Investor’s Club: How the UC Regents Spin Public Funds into Private Profit

LA Times Follows Up Our Reporting

There is a saying: Imitation is often the best form of flattery.

If that is the case - then the LA Times just gave our reporter Peter Byrne a very big compliment.

Yesterday the LA Times published a column: "Is UC regent's vision for higher education clouded by his investments?"

Conflicts of interest almost always involve money, but sometimes they raise more questions about the subjects' perspective than about their wallets.

Consider the large investments University of California Regent Richard C. Blum has made in two for-profit higher education companies, Career Education Corp. and ITT Educational Services Inc.

Blum's San Francisco investment firm is the largest shareholder in both firms, owning nearly 20% of Career Education and more than 10% of ITT Educational.

The firm's combined holdings in these two stocks is valued at about $700 million, based on their recent market prices. That sounds like a lot of money, but I think we can concede as a matter of courtesy that Blum, who is a billionaire and the chairman of the real estate firm CB Richard Ellis, probably wouldn't take any action as a regent merely to juice the value of those holdings.

But what do these investments say about Blum's vision for higher education? Should an important official of what is arguably the most prestigious system of public higher education in the world also be a leading financial backer of an industry that has been coming under intense regulatory scrutiny because of persistent allegations of fraud?

Or put another way: If the chairman of the World Wildlife Fund held significant investments in, say, BP, wouldn't people wonder exactly what he thought about how to balance environmental protection and oil industry regulation?

You can read the rest at the LA Times.

The column, which has some good original reporting, is based off our reporter Peter Byrne's published findings thus far. Just two weeks ago Spot.Us, The Public Press, San Jose Weekly, Santa Cruz Weekly, The Berkeley Daily Planet, Sacramento News & Review and the North Bay Bohemian published this update from Peter.

"Billion Dollar Baby: University of California invests $53 million in two diploma mills owned by a regent."

.....

“It’s like anything else,” [Blum] said. “It’s how you market it.”

Marketing strategy aside, Blum, husband of U.S. Sen. Dianne Feinstein,  has taken on two seemingly disparate roles — one as an advocate for a nonprofit university, and the other as an owner of two for-profit educational corporations. However, as a regent, Blum has taken actions that (intentionally or not) have enhanced the value of his vocational schools. Are his loyalties conflicted? 

For several years, Blum’s firm, Blum Capital Partners, has been the dominant shareholder in two of the nation’s largest for-profit universities, Career Education Corporation and ITT Educational Services, Inc. The San Francisco-based firm’s combined holdings in the two chain schools is nearly a billion dollars. As Blum’s ownership stake enlarged, UC investment managers shadowed him, ultimately investing $53 million of public funds into the two educational corporations.

LA Times reporter Michael Hiltzik did give Peter Byrne credit for his original reporting mid-way down his column. He also thanked Peter. "Your story did inspire me--excellent work, and very timely," he wrote in an email.

There you have it. Peter's updates continue to make waves. His first mid-term report caught the attention of a Senator. This one - the LA Times. Stay tuned as Peter and Bernice continue to make progress and waves.