May 6, 2016

New Head of Zuckerberg Education Charity Sits on Board Governing Troubled For-Profit College


In an announcement that received wide media coverage, James H. Shelton this week was named the first head of the education component of the Chan Zuckerberg Initiative, a new corporation, dedicated to charitable ventures, that is funded by Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan.  According to Zuckerberg’s announcement of Shelton’s appointment, “Jim will bring all of his own experience in improving personalized learning and helping underserved communities.”

It was unclear whether that description was meant to include Shelton’s current service on the corporate board of directors that oversees troubled for-profit college Kaplan University.  In January 2015, Shelton left his job as the U.S. Deputy Secretary of Education in the Obama Administration, which had been engaged in increased scrutiny of the for-profit college industry. In November 2015, Shelton joined the board of Graham Holdings, whose Kaplan Inc. subsidiary includes Kaplan University.

By the time Shelton joined the Graham Holdings board of directors, Kaplan University had been accused of a range of questionable acts, with many former students, often from low-income backgrounds, claiming they were misled by Kaplan and left worse off than when they started.

Graham Holdings directors receive $150,000 in annual compensation.

Kaplan has been getting as much as $1.5 billion annually in taxpayer-funded federal student grants and loans. Yet its schools have often been bad actors in the for-profit college industry, charging sky-high prices for the kinds of programs that are often much more affordable at state and community colleges, tallying high dropout and loan default rates, and sometimes engaging in deceptive and coercive recruiting and other abusive practices.

I know from talking with dozens of people inside Kaplan schools that there are good teachers in Kaplan programs. Some of the students get good training and good jobs. But there also have been far too many cases of students being misled, overcharged, and under-credentialed.

An award-winning 2015 Miami Herald investigation of the industry led with the story of a Florida mom, Sara Pierce, who says she was misled by a recruiter for Kaplan into signing up for an online bachelor’s degree program in Nutrition Science. Pierce thought the program would directly qualify her to be a licensed nutritionist, when in fact it was not accredited by the appropriate agency. When, near the end of her studies, a professor let Pierce know that the degree would not make her eligible for the job she sought, and she complained, the school pointed her to fine print in a Kaplan manual. But it stands to reason that had Pierce actually known the low value of the degree, she would not have enrolled.

And there are other instances of Kaplan students feeling similarly misled —  in Kaplan’s dental assistant program in Charlotte, in Kaplan’s online Concord law school — and left deep in debt, without the useful degree they sought.

Last year, Massachusetts attorney general Maura Healey announced settlement of an investigation of Kaplan for unfair and deceptive student recruiting practices. Kaplan agreed to pay $1.375 million to former students.

According to Healey, Kaplan Career Institute, which had campuses in Charlestown and Boston’s Kenmore Square, got students to enroll “with harassing sales tactics and misleading representations in its recruitment materials concerning its educational program and employment.” Healey found that Kaplan’s website and its recruiters claimed job placement rates for Kaplan’s Medical Assistant and Medical Billing and Coding programs as above 70 percent when in fact the rates were significantly lower. Kaplan also promised to help students find jobs, but students told Healey’s office “that the job listings provided by Kaplan were from publicly available resources and that Kaplan did not provide any special services or programs to assist students and graduates in their job search.” Accordingly, Healey said in her court filing, “Kaplan unfairly or deceptively induced students to enroll…”

In the settlement papers, Healy noted that Kaplan no longer operates any Kaplan Career Institute schools in Massachusetts. Under the settlement, Kaplan must give the attorney general’s office notice “before attempting to open or re-open any for-profit school campuses in Massachusetts.”

Kaplan admitted no wrongdoing in the Massachusetts settlements, and it publicly denied Healy’s allegations.

Graham Holdings was formerly called The Washington Post Company, before it sold its flagship newspaper to Jeff Bezos. The company chairman is Donald Graham, who has been an aggressive lobbyist in Washington against efforts by the Obama Administration to hold for-profit colleges accountable for waste, fraud, abuse, and bad student outcomes.

Graham’s status as an elite Washington insider has led many influential people in the capital to assume that Kaplan is “one of the good ones.” In reality, Kaplan’s record of misleading students is not too far removed from the notorious, now-shut down Corinthian Colleges, in which Graham’s company also owned a major stake.

Kaplan has been under investigation by at least four other state attorneys general in the past few years. It agreed last year to pay about $1.3 million under a settlement with the Justice Department to resolve whistleblower allegations that it employed unqualified instructors at its campuses in Texas.

In December 2015, after Shelton joined the Graham board, the Department of Education placed Kaplan University on “provisional certification status” through September 2018, which means that Kaplan must obtain prior approval of the Department to open a new location, add an education program, acquire another school, or make any other significant change. In an SEC filing this week, Kaplan says the shift to provisional status was “in connection with” an ongoing review of its programs by the Department but that the Department “has not notified Kaplan University of any negative findings.”

As the for-profit college industry has become controversial for predatory practices and mounting law enforcement investigations, it has regularly hired prominent leaders as validators and lobbyists.

UPDATE 05-06-16 5:50 PM: I remembered but then neglected to include a relevant fact: Donald Graham and Mark Zuckerberg are not exactly strangers. Graham served on the Facebook board of directors from 2009 until last year and was the company’s lead independent director. Graham reaped tens of millions of dollars from the Facebook initial public offering.

UPDATE 05-16-16 4:30 pm: A Graham Holdings SEC filing today states: “On May 12, 2016, James H. Shelton announced his decision to resign from the Board of Directors of Graham Holdings Company (the “Company”) effective immediately and not to stand for reelection to the Board of Directors at the Company’s 2017 annual meeting of stockholders. Mr. Shelton’s decision to resign is for personal reasons and not a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.”

A source had told me on May 6 that Shelton would be resigning from the Graham board and other boards in connection with joining Chan Zuckerberg.  But Shelton may be taking an additional prize before he goes: According to the same SEC filing, on the same day that he announced his resignation, Shelton was re-elected, at Graham Holdings’ May 12 annual meeting, to director of the company as one of the board’s “Class A Common Stock Nominees.”

It’s good that Shelton will not serve simultaneously as head of the Chan Zuckerberg education project and as a director of a company that operates predatory for-profit colleges.  But Shelton’s resignation doesn’t change the fact that he traded on his reputation and experience in the Obama Administration to validate and support the work of a company that has been under law investigation for abuses of students.  I hope Shelton can redeem this questionable course by being a strong leader for educational opportunity and innovation going forward.

This article also appears on Huffington Post