UA President Robbins OK’d effort to erase millions in fines against fraudulent online university

University of Arizona President Robert Robbins in late 2021 authorized the hiring of a prominent lobbyist who was paid $10,000 a month by the university's foundation for the stated purpose of building UA's relationship with the country of Morocco.

But behind the scenes, the lobbyist had another role: helping to persuade the attorney general of California to erase millions of dollars in fines against a fraudulent online school acquired by UA, documents obtained by The Arizona Republic show.

While the lobbyist, Richard Smotkin, does have extensive connections in Morocco, he had another important relationship: a yearslong bond with California Attorney General Rob Bonta.

Soon after he was hired, Smotkin worked with Robbins on the stealth effort to spare the for-profit company that operated the disgraced online university, the documents show.

The California Attorney General’s Office had sued what was then Ashford University and its parent company, Zovio, in 2017 for luring vulnerable college students to enroll with false promises and leaving many with piles of debt.

About a month before a San Diego County judge ruled in the case and fined Ashford and Zovio $22.3 million, the president of the online school — rebranded as the University of Arizona Global Campus — sent an email to prominent staff members at the California Department of Justice.

“Thank you and A.G. Bonta for taking the time to speak with President Robbins, Rick and me yesterday afternoon,” the Feb. 2, 2022, email reads. It goes on to promise “a written proposal” to come the next day. The subject line of the email, on which Smotkin was copied: “CA v. Zovio.”

It’s not clear if a proposal was sent the next day, but about two weeks after the ruling came down, another email from the UAGC president went to the California Department of Justice. It included a memo that argued for a nearly $15 million reduction in the punishment for committing fraud against students. The email was forwarded to Smotkin.

When asked by The Republic last month about Smotkin’s role in any negotiations involving UAGC, Robbins flatly denied it. “None whatsoever. Zero,” Robbins said.

Asked again if Smotkin had any role in mitigating risk from UAGC, Robbins simply answered again, “Zero.”

Five weeks later, when questioned about the emails obtained by The Republic, Robbins, through a spokesperson, backed off his terse denial, clarifying that he meant only that Smotkin had no role in acquiring UAGC.

The call with the California Attorney General’s staff had nothing to do with the acquisition. It was about the impact a Zovio bankruptcy would have on UAGC’s ability to serve its students,” Robbins said.

Who is Richard Smotkin and why was he hired?

Smotkin, a high-powered international lobbyist who has courted controversy in the past, built a business around leveraging relationships with government officials here and abroad to advance the political and business goals of his clients.

Smotkin was hired through the University of Arizona Foundation in December 2021 to help the public university develop certain international projects, including UA degree opportunities in Morocco and development opportunities in Qatar and the United Arab Emirates, according to a contract obtained by The Republic.

His original six-month contract was extended through the end of 2022 under the direction of Robbins, according to correspondence obtained by The Republic; Robbins sits on the UA Foundation’s board of trustees. The contract did not indicate that Smotkin would do work on behalf of UAGC.

Robbins said in a statement that Smotkin “was not retained to consult regarding UAGC or Zovio” and that his role relating to the online university did not go beyond "offering to set up that one call" with the California attorney general, “whom he said he knew.”

Correspondence obtained by The Republic indicates Smotkin’s efforts went beyond facilitating a single phone call, including sharing the memo advocating for a reduction in fines “directly with General Bonta,” according to an email exchange.

The University of Arizona Foundation did not respond to a request for comment.

Smotkin is registered as a foreign agent under his lobbying firm ThirdCircle Inc. In a slideshow advertising his firm’s services, he describes his work as foreign relations focused, with a deep understanding of policy.

He also has ties to Bonta that predate conversations about UA’s online school.

Smotkin met Bonta in Singapore in the 2010s where the two “hit it off,” and Smotkin later asked him to attend a panel in Qatar in 2017 about then-President Donald Trump, according to a report by CalMatters.

In 2021, Smotkin donated $1,500 to Bonta’s wife, Mia, for her campaign to fill her husband’s open seat in the state Assembly, campaign finance records show.

According to his foreign agent registration from 2022, Smotkin worked with embassies in Morocco and Qatar, work that netted his firm at least $600,000 for that year.

While his international lobbying efforts are documented in records, his efforts to persuade government officials in the U.S. don't appear to have the same documentation.

Smotkin and ThirdCircle Inc. are not in the databases of registered lobbyists in Arizona or California currently or in 2022.

Smotkin said in a written statement that his counsel advised him that he has been “fully compliant with the law.”

“Whether working for ThirdCircle or on my own, I make best efforts to comply with any applicable lobbying registration or reporting rules,” he said.

Under Arizona law, an “authorized lobbyist” is any person employed by, retained by or representing a principal group, with or without compensation, for the purpose of lobbying.

According to the California secretary of state’s lobbyist directory, under that state’s Political Reform Act, a “lobbyist is a person who is paid for directly communicating with government officials in order to try to influence legislative or administrative actions.”

UA warned of ‘catastrophic result’ if penalty implemented

In addition to questions about Smotkin, the documents obtained by The Republic seem to contradict statements by Robbins and other UA officials who have said the acquisition of UAGC has had no negative effect on UA finances.

In fact, the documents show they had grave concerns about the online school.

The full pitch for the reduction in Zovio’s fraud penalty came on March 23, 2022, when UAGC President Paul Pastorek sent an email to Nicklas Akers, the senior assistant attorney general for the California Department of Justice. It was about two weeks after the judge’s ruling in the lawsuit against Zovio and Ashford.

“On behalf of President Robbins at the University of Arizona and myself, I request that your office afford us the opportunity to meet with you and the Attorney General and other relevant members of your (...) to discuss our memorandum attached and the proposal to resolve this matter,” Pastorek wrote, apparently skipping a word in his sentence.

Pastorek did not respond to a request for comment about his involvement in these negotiations.

The memo raised concerns about a “catastrophic result” for UAGC and serious “financial and reputational harm” to UA if the financial penalty was enforced, which it ultimately was. (Last month, the California Court of Appeals reduced the judgment by approximately $900,000 because certain violations fell outside the statute of limitations but upheld $21 million in penalties against the school and affirmed the trial’s verdict.)

“If the Court declines to reduce the amount of penalties awarded, execution on the AG’s $22 million judgment will likely be an extinction-level event for Zovio,” the memo reads.

The memo goes on to describe the judgment as a “Pyrrhic victory” (or one that harms the victor) for the California Department of Justice.

Instead, the memo proposed a “win-win” alternative that would decrease the judgment against Zovio to $7.5 million in penalties, nearly a third of the court’s ruling, and UAGC would forgive $45 million in student debt. It’s unclear where that money would come from.

About an hour after Pastorek sent that memo to California in March 2022, he emailed Smotkin directly with a short message — “Rick, Just sent this” — and forwarded him the attached memo.

But according to court filings, the supplication failed. In July 2022, Zovio and Ashford paid the $22.3 million judgment. A few months later, Zovio announced its plan for dissolution and began liquidating its remaining assets.

In his statement to The Republic, Robbins said his efforts were focused on the “best interest of the UAGC students,” explaining that he was concerned about a possible bankruptcy for the sinking education company.

“A Zovio bankruptcy resulting from the judgment in the California AG’s case could have substantially and negatively impacted the opportunity for UAGC students to continue to pursue their education,” Robbins said.

Robbins reiterated that circumstances had changed “significantly” by the time the university fully onboarded the school last June.

A spokesperson for the California Department of Justice confirmed that multiple individuals tried to appeal the size of the judgment, but that the office defended the judgment fully.

"The allegations against Ashford University were very serious, and as such, our office has prosecuted this case to the fullest extent of the law," the spokesperson said.

Amid 'financial challenges': UA President Robert Robbins to take pay cut, lose bonuses

What UA knew, and didn’t know, about Zovio

Despite the dire warnings to the California attorney general, Robbins called Zovio’s rapid unfolding a “good thing” in a February meeting with The Republic’s editorial board.

He said students would no longer be subjected to the company’s “tactics.” But the dissolution also pressured UA to take on $231 million in operating costs in 2023, according to the university’s interim CFO, John Arnold. The online school is operating at an estimated $2.4 million deficit, according to university officials, after bringing in $229.8 million in revenue. In his statement, Robbins maintained that the online school has been “financially positive” for the public university.

The acquisition moved the school’s acceptable level of working capital squarely into the red, contributing to the public university’s current financial instability, according to data presented in November to the Arizona Board of Regents, the governing body that oversees the state’s public university system.

UA officials have since walked that back. They say UA’s push to consolidate with UAGC has removed duplicated costs and will make the school profitable by 2025. They also cite a one-time cash influx of $47 million when the deal was finalized. UA received $20 million before that from its contract with Zovio.

During the meeting with The Republic, Arnold was asked to diagnose the causes of the university's current financial crisis.

“The one thing it’s not is UAGC,” he said.

Robbins also continues to publicly defend UA's acquisition of UAGC and deny that he knew the acquisition could pose a serious threat to UA.

At the editorial board meeting, Robbins said he had “never heard” of Ashford University or its public malfeasance before he chose to acquire the school in 2020, despite the California attorney general’s lawsuit filed years prior.

He denied that he was aware of the financial and reputational harm the acquisition could cause Arizona’s land-grant university, and, ultimately, Arizona taxpayers.

“There were several lawyers and businesspeople that were advising at that time ... that it was a very low-risk situation,” Robbins said. “We can follow up and get you the names.”

Since the Feb. 16 meeting, UA officials have not responded to repeated requests for those names.

Robbins also said he was advised that the risk that the U.S. Department of Education would “ever come and ask us to pay back money” for Ashford’s transgressions was “very low.” When UA assumed Zovio’s assets in 2022, Pastorek insisted that the university did not assume any legal liability from the acquisition.

On those wagers, UA leadership also miscalculated.

Earlier this month, a Department of Education spokesperson confirmed that the federal agency is “in the process of initiating a recoupment action” against UAGC to seek repayment for “some or all” of the approved borrower defense claims against Ashford.

A spokesperson from the Education Department said there is no set timetable for how long the recoupment action may take.

Financial implications, and credit downgrades, materialize

While UA’s leadership defends the acquisition, UA employees continue to ask hard questions.

At a Faculty Senate meeting in January, UA professor of educational policy Gary Rhoades said the initial cash infusion from the acquisition still doesn’t cover what the online school would likely need in reserves for its more than $230 million in operating expenses — he estimates that to be around $80 million. The number far exceeds the cash initially brought in by the school, which was about $47 million in cash reserves.

Rhoades has worked with a faculty committee for several months to propose a financial recovery plan to the university administration.

What to know: New Arizona Regents Chair Cecilia Mata to take on UA financial crisis

Moody’s Investor Services previously ranked UA with a “stable” rating in the immediate aftermath of the discovery of its cashflow concerns, which board officials pointed to as a positive sign. But this month, the ratings agency moved the university to “negative,” explaining that “uncertainty remains around prospects for balanced budget recovery by fiscal 2025.”

Alongside rising inflation and a higher ratio of debt, the firm cited UAGC as a negative component of UA’s strategy, specifically pointing to “continued integration risk” for the school. To bring the rating back up, the school would have to raise its cash-on-hand levels and bolster revenue sources.

The demotion brought down the Board of Regents’ credit rating as well; previously “stable,” it is now also listed as “negative.”

Meanwhile, Bonta still seems satisfied with the outcome of his lawsuit. He celebrated the California Appellate Court’s decision last month to affirm the lower court’s ruling that Ashford and Zovio violated state law for years by giving students false information about the cost and value of their degrees.

“Today’s decision is a big win for consumers who trusted and invested in Ashford and believed this for-profit college would provide immense opportunity,” he said in a statement on Feb. 20. “I am proud to fight for the rights of consumers and am committed to ensuring businesses can never take advantage of vulnerable students again.”

‘Long road ahead’: Gov. Katie Hobbs says regents, UA leadership have their work cut out for them

Hannah Dreyfus is an investigative reporter for The Arizona Republic. Reach her at Follow her on X @Hannah_Dreyfus or Threads @hannahdreyfus.

Helen Rummel covers higher education for The Arizona Republic. Reach her at Follow her on X @helenrummel.

This article originally appeared on Arizona Republic: University of Arizona sought to erase fines for Ashford, Zovio