New Fraud Suit Targets Call Center That Pushes Students to Predatory Colleges
A former employee of a call center that pushed students into predatory for-profit colleges has initiated a blockbuster whistleblower lawsuit on behalf of taxpayers against his former employer, Utah-based EduTrek, and against numerous for-profit colleges that have used the company to recruit new students. The complaint, filed with the federal court in Utah in 2016, was unsealed today.
Republic Report wrote about the ex-employee, retired U.S. Army captain Jack Suenram, in 2014. Suenram had recently quit the EduTrek call center, called EdSoup, after working there for four years. As an EdSoup phone rep, Suenram had only one objective: to sell people programs, mostly online programs, at for-profit colleges — programs that he came to believe would be financially disastrous for many enrollees. Suenram resigned because he felt that being part of such a deception operation was “demoralizing and disgusting.”
After we wrote about EdSoup, we ended up writing more, because we were contacted by additional employees from EdSoup and from a marketing company, Neutron Interactive, that fed prospective students to the call center through phony websites that promised jobs, food stamps, and other things low-income people need, but in fact were aimed at luring people into enrolling at overpriced for-profit schools. (The Federal Trade Commission has since been examining and cracking down on such bait-and-switch college marketing.)
Suenram’s lawsuit alleges that EduTrek and its client for-profit colleges violated the Department of Education’s ban on paying college recruiters a sales commission for signing up students — a provision aimed at deterring colleges from high pressure and deceptive sales tactics.
Many for-profit colleges get 80 percent, 90 percent, or more of their revenue from taxpayer-funded student grants and loans, and cashing those checks while violating federal laws can give rise to whistleblower suits under the federal False Claims Act.
The complaint says that the colleges paid sales commissions to EduTrek and that EduTrek in turn paid commissions to its own employees. According to the complaint, around 2011 EduTrek management told Suenram and other recruiters that paying commissions was illegal under revised Department of Education rules. “In an apparent effort to hide its commission payment program under the new regulations,” the complaint charges, “EduTrek instituted a tiered hourly wage system for newly hired Recruiters. However, EduTrek did not change its compensation system for its existing employees; it continued to pay some, like [Suenram], an hourly wage plus commissions/bonuses and others on a strict commission basis.”
Suenram’s complaint also asserts that EduTrek “has used repugnant practices” — including the bait-and-switch websites I’ve described — “to gather contact information of people down on their luck, which its recruiters then used to call the unsuspecting website visitors and aggressively recruit them to attend one of EduTrek’s for-profit client schools.” The complaint alleges that most of the people called by EduTrek recruiters “do not actually have an interest in attending college,” so call center employees will ask prospective students “about their hobbies, general interests, and desired careers and then suggest degree programs and areas of study based on these responses.” In addition, “EduTrek’s Recruiters are instructed and trained to steer prospective students to programs offered by Defendant Schools. If a prospective student says that she wants to study a subject not offered by one of the Defendant Schools, Recruiters are trained to re-direct the prospective student to an area of study offered by one of the Defendant Schools.”
The companies and schools that Suenram is suing include: Apollo Education Group (University of Phoenix); the demised ITT Tech; DeVry; Education Corporation of America (Virginia College, the former Kaplan College schools), Zenith (former Corinthian Colleges schools); Grand Canyon; Career Education Corporation (Sanford Brown); Center for Excellence in Higher Education (College America); Education Management Corporation (the Art Institutes); Education Affiliates; Bridgepoint Education (Ashford University); Delta Career Education Corporation; and Full Sail University. Many (not all) of these companies have faced multiple law enforcement investigations for fraud and other misconduct.
Although the U.S. Justice Department has declined to join Suenram’s lawsuit, he has a strong legal team; he’s represented by Salt Lake City trial lawyer Brandon Mark, who has a separate pending whistleblower case against the predatory chain CollegeAmerica, and by Robert Nelson and Lexi J. Hazam from the powerhouse San Francisco trial firm Lieff Cabraser.
I spoke with Suenram this afternoon. He criticized EduTrek’s recruitment into predatory college programs of “people in between jobs, people who are young,” and people who are low-income.
He says that despite the closure of some of the worst for-profit schools, like ITT and Corinthian, he knows from following the industry and staying in touch with colleagues that “the system is still set up for failure for the person who enrolls … that hasn’t changed.” He mentioned a co-worker from his current telecommunications job who was persuaded to enroll in an online business program at for-profit Full Sail University. It cost her $60,000 “yet doesn’t make her any more marketable in the job market.”
Suenram says the lawsuit is “worth the fight” because students are “being sold a bill of goods” by predatory schools.
He says that the education provided by many for-profit colleges does not help students in the job market; in that regard the expensive degrees are “neutral or a slight negative.” (Research, including a new Brookings study, bears out such concerns.)
Suenram says that if for-profit colleges were sports teams, and winning was measured by actually helping students, the schools “would be in last place every year.”
If Suenram and his lawyers can prove the call center and the colleges defrauded the government, they could recover millions for taxpayers.