November 23, 2015

Breaking: Court Rejects CollegeAmerica’s Effort to Dismiss Fraud Case


A Colorado state trial court has rejected nearly every aspect of a motion by a former for-profit college company to dismiss a fraud lawsuit brought by the Colorado attorney general.  In a November 17 opinion, Judge Ross B.H. Buchanan denied most of the arguments put forth by the Center for Excellence in Higher Education, which operates the CollegeAmerica and Stevens-Henager schools.

The complaint filed by the Colorado AG alleges the systematic, sophisticated fleecing of students and taxpayers by CollegeAmerica. The lawsuit asserts that CollegeAmerica staff consistently misled and lied to students about the selectivity of the school, the transferability of credits, the jobs they could obtain, the salaries they could earn, and more.

In one stunning example, the school, according to the Colorado attorney general, hyped its “Medical Specialties” associates degree as leading to lucrative careers in a range of medical jobs. The program cost $42,000 — more than four times as much as comparable degree programs at community colleges. But most of the jobs that graduates had a chance to get were low-level, low-paid positions did not require a college degree at all.  Once students had completed the program, CollegeAmerica employees would then sometimes disparage the value of the program and hype the next expensive program — a bachelor’s degree in Healthcare Administration. But again, most graduates could only get low-rung jobs that did not require an associate’s degree, let alone a bachelor’s.

CollegeAmerica has responded that Colorado’s suit is “full of distortions, half-truths and false allegations.”

But Judge Buchanan knocked down nearly every claim in the company’s legal brief, allowing the case to go forward.

The company’s 2012 conversion from a for-profit to a non-profit has raised serious concerns that the transaction seemed to enrich the company’s founder, Carl Barney, in ways that disturbingly distort the concept of a non-profit. But the apparent abuses of students are even more troubling.

Last year the U.S. Justice Department joined a separate employee whistleblower lawsuit charging that College America / Stevens-Henager schools paid their recruiters bonuses, commissions, and other forms of incentive compensation in violation of the federal ban on such compensation. The suit further claims that CollegeAmerica employed faculty members who lacked the minimum qualifications required by the school’s accrediting agency, and that CollegeAmerica officials falsified student attendance records and grades.

Students who get deceived by college recruiters often end up worse off than when they started. CollegeAmerica schools have established records of leaving their students deep in debt. For example, as of 2009, 40.2 percent of students at the Flagstaff, Arizona, campus of CollegeAmerica defaulted on their loans within three years. The figure was 38.8 percent at the CollegeAmerica campus in Denver. For comparison, the default rate at Michigan State University was 4.3 percent.

This article also appears on Huffington Post