Keiser: Not-for-profit but still lucrative

Arthur Keiser.
Arthur Keiser. Tampa Bay Times file

For many years, Arthur Keiser was the face of for-profit colleges — both in Florida and in Washington, D.C. Keiser chaired the for-profit industry’s D.C.-based lobbying group, the Association of Private Sector Colleges and Universities (APSCU), and presided over the Florida Association of Postsecondary Schools and Colleges, whose members are mostly for-profits.

But in 2011, the school that he co-founded and still runs, Fort Lauderdale-based Keiser University, made a dramatic change: becoming a nonprofit. The switch came a year after the unveiling of the Obama administration’s “gainful employment” proposal, which threatened to cut off taxpayer funding for “career training” programs where students struggled to pay back their student loans. The regulation is set to take effect in July.

Nonprofits are still affected by some parts of the rule, but not as severely. Being a nonprofit also means schools can get 100 percent of their revenues from taxpayer-funded federal financial aid. For-profit colleges, by law, are capped at getting 90 percent of their money from taxpayers.

Keiser is one of several for-profit colleges that switched to nonprofit in the past few years. An Orlando-area for-profit school, Remington College, also did so.

At a 2012 convention of APSCU, industry lawyers made a presentation that noted the “regulatory advantages” of going nonprofit — along with other potential perks, such as being exempt from property taxes and sales taxes. Arthur Keiser was chairman of APSCU at the time.

There’s also a public-perception benefit: With the for-profit college industry beset by lawsuits and prosecutions, being nonprofit allows Keiser to distance itself from that — though Arthur Keiser told The Chronicle of Higher Education in 2011 that “it’s operating in the same way, with the same people, the only difference is that it’s owned by a nonprofit.”

The Keiser family now operates two schools that are nonprofit — Everglades University and Keiser University — and one that is still for-profit, Southeastern College, which has its main campus in Palm Beach County.

In a March interview, Arthur Keiser said Keiser University, his flagship institution, is fully immersed in its new nonprofit role. The school now rejects 37 percent of applicants, he said.

“We are in the not-for-profit sector,” Keiser said. “We made a very significant commitment to that.”

That same month, Keiser University, which had 20,000 students spread across 17 campuses in Florida, added another, buying the 100-acre West Palm Beach campus of Northwood University, a struggling nonprofit based in Michigan. The move added a new element to the Keiser network: a traditional college campus with dorms and sports teams.

One prominent critic of the for-profit industry is skeptical of Keiser University’s new identity and filed a complaint with the IRS.

Robert Shireman, the former deputy undersecretary at the Department of Education, cited information from Keiser’s 2012 nonprofit tax filings. Shireman alleged that Arthur Keiser and other school leaders are “using income/assets for personal gain.”

Those tax filings, which are public record, show that Keiser’s nonprofit conversion was achieved by Arthur Keiser selling the for-profit Keiser University to a smaller nonprofit controlled by the Keiser family, Everglades College Inc. Essentially, Keiser sold the left hand of his empire to the right hand.

To pay for it all, Keiser made a $300 million loan to himself, and he’s now paying it back with college revenue — with interest.

Records show that Keiser’s 2012 compensation as college president for the combined Everglades/Keiser schools was $855,842.

The records also show that 10 of the nonprofit’s campuses are paying rent to companies in which Arthur Keiser has an ownership interest.

The combined rent for those properties: about $14.6 million.

Keiser said suspicions about his conversion to nonprofit are “totally unfair” and that Shireman has misconstrued some of the numbers in the nonprofit tax filings.

“I don’t own 100 percent of the buildings,” Keiser said. The school did not respond to a later question about what percentage he does own.

Keiser’s salary is not out of line with those of presidents of other nonprofit schools of a similar size. A Chronicle of Higher Education analysis of nonprofit college salaries in 2011, the same year Keiser converted, showed that Nova Southeastern University in Davie paid its new president $841,523 that year. Outgoing University of Miami President Donna Shalala made $1.26 million.

Arthur Keiser said Shireman has a conflict of interest on the for-profits issue. A group called Citizens for Responsibility and Ethics in Washington (CREW) accused the U.S. Department of Education of being cozy with Wall Street short sellers — investors who profit when a stock price goes down — when Shireman was with the department.

The group also questioned Shireman’s ties with the Institute for College Access & Success, a nonprofit he helped found before joining the government. Although its agenda is broader, the institute has criticized for-profit colleges.

Republican Sens. Tom Coburn of Oklahoma and Richard Burr of North Carolina called for an inspector general investigation into Shireman — an investigation that is pending.

“He has a motive,” Keiser said of Shireman. “And he certainly has his own problems.”

Two conservative news outlets, the Washington Examiner and the Daily Caller, have raised questions about CREW, pointing out that the organization received $150,000 in funding from the Civic Duty Foundation, which is heavily funded by the Sperling family.

John Sperling founded the for-profit University of Phoenix, and Peter Sperling, his son, is chairman of the board for the college’s parent company.

A 2012 U.S. Senate Health, Education, Labor and Pensions Committee report that was highly critical of the for-profit college industry noted the advantages inherent in Keiser’s conversion and said it should be “more closely scrutinized.”

Laura Kalick, a tax director for BDO, one of the country’s largest accounting firms, reviewed Keiser’s nonprofit tax filings at the Herald’s request. She said there is nothing to suggest Keiser broke any rules.