After the online newspaper Inside HigherEd reported in January that Wharton MBA Admissions officer Judith Hodara was consulting for a Japanese admissions firm and also owned a consulting business catering to high-school students, observers and members of the higher-education community quickly labeled the activities as a conflict of interest.
A few days later, Penn also spoke out, saying it "does not consider this type of situation appropriate, which is why it has been ended."
The gravity of the infractions, though, is difficult to ascertain because both relationships dealt only indirectly with her job duties.
But these revelations came less than a year after other areas of the higher-education industry, most notably the financial-aid sector, came under serious legal scrutiny for conflicts-of-interest allegations and spurned debate among experts about the true nature of conflicts of interest at a university level.
Student loans history
Last spring, New York Attorney General Andrew Cuomo made waves when he sent letters to over 400 colleges and universities, including Penn, requesting that their financial-aid offices end certain relationships with student-loan companies that, he said in a press release, were "filled with the potential for conflicts of interest" and in some instances broke the law.
Cuomo pointed to financial kickbacks, all-expense-paid resort vacations for financial-aid officers and financial-aid call centers staffed by lending-company employees.
At Penn, Cuomo's investigation revealed a relationship between Penn and Citibank, which gave the University a 2-percent fee from every loan borrowed by a Penn student in the CitiAssist program. The University then redistributed the money as financial aid.
The University and the Attorney General quickly settled, with Penn agreeing to redistribute $1.6 million to students who had used CitiAssist loans.
After the settlement, Penn underwent a "thorough examination by our internal audit and compliance team of all departments under the [Executive Vice President] and energized the staff to be extra-diligent in managing contracts with all external vendors to ensure we were - and are - compliant" with conflict-of-interest policies, Executive Vice President Craig Carnaroli wrote in an e-mail.
"We continue to review our policies to make sure that they are in the best interests of the students," he added.
But while Penn quickly responded to the issue, one of the investigation's worst widespread effects was the shattering of the public's trust in financial-aid offices across the country.
"The consequence and the negative outcome affected everybody, and that means today families are bewildered and the nation as a whole is worse off, I believe, as a loss of that trust," said Barmak Nassirian, the deputy director of the American Association of Collegiate Registrars and Admissions Officers.
And with many in the higher education community already wearied from Cuomo's exhaustive investigation, this recent flare in the admissions world caused some to wonder if another investigation would be needed.
A community reacts
With the publicity following the Hodara story, the reaction in the admissions community was swift and largely negative. Many saw Hodara's knowledge and positions as unfair advantages to her clients.
"It's shocking to hear. You can't do that. I worked in the Dartmouth admissions office and it would have never occurred to me. That's cheating," said Michele Hernandez, president of Hernandez College Consulting.
Such an incident "violates the trust of the system and it hurts applicants because it makes it unclear who is advocating for whom," added Steve Goodman, another college consultant.
But observers also saw echoes of the earlier financial-aid scandal.
"The key similarity [between the two] is that there is an issue of a decision or process that really has profound consequences for students," said David Hawkins, policy director for the National Association for College Admissions Counselors.
NACAC, a membership organization for admissions officers nationwide, already has a Statement of Principles of Good Practice to guide schools and officers on ethics but will probably release short-term guidelines dealing with conflicts of interest, he said.
The difference in scope between the student-loan scandal and Hodara's practices, however, are substantial.
"If we go to the financial-aid scandal, [it's an] $85-billion-a-year business," Nassirian said.
"The elements of that scandal were much easier to grasp, and a lot more [money] was at stake. . There isn't enough money swishing around the admissions offices like there was in student lending."
The student-lending situation was also industry-wide, said Hawkins, while conflicts-of-interest in admissions don't appear to be as widespread.
Still, Hawkins said, "I think it could absolutely follow the same path" if more evidence is uncovered.
Defining a conflict
At universities, especially large research universities like Penn, everything from scientific research to the choice of the university bookstore could be construed as a conflict of interest, Nassirian said.
However, when a conflict or perception of a conflict arises within an advisory office, like admissions or financial aid, "it's particularly upsetting [because] . the families expect quite rightly a sort of ethical commitment to their best interests," he said.
To combat this, all nonprofit universities, like Penn, must have a conflict-of-interest statement; but, because conflicts of interest are amorphous, the statements must be broadly written.
After Cuomo's student-loan investigation, professional groups began to work toward more clearly defining conflicts of interest and assisting universities when conflicts arise.
To that end, the American Council on Education recently released a 10-page working paper on conflicts of interest at the university level.
According to Ada Malloy, general counsel for the ACE, the group wrote the report largely because Cuomo's investigation, which "caused many in the higher-education community to get concerned about whether conflicts of interests in higher ed . needed to be addressed."
The paper characterizes conflicts of interest as usually involving money, in which a university decision maker has a financial stake in the outcome, but allows for almost any hypothetical situation, including ones involving "conflicts of commitment," such as personal relationships with vendors.
For instance, Nassirian said, universities endorse one bookstore or food-service company by signing contracts. Students and faculty must trust that this arrangement is made in their best interests, but the financial nature of the agreement means a conflict of interest could theoretically arise.
Still, he added, "when you encounter the bookstore you expect someone to sell you a book," while in university offices, students shouldn't have to worry about who is profiting from their interactions.
'Shades of gray'
But while the scandals have left universities and advocacy groups rattled, stronger conflict-of-interest statements may not be the way to go.
"I think it is often helpful to have an explicit policy; however, when you do have a very explicit policy, sometimes that allows for people to look for the cracks in the policy," Malloy, of the ACE, said.
Writing an explicit policy is also problematic because some forms of extracurricular activities are very beneficial, Hawkins said. The "shades of gray" in the debates become central to judging a conflict.
"If [an admissions counselor is] in Philadelphia, and someone in . Dover wants you to come and speak to their outreach program for low-income underserved youth . I can't see the maleficence there," he added.
Instead, the flexible guidelines that institutions and organizations like NACAC and AACRAO offer, as well as steady oversight and disclosure may be the best way to manage conflicts of interests and the appearance of conflicts of interests.
Despite the limited reach of policy statements, conflicts-of-interest statements need to incorporate what is harmful to students, Nassirian said.
A university may "need a more nuanced conflict-of-interest statement because it may well be they have an obligation to another body: the students."
