UC Irvine No Longer to Receive Capella Cash

The profitable articulation agreement formulated in fall 2002 between UC Irvine Extension and Capella University, a Minneapolis-based for-profit online institution, will be concluded by Oct. 31, 2007, according to UCI Dean of Continuing Education Gary W. Matkin.
According to the agreement, UCI receives $500 for every student referred to Capella. The agreement allows UCI Extension students to transfer their credits to Capella in the hope of obtaining a master’s degree from one of their graduate programs.
The agreement was concluded after critics proposed that Capella’s compensation provisions create strong financial incentives for college counselors to direct students to Capella instead of offering them fair and unbiased advice.
However, Kathy Tam, the UCI Extension director of marketing and communications, affirmed that because Capella is a for-profit university, UCI Extension is allowed some reimbursement to offset the cost of marketing the online institution through catalogues, pamphlets and other forms of advertisement.
According to a statement issued by Michael Walsh, public relations manager at Capella, Capella has accepted 36 UCI students and paid $12,000 under the recruiting agreement in the past five years. According to a recent article from the Los Angeles Times, Matkin claims that the money was used to market students’ eligibility for transferring to Capella.
In the past, Matkin has defended the deal under the safe harbor exemptions, which were enacted in November 2002. They modify the 1992 ban on incentive-compensation by allowing universities to receive per-student payments.
Matkin states that the deal was ‘completely legal and in accordance with the U.S. Department of Education.’
However, because the deal was frequently criticized as illegal and unethical, he decided that it would be best to conclude the agreement. According to Press Secretary Samara Yudof, the Department of Education did not comment on the legality of the agreement to outside parties.
Jeffry La Marca, a former UCI Extension student, discovered the arrangement after issuing a public records request under the California Public Records Act to UCI. He was refused assistance, but he accidentally received e-mails and other documents about the referral fee payments instead.
La Marca enrolled in Capella in January 2003 to obtain a second master’s degree in computer development and programming. Due to various disabilities, he was unable to take one of the online courses that Capella offers, which had installed a new software application.
After becoming dissatisfied with the program, he not only sued for tuition reimbursement, but also for what he claims were atrocious violations of the Americans with Disabilities Act on charges of ‘failure to accommodate.’
Additionally, La Marca is suing under two California laws, one of which is the Unruh Civil Rights Act, which states that everyone in the state of California is entitled to full and equal accommodations in all business establishments of every kind.
The second law, the ‘Leonard Law,’ is a state statute that gives protection to students under the First Amendment.
According to La Marca, Capella has been found to be in violation of 10 counts of the Family Educational Rights and Privacy Act as a result of refusing to turn over his records.
The matter is still under investigation by a law enforcement agency within the U.S. Department of Education. La Marca told the agency that ‘Greg Thom, the chief counsel of Capella, is at the center of that complaint for his refusal to abide by the law.’ The case will go to trial on Nov. 13 in Santa Ana.
La Marca noted that the California Bureau of State Audits has also recently opened an investigation into the UCI-Capella kickback scandal.
In addition to UCI Extention, the UC Santa Cruz and UC Berkeley extension programs also have articulation agreements with Capella.
UCSC, however, does not receive referral payments, and UCB has yet to have any students transfer to Capella. Ann Guy, a spokeswoman for UCB’s extension program, stated that it will also end the agreement due to the suspicion prevalent in the public’s perception of the deal.
The Chronicle of Higher Education revealed that UCI had tried to hide the payments in an e-mail written in September 2002. Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers in Washington, D.C., explained the critics’ trepidation over the deal.
Nassirian expressed concern about UCI’s relationship with Capella because it involves deals carried out without informing students and creates compensation practices that breed strong financial incentives for colleges to direct students to a certain lender.