February 13, 2014

Colin Powell Chairs Business Accused of Systematically Defrauding Veterans

Colin Powell poses with ATI CEO Arthur Benjamin at the 2011 meeting of APSCU, the lobby group of for-profit colleges. ATI already had been exposed as a fraud; it has since been shut down by the Justice Department.
Colin Powell poses with ATI CEO Arthur Benjamin at the 2011 meeting of APSCU, the lobby group of for-profit colleges. ATI already had been exposed as a fraud; it has since been shut down by the Justice Department.

As veterans return home to earn a college degree, many say they have been defrauded out of their education benefits from a company chaired by none other than retired general and former Secretary of State Colin Powell.

Powell is the chairman of the advisory board to Leeds Equity Partners, an investment firm that co-owns for-profit college megacorporation EDMC, the parent company of the Art Institutes, Argosy University, Brown Mackie College and South University. Leeds is part of a consortium of investors including Goldman Sachs and Providence Equity Partners that took control of EDMC in 2006. Over the years, EDMC has developed a history of aggressively targeting returning veterans to use their GI benefits at EDMC-owned schools. Increasingly, many veterans complain about low quality programs. They also claim they have been deceived by EDMC’s recruiting tactics, including false promises of high paying jobs after graduation and degrees that cost far more than what students say they were led to believe when enrolling.

Michael Bahari, a nine year Navy veteran of Operation Iraqi and Enduring Freedom, signed up for a two-year degree at the Art Institute of New York City. In an e-mail interview with Republic Report, Bahari says his education has been a “complete farce to say the least.” He says his professors are subpar, with some who can barely speak English, and others who do not understand the software students are instructed to use. After absorbing his GI benefits for $65,000 in tuition, Bahari says he is being prevented from enrolling in his final semester this spring because of a mysterious $1,700 in additional charges that the Art Institute is billing him. Bahari also says his school advisors have encouraged him to take on more student loans to pay loans to pay for various fees, including books.

Bahari said he had learned that the Art Institute was co-owned by Goldman Sachs, but that he hadn’t known about Powell’s role. “My view on that dirt bag Powell is, I would like to personally thank Colin Powell with a Bravo Zulu of bullshit and cowardness,” wrote Bahari, who added that Powell is being used as a “poster boy for EDMC … he has to be getting paid some type of margin in this all.”

A request for comment to Leeds Equity Partners and to Powell by Republic Report has not been answered. In 2011, Powell appeared before a lobbying association for the for-profit college industry, where he gushed, “Our society has such a need for education and no field has more to help than career and private sector education.”

Bahari’s experience is not unique. Investigations from Bloomberg News and ABC Action News (a Tampa, Florida affiliate) have highlighted the stories of veterans who say they have been cheated by EDMC’s for-profit colleges. An investigation from the U.S. Senate found that the Art Institute charges nearly seven times the amount for a similar degree from a community college. The report also revealed that EDMC has recruiting teams focused on enrolling veterans. “Capitalize on $6k lifetime spouse benefit and the ability of the spouse to use funds from the new GI Bill,” reads one internal EDMC recruiting document.

Federal law requires for-profit colleges to obtain at least ten percent of their revenue from sources other than U.S. Department of Education-backed student grants and loans. To sidestep the law, many for-profit colleges recruit veterans because GI benefits do not count as part of the 90/10 rule. From 2009 to 2011, records show EDMC received $173 million dollars from veterans.

As the for-profit college industry has attracted more scrutiny, a number of companies have enlisted former high-ranking military officials to serve on boards and to represent them in public. Retired Admiral Mike Mullen was brought on to speak to a conference of for-profit colleges and lobbyists. Similarly, retired Air Force General Bill Looney joined the board of a for-profit college and has posted pieces defending the industry against increased oversight.

Jeffrey Leeds, the co-founder of Leeds Equity Partners and a board member to EDMC, explained in an online interview with OneWire about how he signed Powell up for his company. “We thought about how [Powell] could add value and what a relationship might look like, both for us and for him,” said Leeds. “After six months of due diligence on his part on us, he said, ‘yes.'”

EDMC is now under investigation by several state attorneys general and the U.S. Department of Justice for allegedly using illegal recruiting tactics, and for lying to regulators about job-placement and student debt figures.