CollegeAmerica’s Legal Battles Go On
Just before Christmas, the Center for Excellence in Higher Education, which operates CollegeAmerica, Stevens-Henager College, and Independence University, dismissed its lawsuit against the U.S. Department of Education, which had, in the final year of the Obama administration, refused to recognize the company’s schools as non-profit for purposes of federal regulations; the Department under Obama had concluded that the schools, although technically converted from for-profit to non-profit, were being run primarily for the benefit of the prior for-profit owner, Carl Barney, rather than students.
The Betsy DeVos Department still has not explained the basis of CollegeAmerica’s lawsuit dismissal, and whether there was a deal with DeVos’s team that will now give CEHE non-profit status, which would allow it to avoid some critical federal rules. I’ve asked the Department public affairs office multiple times for an explanation, and gotten no response; I’ve urged others, including reporters and lawmakers, to ask.
Meanwhile, CEHE continues to face trouble with various oversight bodies and court proceedings. That’s the case, I believe, because CEHE has run its schools in a predatory manner that abuses students and rips off taxpayers.
Late last week, the Colorado Board of Private Occupational Schools — the body overseeing state regulation of for-profit colleges — released the minutes of its February 26 meeting. The minutes are confusing, but seem to reflect a long struggle over an earlier vote by the board to issue a “Notice of Noncompliance” to CollegeAmerica in the wake of CollegeAmerica being penalized by its accreditor.
Last September, the largest accreditor of for-profit schools, ACCSC, had issued a scathing letter placing all eleven of the campuses of the CEHE chain on probation, citing deceptive recruiting, weak academic quality, poor graduation rates, and, strikingly, efforts to blame Native American culture for the poor results at one campus. ACCSC found that CEHE’s “advertising and recruitment tactics coupled with a poorly documented admissions process has fostered the creation of a student population that the schools are ill-prepared to educate.”
The chain’s CEO, Eric Juhlin, charged ominously at the time that ACCSC’s decision “may have been issued in reaction to external or other inappropriate influences.”
In the wake of ACCSC’s decision, Senators Dick Durbin (D-IL), Richard Blumenthal (D-CT), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), and Maggie Hassan (D-NH) pressed DeVos to investigate ACCSC’s findings and take appropriate action. In a letter to DeVos, the senators noted that since ACCSC had first raised concerns about CEHE’s conduct, back in 2012, CEHE schools had received about $1 billion in taxpayer-funded student aid.
In October, according to earlier minutes, the Colorado state board took account of the ACCSC probation and expressed concern that CollegeAmerica had not adequately explained the gravity of the probation to students and staff. After the board met behind closed doors with lawyers, one board member, Christoper Reister, made a motion to issue a Notice of Noncompliance to CollegeAmerica based upon a reasonable belief that Colorado law “may have been violated.” The board then amended its motion to provide that College America “may be placed on probation with the Division if the issue is not resolved.” At this meeting and subsequent ones, representatives of CollegeAmerica addressed the board.
In December, the board discussed CollegeAmerica again, and this time, another board member, Ryan Minic, who, according to his LinkedIn profile, is a campus director at for-profit Pima Medical Institute, “motioned to fully withdraw the Notice of Noncompliance.” Then, “A roll call vote determined three votes in favor of the motion and three votes against the motion thus, the matter was tabled until January.” At a January meeting, yet another board member, Arlene Rae Malay, president of the for-profit College of International Esthetics, “motioned to table the matter until the February Board Meeting so that the Board may have seven members to vote on fully rescinding the previously issued Notice of Noncompliance.”
At the February meeting of the board, after a closed session with lawyers, Malay, according to the board’s minutes, “made a motion to amend the Board’s October of 2018 Order to issue the Notice of Noncompliance to CollegeAmerica. A roll call vote was taken with all Board Members in favor of the motion with the exception of Mr. Reister. At this time, Mr. Reister left the Board however a quorum was still present.”
It’s unclear from the minutes what this February “motion to amend” accomplished — did it implement, modify, or entirely cancel, the board’s Notice of Noncompliance to CollegeAmerica? It’s also not clear what the effect of the board’s Notice of Noncompliance is, or was, and whether CollegeAmerica students even know that the board took an action against their school.
I asked Colorado’s Division of Private Occupational Schools what the board action meant, and initially it declined to comment, saying it was an ongoing legal matter. After I pressed for clarification as to simply what occurred in the meeting, a staffer responded that the February amendment “was to issue the Notice of Noncompliance.” That seemed confusing, because Reister, who made the October motion to issue a Notice of Noncompliance, was the only board member to vote against the motion to amend, and, after losing that vote, he “left.”
Other ongoing legal matters involving CollegeAmerica are slightly less shrouded, but no less concerning.
CollegeAmerica is pursuing a lawsuit, set for trial in May in a Colorado state court, against Debbi Potts, a former campus director of the school’s Cheyenne, Wyoming. Potts says she resigned after supervisors asked her to participate in and conceal various frauds and other violations of law. After she quit, Potts made a claim against CollegeAmerica for $7000 in unpaid bonuses. She then made an agreement with CollegeAmerica under which the school would pay her $7,000, and she agreed not to make false statements about CollegeAmerica with “malicious intent.” Now, CollegeAmerica wants its $7000 back, it says, because Potts made disparaging statements about the school to another former CollegeAmerica employee.
The agreement with CollegeAmerica also purported to prohibit Potts from contacting law enforcement and other government agencies about violations of law, a provision that CollegeAmerica eventually conceded was illegal. The United States Equal Employment Opportunity Commission (EEOC) has sued CollegeAmerica in Colorado federal court over the severance agreement because of this provision. It was only after Potts filed an age discrimination complaint with the EEOC — a complaint that led to the EEOC lawsuit — that CollegeAmerica sued Potts for the $7000 back. EEOC charges that CollegeAmerica’s push to have a trial soon on its $7000 claim against Potts is inappropriate because the federal court has not decided its claim the severance deal was illegal; the EEOC trial is set for November.
Potts also provided information to the Colorado attorney general, which was investigating CollegeAmerica for fraud. In late 2017, the Colorado took CEHE to trial on claims that CollegeAmerica engaged in the systematic fleecing of students and taxpayers — 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. Almost a year and a half later, the two sides still await a decision in the case from Colorado state judge Ross Buchanan. (CEHE hired as an expert witness for the trial, to testify against the fraud charges, Diane Auer Jones, who is now DeVos’s top higher education aide.)
In 2014 the U.S. Justice Department joined a separate employee whistleblower lawsuit charging that CollegeAmerica paid its recruiters bonuses, commissions, and other forms of incentive compensation in violation of the federal ban on such payments. 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. In 2016, a federal judge refused to dismiss that case. As the lawsuit’s endless docket sheet reveals, the Barney chain has been fighting in court ever since to conceal documents relevant to the case, even though the judge keeps ruling against it. The chain is claiming that, in paying the bonuses, it was relying on legal advice from its attorney.