Accreditor Rejects Partnership Between Business School and For-Profit Group

March 17, 2014

A deal between the Thunderbird School of Global Management and a for-profit education company has been rejected by the business school's regional accreditor, giving at least a temporary victory to an alumni group and some former board members who said the arrangement would turn Thunderbird into a "diploma mill."

Thunderbird, based in Arizona, had been seeking a partnership with Laureate Education Inc. in order to shore up its troubled finances. The arrangement would have brought the school $53-million through a sale-leaseback of its campus and $13-million more to start online and undergraduate programs and to expand its international sites.

Thunderbird pursued the deal with Laureate after rejecting several other suitors, including Arizona State University and the Hult International Business School, saying that the for-profit company was the only one that would sustain its financial health and protect its brand.

Some alumni and members of Thunderbird’s Board of Trustees who resigned after the partnership was announced described the arrangement as a rotten deal that would create a windfall for Laureate at the expense of Thunderbird's reputation and academic quality.

Some also charged that Laureate was just buying the school’s accreditation. Thunderbird's Independent Alumni Association even hired a law firm and filed a complaint with the school’s accreditor, the Higher Learning Commission of the North Central Association of Colleges and Schools, charging that the agreement had been tainted by conflicts of interest and had not been properly vetted by the entire governing board.

Thunderbird announced on Friday that the Higher Learning Commission had nixed the deal with Laureate "based on specific elements of the strategic alliance," according to a news release from the school's president, Larry E. Penley, and the chair of the Board of Trustees, Ann Iverson.

Under the terms of its accreditation, the school must receive approval for a "change of control, organization, or structure," according to the notice from the Higher Learning Commission on its decision. Neither the school nor the accreditor provided any details on why the commission had rejected the deal.

Thunderbird can reapply for approval of the partnership later this year, and a statement from Laureate said that the company and the school "intend to explore other models of collaboration that would respond to the specific concerns expressed by the Higher Learning Commission."

As an alternative to the deal with Laureate, the Independent Alumni Association has offered to assist Thunderbird with $17-million as part of a plan to restructure the Board of Trustees and turn the school into an "alumni membership based" nonprofit organization.

Correction (3/17/2014, 6:18 a.m.): This article originally misstated the name of the accreditor. It is the North Central Association of Colleges and Schools, not Schools and Colleges. The article has been updated to reflect this correction.