Paul Smith’s merger, short on details, gets leadership help

Former SUNY chancellor brought in to foster deal with Fedcap

By James M. Odato

As Paul Smith’s College awaits government review of its petition to merge with a Manhattan-based job training enterprise, the former chancellor of the State University of New York has entered the process.

Although both the college and the enterprise, The Fedcap Group, refused interview requests or would not respond to the Explorer, people familiar with the situation or associated with the college say former SUNY chief James Malatras is part of the team involved in the planning for the proposed unconventional marriage.

The discovery of Malatras in the mix comes as records provided by the State Department of Education (SED) show it received sparse details from Paul Smith’s about the proposed merger earlier this year and that the school expected sign-off months ago. The Fedcap Group reported more than $400 million in annual revenue and more than 250,000 people served with the aim of securing long term economic well-being.

An early record Paul Smith’s provided the SED said the college planned a merger and would become a “venue” for students who are non-traditional learners “upskilling as part of a workforce development focus,” an extension of the college’s existing mission.

A summer 2021 document about the plan indicates the acquiring “organization,” which at that time was not disclosed but with a description similar to Fedcap, would have power to pick the president: “The organization would be responsible for appointment of the College President/CEO, in consultation with the College’s Board of Trustees.” The college trustees would take on an advisory role to the campus leadership. More recent documents from earlier this year disclose Fedcap as the merger partner and did not restate this authority to choose a campus leader.

Sarah Wheeler, the college’s marketing and communications director, confirmed that Malatras, along with Fedcap’s chief executive and board members, attended Paul Smith’s board and alumni events in October. She would not answer questions about why they were in the Saranac Lake area or the role of Malatras. 

He announced his resignation from his SUNY job last December amid scrutiny of his harsh remarks about a woman who later accused former Gov. Andrew Cuomo of sexual harassment. Malatras had been one of Cuomo’s top aides. The SUNY trustees named him chancellor in 2020, drawing criticism for skipping a nationwide search.

Wheeler referred questions to Paul Smith’s College administrator Nicholas Hunt-Bull who, before hanging up on a reporter, would not say anything about his job situation or provide an update on the planned merger other than it hasn’t been authorized by “accreditors” reviewing the plan.

Less than two weeks after Malatras and Fedcap’s top officers met with Paul Smith’s board and engaged in activities with college leaders in Saranac Lake, the college’s trustees announced it was replacing Hunt-Bull with an interim president and returning him to his post as provost. Three months earlier, the board had appointed Hunt-Bull as the college’s 13th president, eschewing the nationwide search it says it has now decided to undertake.

The State Education Department Office of College and University Evaluation and the Middle States Commission on Higher Education, which provides accreditation of Paul Smith’s, have been reviewing the merger plan for months. A spokesman for Middle States said its work is confidential but that the sort of thing Paul Smith’s was proposing would be considered a “complex substantive change.” 

Records provided through the state Freedom of Information Law show that the State Education Department had questions about the union and that the department’s counsel’s office was tapped for assistance.

The records indicate the provost’s office of Paul Smith’s College had written and called the state agency about the “transaction” agreed to between Fedcap and the college and that the college expected approval from the state and Middle States by the summer of 2022.

Moving ahead

The emails show that the school was light on details even to the regulator. In an interview, the now retired director of the SED unit reviewing the merger, Leslie Templeman, said: “Our primary concern is what is it that the students are getting. We had very little information.”

The school, the records state, was letting the education department in on its intentions to fast-track a wedding.

“We have decided to move forward with the transaction,” Catherine Lalonde, who has been the acting provost, wrote to SED in March. “Specially, PSC has agreed with The Fedcap Group, Inc. (“Fedcap”) that it will convert from a nonprofit corporation with no members to a single-member nonprofit corporation, with Fedcap as the sole member. … We anticipate the transaction will be approved by our institutional accreditor, the Middle States Commission on Higher Education, in June 2022 and hope to conclude the transaction no later than August 1, 2022.”

Lalonde said the college’s tax status, mission, educational offerings, facilities and faculty would “remain the same after the transaction (subject to normal faculty attrition).”

She also wanted to know if the Board of Regents had to weigh in on the deal because the school’s charter, granted by the Regents in 1937, would be changed to include Fedcap as its sole member and its board might be expanded.

“We appreciate your prompt confirmation,” Lalonde said, so that any application could be completed “no later than July 1, 2022.”

The plan, Lalonde said, calls for college’s board to continue in its governing role but Fedcap would gain “certain reserved powers as the sole member” such as approving any bankruptcy or banning significant corporate actions like bylaw amendments. The college’s board would control the “day-to-day operations” of the school. 

The college’s charter provides for between 10 and 30 board members; after the proposed transaction the board would consist of between three and 40. All of the existing members would continue in their terms.

Fedcap would operate under a consulting services agreement in which some college administrative services would be “integrated into Fedcap’s larger platform to achieve efficiency and reduce costs.” Fedcap also would work with the school on deferred maintenance projects. 

Fedcap, which has identified itself in public disclosures as receiving heavy federal reimbursement for its job preparation programs, has no experience operating a college. But it runs educational institutions in New York and New Jersey including The Kessler Center (a professional trade school for students with developmental disabilities), The Fedcap School (a special education school with a 97% graduation rate), and, indirectly, Apex Technical School (a federally supported school owned by a Fedcap affiliate). 

The SED records indicate that Fedcap’s mission is broader than education. Its affiliated group of nonprofit organizations partner throughout the United States, Canada and the United Kingdom to help people underserved by education systems, including those released from prison. 

Founded around 1935 as the Federation of the Handicapped and Disabled, Fedcap’s mission has expanded to include nonprofit organizations involved in philanthropy, child development, occupational health, workforce development and economic development, the records disclose. 

Christine McMahon, Fedcap’s chief executive, has said her goal is to help people get employed. She did not respond to an email message following her trip to Saranac Lake.

Malatras returned a message but requested questions be sent to him which he did not answer, including an explanation of what his work for Fedcap involves.

In recent years, several small, private nonprofit colleges have sought mergers to save on overhead and improve efficiencies as the costs of providing academic services grew and enrollments shrunk.

Paul Smith’s has been seeking a new model for some time. Adminstrators thought it had hit on some help a few years ago when a philanthropist, Joan Weill, offered $20 million to the school if it changed its name to hers. An uproar that included dozens of calls of protest to the SED and a lawsuit ended seven years ago without the name change or the donation.

Higher education experts say the Fedcap/Paul Smith’s union is at least unusual. “I’m unaware of this type of configuration,” said Frank Casagrande, a higher education consultant who has worked with more than 100 colleges nationwide over the past two decades, including Siena College near Albany. “It’s potentially unprecedented given the mission of Fedcap and Paul Smith’s.” 

Casagrande, a graduate of Union College in Schenectady, said the merger may result in both schools being better able to achieve their mission of reaching “people they are trying to lift.”

Paul Nelson, a spokesman for the Commission of Independent Colleges and Universities, of which Paul Smith’s is a member, said the unconsummated deal might not be the first-ever marriage of an institution of higher education with an entity from another field. In 2007, the Culinary Institute of America and the Center for Foods of the Americas in San Antonio consolidated with Board of Regents approval.

Fedcap informed the state Attorney General’s charities bureau that a key unit of its enterprise, Fedcap Rehabilitation Services Inc., provided vocational evaluations, training, and employment services and other government-funded employment and job search programs helping people find jobs as mail clerks, messengers, custodians, food service workers, data enterers, office staff, document imaging employees, hospitality crew members and security officers.

Fedcap Rehabilitation’s participants came from all five of New York City’s boroughs. They were people with severe or multiple disabilities, including mental illness, developmental and physical disabilities, learning disabilities, hearing and visual impairments, histories of drug abuse and criminal convictions; 40% were adults and a vast majority were recipients of some form of government support.

Fedcap intended its partnership with Paul Smith’s to be in place while it opened an 80,000-square-foot digital training center for “re-skilling and up-skilling” workers to meet new employment demands and to supply a workforce for “green technologies.” The company said it would educate, prepare and train at-risk individuals for employment in the high-demand areas of clean energy and renewables.

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