HIGHER YEARNING

INVESTORS WANT WESTERN INTERNATIONAL UNIVERSITY TO CASH IN ON THE MBA CRAZE. BUT THE SCHOOL HAS YET TO MASTER ITS OWN BUSINESS PROBLEMS

Then, in 1989, the board of directors discovered that Ronald Bauer was entertaining investors willing to pay off WIU's obligations to World Universities and then take over the board and administration of WIU. Board members felt Bauer had betrayed their trust, refused to reelect him to the board and dismissed him as president. Robert Webber assumed the presidency.

Two years later, Bauer and World Universities sued WIU for the money it had lent or endowed, plus interest, an amount totaling $4.6 million. To Western International's great relief, Maricopa County Superior Court, in a summary judgment, ruled that not only were World's loan agreements too vague to collect on, but the demand for repayment had exceeded the statute of limitations, and it ruled in favor of WIU.

In 1992 and 1993, the university lost about $1.5 million, according to Jim Haynes. The board, concerned that Robert Webber was not on top of the financial situation, fired him, and asked Haynes, who was then a member of the board, to step in as chief executive officer of the university last November.

Fiscal '94, Haynes claims, will show about a half-million dollars in income over expenses (he can't use the word "profit" while referring to a nonprofit institution), but it was too little, too late.

In June, the U.S. Department of Education demanded that the university post the $450,000 letter of credit to guarantee its student loan program, which affects about 40 percent of the student population. Essentially, the school needed to come up with $450,000 cash as collateral. The deadline was June 30.

"We are out of compliance," Haynes admits, "but fortunately, it takes time for pieces of paper to wander around the Department of Education." Time is running out. "We feel the school does not satisfy our department's regulatory requirements for financial responsibility," a DOE spokesperson told New Times. "It's most likely that we will send an 'intent to terminate' letter to the school in the near future."

Haynes started shopping for investors, much as Ronald Bauer had, and he found help in one of his former associates at the Phoenix Chamber of Commerce, John Cotton, a local investment banker. Cotton was once president of Great Western Bank, once head of the Goldwater Institute for Public Policy Research, once sued by the Resolution Trust Corporation.

He put together a group that includes Haynes ("John and I go back a long way," Haynes says), John Norton III, Matthew and Daniel Diethelm and Jock Patton. Norton is a former deputy secretary of agriculture, president of J.R. Norton Company, and his name frequently shows up on boards of directors--he has sat on the boards of Arizona Public Service Company, America West Airlines, Aztar Corporation, Pinnacle West Capital Corporation and WIU.

Matthew Diethelm is an engineer with a Ph.D., who, as general manager of a division of Intel, knows the value of a WIU degree; his son Daniel is an associate at Cotton's investment firm, Maricopa Partnerships. Patton is an attorney and president of a stock evaluation firm; like Cotton, he was sued by the RTC in the Western Savings and Loan failure while he was an attorney at Streich, Lang.

The investor group made its decision to buy the university's assets after conducting a market survey--which it will not share.

"If you could sum this up in a short phrase," says Daniel Diethelm, "the type of product that this investor group would want is a program that we, as employers, would want our employees to go to, where they could learn valuable skills that could help the employer, and that's the point."

That's one point in favor of the sale, perhaps. Another is that it's a screaming deal for the buyers. Haynes expects the fair market value to be appraised between $1.3 million and $1.5 million. But John Blair, who now heads the board controlling the nonprofit university, admits that WIU would have to pay back about $700,000 to the new university corporation to compensate it for instruction that must be delivered to students who already have paid for it. The new owners, then, would only really have to come up with $600,000 to $800,000 to buy WIU.

A paltry price, given the potential profits. "I'd be disappointed if it wasn't regularly running at least a quarter of a million in profits," says Jim Haynes.

Or more. Every conversation about WIU's future--whether a conversation with local educators or businessmen or with national education experts--starts the same way: "Look at the University of Phoenix."

Indeed, look at business schools in general, and especially at the new breed of lean-and-mean proprietary business-school franchises that offer market-driven degree programs, especially degrees resulting in MBAs.

In 1972, American universities awarded 30,000 master degrees in business administration; by 1992, that figure had swollen to 84,000. Similarly, the number of MBA programs has grown from 389 to 700 in the last 20 years. As many as 60 percent of the students in those programs go to school part-time.

Traditional academics worry that with the glut of MBAs, the degree has lost its value, and that today's students view it only as a ticket to a better salary. "They want the degree, not the knowledge," said one Arizona State University professor who asked to remain anonymous. "They don't want to work very hard. They just want to get that piece of paper that says 'MBA.'"

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