June 19, 2013

Jury Awards $13 Million To Single Mom Deceived By For-Profit College Tied to Mitt Romney

On Friday a Missouri jury awarded $13 million in punitive damages to a single mother who had been deceived by for-profit Vatterott College. Vatterott, which has a long record of abusing students and leaving them deep in debt, is owned by TA Associates, a private equity firm financially tied to Mitt Romney’s own private equity firm and to the 2012 Romney presidential campaign.

Jennifer Kerr of Lee’s Summit, Missouri, saw Vatterott’s TV ads and visited the campus in 2009 to pursue her dream of becoming a nurse.   A Vatterott recruiter told Kerr that the school didn’t have a nursing program, but it did offer a medical assistant’s degree. With that credential, the recruiter said, Kerr could make $15 to $17 an hour, and her Vatterrott credits would transfer to a nursing program and put her on the “fast track” to being a nurse.

But after signing for more than $27,000 in loans and being in the program for over a year, Kerr discovered that her program wasn’t a medical assistant program at all — it was a medical office assistant program. Vatterrott staff then told her that a medical assistant’s degree would require more classes and another $10,000.

While Vatterot appears to have been greedy with Jennifer Kerr, Vatterott’s owner, TA Associates, was extremely generous to Mitt Romney’s campaign. The Romney Super PAC Restore Our Future received $329,900 from TA executives Kevin Landry and P. Andrews McLane, and another $135,000 from Bill Heavener, CEO of Full Sail University, another for-profit college owned by TA.  Landry also donated $89,900 to American Crossroads, the pro-Romney Super PAC founded by Karl Rove.

Romney returned the favor: On the campaign trail he praised TA’s Full Sail University as a school that knows how to “hold down the cost of their education.” In fact, Full Sail is the third most expensive college in America.

In praising Full Sail, Romney never mentioned that the for-profit college’s owners had contributed heavily to his campaign effort.  Nor did he disclose that he was actually in business with them.

You see, Mitt Romney’s son Tagg and campaign finance director Spencer Zwick launched the private equity fund Solamere Capital in 2008 with a $10 million investment from Mitt Romney. In June 2012, the Romney campaign held a retreat in Park City, Utah, for about 200 wealthy donors. Remarkably, right outside the retreat, Solamere Capital held its own investor lunch meeting.

In March 2013, following his defeat in the presidential election, Romney took on a more formal role at Solamere, becoming chairman of the executive committee.

Solamere describes itself as a “fund of funds” that allows its privileged investors to buy into high-end private equity firms. TA Associates is one of the firms that Solamere Capital has offered to its clients for investment, according to a prospectus sent to potential investors and obtained by the Boston Globe in 2011.

Jennifer Kerr was not the first student to be deceived by Vatterott College, which TA Associates acquired in 2009.

Senator Tom Harkin’s staff obtained internal training documents from Vatterott that seemed to instruct recruiters  to use exploitative tactics: “We deal with people that live in the moment and for the moment. Their decision to start, stay in school or quit school is based more on emotion than logic. Pain is the greater motivator in the short term.”  Another Vatterott document described the target market for recruiters: “We serve the UN-DER world, Unemployed, Underpaid, Unsatisfied, Unskilled, Unprepared, Unsupported, Unmotivated, Unhappy, Underserved!”

Vatterott’s recruiting abuses have led to bad outcomes for enrolled students. The percentage of Vatterott students who default on their student loans within three years of dropping out or graduating is a very-high 26.6%. Last year, eight of Vatterott’s 39 programs failed all three tests of the Obama Administration’s “gainful employment” rule, which established bare minimum standards to penalize schools that consistently leave their students with insurmountable debt.  Student bulletin boards are full of complaints about the quality of a Vatterott education.

In 2009 and 2010, three top Vatterott executives pleaded guilty to a criminal conspiracy to fraudulently obtain federal student grants and loans for ineligible students in 2005-06 by providing false general equivalency diplomas (GEDs) and doctoring financial aid forms.

In Kerr’s case, the jury determined that Vatterott had violated the Missouri Merchandising Practices Act and ordered Vatterott to pay Kerr $27,676 in actual damages, as well as the $13 million in punitive damages, even though Kerr’s lawyer had only asked for $2 to $4 million in punitive damages. (Missouri law imposes limits on punitive damages that will reduce the award, probably to $500,000, even if Kerr wins on appeal. But the situation brings to mind the Sidney Lumet/Paul Newman film The Verdict, where the jury awarded more than the plaintiff sought after an angry witness, played by Lindsay Crouse, asked a question that seems tailor-made to Kerr’s claim: “Who were these men?  I wanted to be a nurse!”)

Kerr told the Kansas City Star that, after leaving Vatterott, “for a long time, I was just devastated and depressed. The diploma I got was worthless.” But she was pleased that her case exposed Vatterott’s misconduct: “The truth finally came out. Not just for me, but for everyone like me who was fooled…. I feel like in doing this, maybe others will have the courage to do the same. Maybe they’ll see that they have a recourse.”

And maybe Mitt Romney and other wealthy investors and executives in predatory for-profit colleges should get a conscience and reform their companies, or else shut down.

This article also appears on Huffington Post.