Follow the Money: House DETERRENT Act Tracks Foreign Funds in Higher Ed

Last month, California Congresswoman Michelle Steele and House Education and Workforce Committee Chairwoman Virginia Foxx introduced the DETERRENT Act, an acronym for “Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act.” The bill amends the Higher Education Act of 1965 (the HEA), the main federal law governing higher education, with a focus on Section 117 which requires colleges and universities to report foreign gifts if they are valued at $250,000 or more.

The point of Section 117 should be obvious: Citizens deserve to know if foreign countries are buying influence in American schools. Colleges and universities are heavily subsidized by taxpayers not only with the federal student loan program but, in the case of public universities, with state legislative appropriations. But even private universities are subsidized with their non-profit status since that status means they pay less into the tax base. That’s forgone revenue for everyone else.

Citizens provide these subsidies because schools are, theoretically, in the American public interest. But funding from foreign sources obviously calls that into question: If schools accept foreign money, whose interests will they serve? As the saying goes, “He who pays the piper calls the tune.”

And many foreign countries are, indeed, paying. In 2020, for example, the Trump Education Department found that more than $6.5 billion had poured into American schools from foreign sources. But schools had not disclosed or reported this money as is required by Section 117. Instead, they appear to simply take the money and run, including money from nations hostile to the United States such as China.

In fact, schools complain about the reporting requirement and lobby to have it removed. Is American higher education for sale? Let the highest global bidder win and take all? Research, technology, Defense Department contracts – all appear fair game for foreign governments willing to pay as national security risks get swept under the rug.

For example, the University of Pennsylvania is home to the Biden Center for Diplomacy and Global Engagement, launched in 2017. Since its founding, Chinese funds to the school have nearly tripled, according to records unearthed by Congress. And Harvard’s former Chemistry Department ChairmanCharles Lieber, was paid $50,000 a month by China for developing an academic program called Thousand Talents, known to “reward individuals for stealing proprietary information.” And the Texas A & M “Engineering Experiment Station” has signed million-dollar contracts with Russia and Qatar without any Section 117 disclosures or reporting.

In short, foreign nations buy influence and intelligence. Schools get cash. But America loses.

The DETERRENT Act seeks to correct this. For starters, it increases penalties for noncompliance with Section 117. Right now, a school that fails to report is only asked to pay the government’s cost of enforcement – effectively a slap on the wrist. Under the DETERRENT Act, the minimum fine for a failure to report is $50,000 for a first-time offense but that doubles to $100,000 for subsequent offenses (or, alternatively, a penalty of twice the value of an unreported gift). If funds come from “a country of concern” as listed by the current Defense Authorization Act, the school loses 5 to 10% of its federal funding for a first offense with that percentage doubling for subsequent offenses. Eligibility for federal funding can also be denied.

The Act also lowers the gift amount that schools need to report from the current $250,000 to $50,000.  But if a gift comes from a “country or entity of concern,” then any amount must be disclosed. Finally, the Act also requires that reports include the name of the individual receiving the money so schools no longer turn a blind eye to the Charles Liebers in their midst.

So Chairwoman Foxx and Representative Steele deserve credit for these improvements.

Some concerns remain, of course. Right now schools are in the settled habit of ignoring federal law. And to date, no one on campus answers for non-compliance while no one from the federal government is checking, investigating and formally finding non-compliance. The bill is unclear about what would even prompt an investigation. What good is a higher penalty if no one’s authorized to investigate and make a formal finding of noncompliance to trigger the penalty in the first place?

But the bill does create a Compliance Office with an Officer who is “a current employee or legally authorized agent” of the institution who will “be responsible … for personally certifying accurate compliance ….” Yet can this Officer be sued if reports aren’t made? And if not, what power does the Officer have to insist that things change? Old habits die hard.

The National Association of Scholars (NAS) has long advocated that schools file a Certificate of Compliance with Section 117 as part of their Program Participation Agreement (or “PPA”), the contract allowing schools to get student loan money on the condition that they not discriminate on the basis of race (Title VI of the Civil Rights Act) or sex (Title IX of the Educational Amendments of 1972). That Certificate should be signed by a high level school official, such as a Provost or Dean, and if any American citizen or entity has a credible claim that Section 117 has not been observed, that high level official can be sued in addition to the penalties outlined above. The House Education and Labor Committee’s recent Report on Campus Free Speech actually mentions the Certificate as one way to protect free expression in higher education; but it makes even more sense as an enforcement tool for Section 117.

But this concern should not detract from the gains under the DETTERENT Act, which also directs the General Accounting Office (GAO) to study these issues further and recommend additional ways to increase improve enforcement. That means this bill is just a first step – a really good first step for getting serious about following the foreign money in higher education.

Bravo to Congresswomen Steele and Foxx and to Committee Staff. Keep up the good work.

Teresa R. Manning is Policy Director at the National Association of Scholars, President of the Virginia Association of Scholars and a former law professor at Virginia’s Scalia Law School, George Mason University.

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About Teresa R. Manning

Teresa R. Manning is the policy director at the National Association of Scholars and a former law professor at Scalia Law School, George Mason University.

Photo: Buena Park, CA - November 07: U.S. Representative Michelle Steel (CA-45) speaks to the media during a get out the vote event at Steels headquarters in Buena Park, CA, on Monday, November 7, 2022. (Photo by Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images)

Notable Replies

  1. Good idea, but there needs to be more muscle behind this. Remember when the country had to implement Sarbanes Oxley. CEO’s, CFO’s, COO’s all had to sign the dotted line they could be held personally liable if there was fraud. Well, we need to hold the executives and professors personally liable for fraud.

    People need to go to jail for selling out our country.

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