April 29, 2016

FTC Takes Action Against Florida For-Profit College Marketer


The Federal Trade Commission announced yesterday its first settlement with an education lead generation company, Orlando-based Expand, Inc., and its owner, Ayman “Alec” El-Difrawi, for alleged deceptive practices. The FTC contends that Expand, which operates under the names Gigats, EducationMatch and SoftRock, has been claiming to visitors to its websites that it is “pre-screening” job applicants, when in fact it is gathering personal information for other purposes, including selling it to for-profit colleges that are seeking new students.

Expand’s websites aggregated some job listings from the Internet, but, according to the FTC, many were stale or had no official connection to Expand, and Expand didn’t actually forward job applications to employers.  Instead, Expand directed applicants to “employment specialists” and then “education counselors” who steered the applicants to for-profit colleges that paid Expand amounts ranging from $22 to $125 for each such prospective student, a.k.a. lead.

Under the settlement agreement to be submitted to a federal judge in Florida, Expand agrees to stop the alleged deceptive practices. The agreement also fines Expand $90.2 million, but almost all of that is “suspended” once Expand pays $360,000; however, the fine goes back up if Expand and its operators “are found to have misrepresented their financial condition.”

The FTC, which long ignored the problem of predatory for-profit colleges ripping off students and taxpayers, has stepped up under chair Edith Ramirez. The agency has launched investigations of three of the biggest for-profit college companies — Apollo / University of Phoenix, Career Education Corp. and DeVry, the last of which the FTC sued in January. The FTC also settled a case with a smaller for-profit, Ashworth College, for allegedly deceiving students; in that case the commission imposed an $11 million fine but suspended it entirely, based on Ashworth’s claimed inability to pay.

The FTC also has taken an interest in the lead generation industry, and last year held a day-long public meeting with panelists including industry representatives (and me).  An FTC official stated there that the Commission “will continue to look at unlawful practices involving lead generators and we’ll bring enforcement actions where appropriate.”

Republic Report has exposed in the past websites that promise jobs, government programs, or veterans benefits but seem to be mostly aimed at finding potential students for big for-profit colleges who pay handsomely for these leads. The college recruiters are desperate to find new students so they can cash their federal student grants and loans. The for-profit college industry has been taking as much as $32 billion in federal aid annually, but increased public awareness of how high-priced, low-quality programs in the sector leave students unemployed and buried in student loan debt have sent enrollments and revenues plummeting in recent years. So predatory companies in the industry, like ITT Tech, EDMC (the Art Institutes), and Kaplan, continue to use bait-and-switch on-line lead generation sites to find new students.

I became aware of Alec Difrawi’s operation early in 2015, through a tip from Orlando and then my own on-line research. I found posts like this one, on reddit, suggesting how lead generation bait and switch boiler room scams can pressure reluctant people into becoming for-profit college students:

Don’t know how this happened but I enrolled in the art institute and I’m not sure if it was a smart choice. These guys are incredibly pushy.

It started from a job advertisement that I found on Twitter. It was supposed to be an ad for a pet store nearby, so I applied for it and set up a phone interview for the next day. I called 10 minutes early for a phone interview and the guy started asking me some questions. He’s the guy who works for gigats. It’s a company that matches you with job openings in my area. He also asked me if I was willing to go back to school if there was nothing interfering with it. I said yes. He also stated that his company will pay for the college education. That was when he directed me to an education counselor who mentioned that the Art Institute has programs for my major. I was uncomfortable with this at first, but I went along with it. I was then directed to the Art Institute, it was a 3 hour call with a guy telling me about the school, and attempting to register me. It involved registering me, getting fafsa set up, and talking to financial aid advisors….

I was very adamant about the No Loans. The guy kept asking me why I don’t want loans, and without loans, it would be hard to pay for school. And he kept persuading me to get a loan, and saying it’s not that bad. I still said no.

I also selected that I wish to start classes within a month, and he kept asking me why. I just wanted to prepare, and this guy just constantly asks me questions after question over something that’s my personal choice.

I said I prefer to take an on-site class, on campus with an actual physical class, but the guy kept pushing me to go online, saying it’s not that bad.

After talking to the advisors, after their special Achievement Grant which is $3,000 for one semester(out of $10k for the program.), and $1.7k after pell grants, I would only owe about $3000 just for the semester.

So after some small research, I don’t know what to think. I don’t know if the Art Institute is an actual school that could help me put my foot in the door for employment, which I could really use right now. I don’t know if it’s a scam. I don’t even know if I should pursue it.

I signed a lot of paper work, so I’m really scared. I didn’t pay for anything but if it’s going to be a scam, I don’t want to use my pell grant for it. I’m worried that I’ll be piled with bills.

The Art Institutes is a for-profit college chained owned by EDMC. Once a quality institution with many great teachers, it was destroyed by Wall Street money and has ruined the lives of many students with false promises and sky-high prices.

Another on-line report:

Signed up for Gigats.com as I have recently become unemployed. Found a posted job I was interested in. After hitting the Apply for job button I received an e-mail with a phone number to call for phone interview. Thinking it was an interview with the company I applied to I called. Lo and behold it was Gigats not US Airways. Representative Will S asked many questions then asked me if I wished to continue my education. After stating I did not he insisted I say I wanted to attend school within 1-2 months in order for him to process my application. He then transfered me to a representative Tara from The Art Institute. I was on the phone with her forever, after telling her I was unemployed and there was no way I could afford a 40,000 tuition she tried to transfer me to a loan officer. I quickly got off the phone and immediately went online to check reputation of school. They have a terrible reputation for ripping people off. I continue to get calls from school that I do not answer. Nothing about job I applied for. Gigats is not trying to help people find employment. They are trying to sign down on their luck people up for schooling they can not possibly afford. Stay away from Gigats and Will S…

Meanwhile, Difrawi’s enterprise was presenting itself to the Orlando community as a dynamic tech company.  In 2013, the Orlando Business Journal breathlessly reported, “Gigats — designed as an eHarmony for job seekers, where job seekers are matched for jobs — hit 1 million registered users March 13.” The article’s headline: “SoftRock’s Gigats projecting $75M in revenue, to hire 750.” The Orlando Sentinel informed readers the year before that Softrock was filling 500 jobs “for its call center, customer service and other aspects of their operations in Orlando… The company… operates advertising-based websites and applications for web and mobile devices.”

The Softrock website still boasts:

SoftRock rocks software like Mick Jagger rocks a stage. The software we develop bridges the gap between technology and people by focusing on customer acquisition, engagement and support to utilize its full effectiveness and achieve the WOW factor.

The Sentinel noted at the time of its 2012 article that Difrawi had a prior felony conviction for fraud, but it reported Difrawi’s response — that those days were behind him:

A grand jury in 1994 indicted Difrawi and several associates on conspiracy and fraud charges in schemes involving other companies they started to help people find jobs and loans. He pleaded guilty to conspiracy to commit bank fraud in 1995, was sentenced to 46 months in prison and ordered to pay $2.3 million in restitution. He was released in 1999.

Difrawi said his legal troubles are all in the past and have nothing to do with Softrock’s accomplishments.

“We have more than 400 employees in a positive corporate culture who love the company they work for,” Difrawi said. “I don’t think the problems of more than 20 years ago are relevant to what we do now.”

I received a LinkedIn message from Alec Difrawi last November, stating:

My firm does Education Lead Generation and I would like to discuss an FTC matter with you. Would you be available for a phone call to discuss an engagement?

I responded, telling Difrawi that I would be glad to speak with him.  I planned to tell Difrawi on the phone that, although I do practice law, I’m in the business of advocating for greater protections for students. But I never heard back from him.

This article also appears on Huffington Post