How Senator Portman Pushed the Department of Education to Reverse Course on “Historically Lax” Foreign Gift Reporting Enforcement

February 13, 2020 | Portman Difference

Yesterday, the Wall Street Journal reported that, following the Permanent Subcommittee on Investigations (PSI) February 2019 report and hearing regarding foreign gift reporting in the U.S. education system, increased enforcement efforts by the U.S. Department of Education have resulted in the reporting of approximately $6.5 billion in previously undisclosed foreign money since July 2019. In fact, the Department’s press release yesterday cited the PSI report as the rationale behind its increased enforcement efforts. At the February 2019 hearing, Portman questioned Deputy Secretary of Education Dr. Mitchell Zais on the Department’s lack of enforcement efforts. Dr. Zais made it clear that the Department was not prepared to provide additional guidance to colleges and universities on current law requirements to report foreign funding, saying, “At the present time we do not have a plan.”  But after being pressed by Portman during the hearing, Dr. Zais committed to ensuring that the department would issue new guidance to U.S. colleges and universities to ensure that foreign gifts are reported as required by law.

In a November 2019 letter to Portman, the Department of Education even admitted that prior enforcement of foreign gift reporting was “historically lax.”  The letter goes onto detail, how in response to PSI’s February 2019 findings, the Department opened at least six investigations into compliance with foreign gift reporting regulations.

Below, please find excerpts of Portman’s discussion with Dr. Zais on February 27, 2019.

Senator Portman:Dr. Zais, we know that 33 of the 48, 70 percent, of the U.S. schools that should have reported a contribution from a foreign government of over $250,000 have not done so. So, 70 percent of the schools are in violation. Yet you have not referred a single one to the Department of Justice, which is under law what has to happen. Justice cannot prosecute unless you refer… and we are not enforcing our own laws…and the Department of Education, which does have a responsibility here, ought to at a minimum follow the U.S. law that is in place, and I think put out new guidance. The guidance is 14 years old and was put in place when there was one Confucius Institute, as I understand. As it grows, we ought to be sure that these universities, colleges, high schools, middle schools, and elementary schools know what the guidance is.

Mr. Zais:we are grateful to you and your Committee for shining a light on this issue and bringing it to public attention, and we will look forward to working with you to rectify some of these issues.

Senator Portman: What is your intention with regard to acting on that and specifically including the Department of Justice by giving them the information?

Mr. Zais: In the past every institution that we have called and reminded them of the requirement to report—normally this comes to our attention because they reported significant gifts in the past and then they have failed to report a gift—they have responded appropriately and provided the requested information. We have never had an institution that has just refused to report, which is why we have never referred a case to the Justice Department. But I think what the Department needs to do is figure out how to be a little more proactive in getting complete reports from all of the institutions.

Senator Portman: With all due respect, when 70 percent of the schools, based on our investigation—maybe we are wrong, but based on our investigation, 70 percent of the schools are not complying. I guess you have to make more phone calls if you are saying that is the way to do it, to be sure that they understand it. Otherwise, a civil action may be brought by the Attorney General (AG) at the request of the Secretary of Education. If you are finding that people are not complying even though you are providing guidance, maybe that would—as was indicated earlier with regard to the Chinese Government on reciprocity, maybe that would get people’s attention.

Mr. Zais: Yes, Senator.

Senator Portman: This [Education Department guidance] is about 15 years old. Do you have a plan to issue this updated guidance to U.S. schools regarding the reporting of foreign gifts?

Mr. Zais: Senator, at the present time we do not have a plan, but we certainly look forward to exploring how to clarify this guidance document and working with the Committee to clarify portions of the statute that are not clear…

Senator Portman: We would be delighted to work with you on any clarifications on the statute, but the statute is clear enough to know that you have to report, and so you were pretty forward-leaning earlier in response to some questions on some much more difficult issues. I would think on this one you can give us a yes, which is that you will issue new guidance. The question is when, but you will issue this guidance so we do not have these schools continue to be uncertain about what their responsibilities are.

Mr. Zais: Absolutely.

Senator Portman: That is a yes?

Mr. Zais: Yes, sir.