New Criminal Indictment Highlights Continued Career College Fraud
A federal indictment unveiled Friday charges that the director of the Chicago campus of a non-profit career college conspired with five of her subordinates to defraud taxpayers of millions of dollars in federal student grants and loans. According to U.S. prosecutors, Marie Pickett, director at the Center for Employment Training’s Chicago location, and her staff obtained millions in federal aid by creating phony high school diplomas, falsifying financial aid applications, doctoring student attendance records, manufacturing false test results, and even creating, as the indictment calls them, “fake students” by borrowing social security numbers of people who never appeared on campus at all.
The indictment also alleges that Pickett and her team falsified job placement verification forms “by reporting the names and addresses of fake companies that purportedly employed fake students and other students, knowing that the companies did not exist and that the students were not employed by those fake companies,” and then submitting those phony documents to the school’s accrediting agencies, which were charged with assuring the U.S. Department of Education that the school was achieving good outcomes for students.
We’ve seen these kinds of fraudulent behaviors before, at a range of for-profit and career colleges, in previous law enforcement actions. Owners of many career schools have put relentless pressure on employees to produce revenues, which has led to the kinds of frauds alleged at CET Chicago, as well as deceptive and coercive recruiting of students.
The new indictment serves as a strong reminder that fraud and deception have been widespread at career colleges across America — at a time when representatives of the industry keep claiming that there were just a handful of bad actors, that all have been driven out, and that all that are left are honest, effective school operators. Indeed, the many for-profit college negotiators involved in the Department of Education’s ongoing meetings to repeal and replace the Obama-era gainful employment and borrower defense rules have repeatedly made that claim, even though it’s not remotely true. Serious fraud has been happening not just at giants Corinthian and ITT Tech, but at a whole range of schools, big and small. In fact, negotiators in the Department’s meetings have worked for some of the most abusive schools in the industry, including ongoing predatory operations like Bridgepoint Education and Vatterott College.
The Department’s independent inspector general submitted a report to Congress late last week that reaffirmed that abuses are heavily concentrated in the for-profit college sector; of 24 investigations since 2016 that found a school or its employees had engaged in fraud, 19 were at for-profit schools, and the IG probes yielded $126.8 million in recoveries from for-profits, 83 percent of the total for all colleges.
The CET case also reminds us that a school doesn’t have to be for-profit to engage in fraud. But it underscores that much of the fraud, whether at for-profit or non-profit schools, occurs in career education programs — those training students to be medical assistants, IT workers, diesel mechanics, culinary workers, etc. In this part of higher education, students tend to be lower-income — single mothers, veterans, immigrants — and have less family experience with college, and thus may be more susceptible to fraudulent tactics. And some schools, though structured as non-profits or even state schools, face the same kinds of pressure to sign up students as at for-profits, and thus to deceive taxpayers and accreditors. (Many career education programs are at community colleges, where student tuition is heavily subsidized, demand to enroll is high, and the same pressures to enroll don’t normally apply.)
The CET Chicago indictment also comes at a time when a number of for-profit college companies that have engaged in predatory behavior — including Kaplan, EDMC (the Art Institutes), and the CollegeAmerica/Stevens-Henager chain — have sought to avoid the stigma and regulatory burdens of being a for-profit college by converting to non-profit status, in transactions that are just as troubling as the recruiting and educational operations of the school. The Obama administration had begun questioning these for-profit conversions, and rejected one of them, but Trump Education Secretary Betsy DeVos has blessed them. Indeed, Indiana’s public Purdue University announced today that it had obtained final accreditor approval for the plan already approved by DeVos, in which it will acquire predatory Kaplan University, in an deal that will put Kaplan’s owner, Graham Holdings, in the driver’s seat of a relationship that it is terrible for students and for Indiana’s taxpayers.
The indictment of the CET Chicago employees alleges that the scam went on from 2005 until September 2013. The campus closed in October 2015. But CET remains very much in operation, offering programs in business, health care, truck-driving, and culinary arts, at eleven locations in California, plus campuses in El Paso, Texas, and Alexandria, Virginia.
According to the federally-mandated disclosures on CET’s website, the school’s non-degree, eight-to-nine month certificate program in medical assisting at the Virginia campus costs $11,954 in tuition and fees, and the typical graduate earns $15,047 per year; only 25 percent of program graduates got jobs in the field, as judged by state job placement standards. At the Sacramento campus, a medical office assistant certificate costs $12,406 for tuition and fees, and the typical graduate earns an identical $12,406 per year. At the El Paso campus, the accounting clerk program costs $11,954 for tuition and fees, and graduates earn $9,218 per year. These relatively poor outcomes resemble those at many for-profit schools, where attendance creates debt without taking graduates much beyond the minimum wage opportunities they had before enrolling.
The CEO of the Center for Employment Training, Hermelinda Sapien, told the Chicago Sun-Times that the company discovered the Chicago campus scheme and reported it to the City of Chicago’s Office of Inspector General and that school officials cooperated with the investigation. The company has a board of directors that mixes California state officials with executives from corporations like Pepsi, IBM, and Intel. (Sapien’s most recent reported annual compensation was $256,000, while her two top subordinates made $180,000 – $185,000 — actually modest salaries compared with some others running these kinds of enterprises.)
CET’s management can assert that they weren’t complicit in the apparent ugly fraud at the Chicago campus, and perhaps they didn’t know anything about it. But they failed to stop it for almost a decade, while millions of our tax dollars may have been stolen. The case reaffirms how awful it is for Betsy DeVos to be revoking the gainful employment and borrower defense rules — reforms that could deter and punish bad behavior at career colleges of all kinds.