Attorney General: The Honorable Valerie F. Lewis, Commissioner of Higher Education, Department of Higher Education, 2005-014 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

May 23, 2005

The Honorable Valerie F. Lewis
Commissioner of Higher Education
Department of Higher Educaiton
61 Woodland Street
Hartford, CT 06105-2326

Dear Commissioner Lewis:

In your letter of November 1, 2004, you have asked our opinion whether Teikyo Post University should continue to be considered eligible to participate in the Connecticut Independent College Student Grant Program given that on or about October 22, 2004 the University was sold to a group of private investors who will, contrary to prior practice, operate the University as a "for profit" entity. We are informed that while the University was previously owned by Teikyo Group of Japan, it is now owned by a group of American investors, incorporated in Delaware as Post Education, Inc. (with its subsidiary Post University, Inc.). We are further informed that Teikyo Group of Japan and the new corporation have substantial overlap in their governing boards, and that the Board of Trustees overseeing Post University, Inc., which operates the University, has been expanded but includes many holdovers from the previous board. The University's campus, administration, faculty, course and degree offerings remain unchanged, as has the University's stated mission. "Teikyo" has been dropped from the name.

The "definitions" section of the relevant statutes, Conn. Gen. Stat. 10a-37, at subsection (d), defines an "independent college or university" as "a nonprofit institution established in this state," which has degree granting authority, is not part of the system of public higher education and which does not have the primary function of preparing students for religious vocation. (Internal quotations omitted). However, another statute, Conn. Gen. Stat. 10a-42a, provides that "[n]othing in sections 10a-36 to 10a-42, inclusive, shall affect the eligibility of an accredited independent college or university which, as of June 30, 1983, participated in the program authorized under sections 10a-36 to 10a-42, inclusive of the general statutes ." Notably, the same public act, P.A. 83-197, both required the independent college or university to be a non-profit entity, and inserted Conn. Gen. Stat. 10a-42a's "grandfathered in" language.

It is our understanding that as of June 30, 1983, Teikyo Post participated in the program, and was a non-profit institution at that time. Notwithstanding that the University presently does not, due to its for profit status, fall within the definition of an eligible independent college under Conn. Gen. Stat. 10a-37(d), if the University remains essentially the same institution, then Conn. Gen. Stat. 10a-42a mandates that the University remain eligible to participate.

As noted, the University's campus, administration, faculty, course and degree offerings remain unchanged, as does the University's stated mission. Its governing board, while expanded, reflects a strong degree of continuity. However, the University's corporate identity has changed. It has changed from being a non-profit 501(c)(3) corporation to a for profit corporation. Previous Attorney General opinions establish that for purposes of state licensure requirements, while sale of some or all of a corporation's stock does not alter corporate identity and hence require new licensure, a change in the corporate identity and structure does. Letter to the Honorable Douglas S. Lloyd, M.D., October 21, 1975 (1975 WL 28375); Letter to the Honorable Douglas S. Lloyd, M.D., October 7, 1975 (1975 WL 28420). The statutory language itself in this instance provides little or no guidance as to whether, despite the change in corporate structure, Post remains the same "university," since, as noted above, the same public act both defined "independent college or university" as non-profit institutions, but then "grandfathered in" colleges and universities which had participated in the program in 1983, mandating that "nothing" in the statutory scheme can be construed to dictate that such schools cannot participate.

A review of the legislative history of P.A. 83-197 indicates, however, that the program was intended to only assist non-profit institutions, except for two specific exempted for profit institutions. In the State House of Representatives, the bill's sponsor stated that the bill

clarifies that institutions eligible to receive funding under this program shall be limited to non-profit degree granting independent institutions which have their home campuses in Connecticut, except that it provides for grandfathering for two institutions, Briarwood and Payor [sp] that have participated in the program in the past, These institutions slipped through an inadvertence in the bill the last time it was amended. They are accredited institutions and they had the privilege of receiving grants.

Remarks of Rep. Goodwin, May 5, 1983 (Emphasis added). State Senators were told

[t]he bill would clarify that institutions eligible to receive funding under this program shall be limited to nonprofit degree granting independent institutions which have their home campus in Connecticut except for two for profit institutions which is [sic] Briarwood and Paier School of Arts that have participated in the program in the past and shall continue to participate.

Remarks of Senator Mustone, April 26, 1983 (Emphasis added). In the same vein, the then Commissioner of Higher Education, Norma Glasgow, in reference to the for profit institutions that were sought to be included in the bill's largesse, testified before the Education Committee that "the most desirable way would be to amend the bill to grandfather in just these two institutions and their students that have been participating in the program." March 13, 1983 (Emphasis added).

Certainly Teikyo Post was not one of the two institutions the legislature believed it was grandfathering into the program at the time of passage of P.A. 83-197, since it was a non-profit institution at that time and hence did not need the benefit of the grandfathering provision. Both Briarwood and Paier School of Art were already for profit institutions at that time and were specifically grandfathered into the program. Post University's situation is thus fundamentally different from theirs. Post has chosen, since the passage of the law, to shed its non-profit status and become a for profit institution under a new corporate structure. An institution's transition from non-profit to for profit status fundamentally alters the structure of the institution. As such, given the University's change in corporate structure, under the principles cited above we are of the opinion that absent further statutory amendment, Post University no longer qualifies to participate in the scholarship program.

Nevertheless we are aware that the grandfather provision set forth in Conn. Gen. Stat. 10a-42a appears to be ambiguous and extremely broad in its scope and was relied upon by both the University, and the Department of Education in making a 2004 determination that Post University would remain in the student grant program. Since the grant program money may have already been allocated to Post University students, we recommend that the legislature revisit this law to allow Post University, and ultimately its students, to continue to receive program funds.

Please free to contact us if you have further questions.

Very truly yours,


RICHARD BLUMENTHAL
ATTORNEY GENERAL


Ralph E. Urban
Assistant Attorney General


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