RI’s Shrinking University - Lost Nearly $100 Million in 4 Years While Execs Took Tens of Millions
GoLocalProv News Team
RI’s Shrinking University - Lost Nearly $100 Million in 4 Years While Execs Took Tens of Millions
Johnson & Wales University was a high-flying, fast-growing higher education corporation in the early 2010s.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTHeadquartered in Providence, it exploded in revenue, the number of campuses, and its top executive officers took mega-salaries.
In more recent years, J&W has faced a mammoth decline.
Overall revenue fell from more than $529 million in 2014 to $344 million in 2021— an unheard-of 30% decline in seven years.
All the while, the leadership team took millions in salaries and other benefits.
In a three-year period 2019 to 2021, J&W lost $99,085,047, according to tax records. Some of the University's tax records and audits have only been made public in recent weeks.
J&W claims the economic decline was due to COVID. But those claims don't hold up.
“JWU like many colleges throughout the country had fiscal challenges due to the impact of COVID but we weathered the pandemic and have completed the current fiscal year with a surplus,” said Jennifer E. McGee, the Director of External Communications & Media Relations at Johnson & Wales University.
The financial decline began years before COVID hit America's shores in 2020, and the University received tens of millions of federal COVID-19 Paycheck Protection Program (PPP) funds.
The University, which was founded in 1914 by Gertrude I. Johnson and Mary T. Wales, two women dedicated to providing relevant and practical education, has dramatically transformed over a century and is transforming again.
Big Growth
J&W grew to multiple locations across the United States — locations in Denver, Charlotte, North Miami, as well as Providence.
The revenue exploded to more than half a billion dollars annually.
In 2014, J&W’s revenue rocketed to $529,237,534 — and the net income jumped to $57 million for the year. In Providence, the company gobbled up real estate and expanded its campus in downtown Providence and along the waterfront off of Allens Avenue on the Providence and Cranston line.
But, behind the growth were fundamental problems, changes in education demographics, and big expenses.
The board was stacked with notable “business leaders.”
Board members included former GTECH CEO Guy Snowden, former BankRI President Merrill Sherman, and former Bryant University President William Truheart.
One financial board member was a financial advisor who ran into serious legal troubles.
David Brochu, former Rhode Islander and founder of StrategicPoint Investment Advisors, served on the board for years. He was fined in New Hampshire in 2016 for violating state securities regulations and stripped of his license — and ordered to pay $1.3 million in restitution to twenty-two investors, including ten Rhode Islanders whom he owes $365,000.
The revelation was just one in a series of serious legal issues for Brochu, who in 2014 was arrested on sex and weapons assault charges in New Hampshire, and, in 2010, was embroiled in a court battle after selling StrategicPoint to Focus Financial Partners. All while he was serving on the J&W's board.
Salaries Explode for Top Executives
There were big salaries for top executives.
Then-Chancellor, President and CEO John Bowen received a total compensation package in 2014 of $1.5 million. Vice-chancellor Thomas Dwyer received more than $1 million that year. Those salaries were above average for executive compensation for university leaders, according to a study by the Chronicle of Higher Education.
J&W's overall revenue jumped to $529,237,534.
While 2014 was the height of the revenue for the University, it was not close to the high point for the compensation paid to the top executives.
In 2018, Bowen’s compensation jumped to $5.3 million, and Dwyer's was nearly $3.1 million.
In contrast, just across Providence, Brown University President Christina Paxson’s total compensation was just over $1.5 million. Brown is an Ivy League University and, in 2018, had a budget three times larger than that of J&W.
And in 2018, RISD’s President Rosanne Somerson received a total compensation of $641,000.
While the senior staff was receiving record compensation packages, the core financials had peaked and were on the precipice of collapse.
Over the past five years, Johnson & Wales University has lost more than $80 million — but the numbers are just some of the story.
Between 2016 and 2018, the University lost more than $8 million and Bowen alone received compensation of more that $8.2 million, according to J&W tax records. It is unclear if some of Bowen's take was deferred compensation.
Dwyer took another $4.8 million during the three-year period.
Bowen stepped down in December of 2018.
Shutdown
The poor financial performance took its toll. In July 2020, J&W announced that the multi-campus business model was being revamped.
"Times have changed in higher education across the country, and so too must Johnson & Wales’ strategic direction as we build for the future. To this end, the Johnson & Wales University Board of Trustees has determined that the time has come to consolidate the university’s physical footprint as we move to become a more comprehensive university, strengthening and expanding JWU’s academic portfolio and delivery models," announced J&W in a press release.
"As we prepare for the start of the 2020-2021 academic year, Johnson & Wales will continue to welcome and educate students at the Providence and Charlotte campuses; however, the university will not be enrolling a new, incoming class for the fall of 2020 at the North Miami and Denver campuses," said the University.
J&W slashed campuses, faculties, and costs.
While COVID was blamed after the fact by J&W officials, the financial bleeding had gone on for years.
And, according to the Small Business Administration (SBA), J&W received a total of $24,169,200 in PPP loans during the COVID-19 pandemic.
According to J&W’s 2021 annual report, the school's net assets declined $38 million. The school was reeling.
Financial issues were not the only problem; in 2019 J&W was delisted by U.S. News & World Report for filing false data.
The University was unranked.
“Johnson & Wales University in Rhode Island recently told U.S. News that for many years the school had been over-reporting its financial resource expenditures budget for its Providence campus. The school had been reporting financial expenditures data for all Johnson & Wales campuses to U.S. News instead of just for the Providence campus. The school told U.S. News that for every $100 of financial resources expenditures it had reported, it should have been around $62. Financial resources expenditures per student accounts for 10% of the Best Colleges ranking,” announced U.S. News.
University Says It Has Stabilized
When pressed on the financial viability of the J&W today, the University says they have righted its financial ship.
"In 2020, Johnson & Wales made the strategic decision to right-size the university by closing two campuses that were being subsidized by our other campuses. As a result, our endowment has grown to $340 million, our debt has been reduced to $40 million, and we are investing in new academic programs that will increase our enrollment. The university’s bond rating agencies and banks have complemented JWU on the decisions and changes we have made," said McGee.
At the end of November, J&W announced a major policy change that juniors would be required to use University housing in an attempt to secure housing revenue.