions with companies it covers, including as advertisers.

"I would expect people to be watching us" in light of this purchase, says Lederman. "Our credibility is hugely important to us, and ultimately it will rise or fall on the nature and tenor of our coverage." He says IHE will go on as before: "The proof will be in what we publish." If there are significant references in IHE to specific Quad-owned companies, the publication will disclose the relationship.

IHE continues to publish articles about for-profit college issues.

When informed of Quad's purchase of IHE and Lederman's comments, Barmak Nassirian, one of the top higher education experts in Washington, said, "This is just vexing -- it's not the way to run a media outlet. The high margins and easy money activity that for-profit colleges represent should be the target -- not the owner -- of investigative journalism outfits."

Nassirian stressed that he had great respect for the work of IHE, and the talent and integrity of Lederman and Jaschik. "It's important," he said, to understand "the crucial role that Inside Higher Ed plays in this community, as one the two dominant trade publications," along with the Chronicle. IHE "has done a phenomenal job of digging through details that no one else would."

But IHE allowing itself to be owned by Quad Partners suggests, says Nassirian, that "the bitter lesson of Don Graham's entanglement with Kaplan and the unfortunate results for the Washington Post have really not resonated. An outfit that wants to be an independent journalism operation cannot be financed by companies that should be topics of its coverage. A built-in conflict is unavoidable."

Doug Lederman let me know that Lincoln Frank and Quad would have no comment for this piece.

UPDATE 1-19-15: After the publication of this piece, Inside Higher Ed added to its website an "Ownership Statement" describing Quad Partners' purchase of a controlling share of the company and stating, "Owners of Inside Higher Ed stock who are not editors play no role in the editorial policies of the company." In an interview, Inside Higher Ed co-founder and editor Scott Jaschik said, "In hindsight, I wish we had," publicly announced Quad's purchase, "because clearly this is of interest to people."

This article also appears on Republic Report.

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