School Price-Fixing Probe Expands to USC, Stanford

USC and Stanford University have been added to the list of schools being investigated by the U.S. Justice Department for possible violation of antitrust laws in setting tuition, financial aid and salaries for teachers and administrators, officials at the universities said Monday.

The two schools apparently are the first on the West Coast to receive the demand for documents dating back to 1985 in the federal government’s attempt to find out whether high-priced private colleges collude to fix prices. At least 40 schools nationwide, most of them in the Northeast, reportedly are being investigated.

Officials at USC and Stanford denied any violation of antitrust laws and said they would cooperate fully with the probe. Both schools received so-called “civil investigative demands” last week for internal memos, computer files, telephone records and appointment books and have until Sept. 28 to hand over what the schools say will be an enormous amount of information.

“It’s going to take quite a little bit of work,” said James Rosse, Stanford’s vice president and provost.

According to Rosse, Stanford has had a policy for many years that forbids any exchange of information on tuition, financial aid and salaries before decisions on those matters are made. “We are confident the investigation will show our policy to have been effective,” he said.

At USC, Lyn Hutton, senior vice president for administration, said the school’s general counsel, Christian Markey, met Monday with Justice Department officials in Washington to discuss how to “ensure that we comply” with the order.

Justice Department spokeswoman Gina Talamona declined Monday to identify any of the schools that have received the orders since the investigation began six weeks ago and she refused to discuss why USC and Stanford were included. Talamona also declined to say how many schools are now involved in the investigation but she suggested that more universities might be added soon.

According to a survey published in this week’s issue of the Chronicle of Higher Education, the trade paper for colleges and universities, at least 40 schools have received the orders. They include such elite institutions as Harvard, Princeton, Yale, Brown, Columbia, Amherst, Dartmouth, Mt. Holyoke, Smith, Vassar, Oberlin, Johns Hopkins, University of Chicago, University of Pennsylvania, Massachusetts Institute of Technology, Williams, Tufts, Wesleyan and Wellesley. The list of schools being investigated is so prestigious that some school officials have joked that it is a compliment to be included.

Twenty three of those schools are members of the Overlap Group, an organization that has met annually for many years to discuss financial aid awards to students. Members of the Overlap Group say their goal is eliminate what they consider unseemly competition in granting scholarships for students. They say they discuss the general financial needs of a student but leave up to the schools how much of the proposed aid should be loans, grants or work-study jobs.

Stanford and USC say they are not members of the Overlap Group. But the federal probe now seems to have widened to include a sampling of well-known schools which compete with one another for students and charge in most cases more than $17,000 annually for tuition, fees, room and board. Those costs this year will total $19,164 at Stanford and and $18,728 at USC.

The Justice Department order to Stanford calls for, among other things, “all documents (including minutes, notes, or memoranda) that related to any meeting at which any fee charged by any school, salaries paid by any school, or the financial aid to be provided any student by any school was discussed, proposed, considered, recommended, determined, changed or decided.” The government also wants descriptions of any meetings among representatives of the colleges under investigation and any other schools during which the finances were “mentioned or discussed, formally or informally.”

Officials at some other independent California colleges, including Occidental, Pomona and Caltech, said Monday that they have not received the investigative orders. However, Hans Giesecke, research director for the Assn. of Independent California Colleges and Universities, said he would not be surprised if other schools are added.