July 23, 2019

House Committee Will Question DeVos Aides Over Dream Center Deceptions

House Committee Will Question DeVos Aides Over Dream Center Deceptions

House Education and Labor Committee chairman Bobby Scott (D-VA) has just raised the stakes in the battle over Betsy DeVos’s coddling of predatory for-profit colleges, sending a letter to the Trump Secretary of Education demanding that some of her top aides submit to transcribed interviews with the committee regarding the Department’s handling of the collapsed Dream Center chains of schools. Scott’s letter focuses particularly on evidence that Department officials provided false information to Congress.

In the letter, sent last week and released today, Scott also directed DeVos to hand over documents on the matter.

Scott told DeVos that his review of Department and Dream Center Education Holdings (DCEH) documents already revealed (1) that DCEH executives actively concealed from students that two Art Institutes campuses operated by DCEH had lost their accreditation; (2) that the Department issued guidance that “facilitated” this DCEH misrepresentation; (3) that the Department released millions in taxpayer funds to DCEH as the company was faltering; and (4) that there is evidence that DeVos’s top higher education aide, Diane Auer Jones, may have made untrue statements regarding these issues in testimony and written statements to Congress.

On May 16, 2018, in an article exposing conflicts of interest and deceptions at DCEH, I first reported that a DCEH web page for students misrepresented the accreditation status of the company’s Illinois Institute of Art and Art Institute of Colorado. On that page, DCEH stated that each school “is in transition during a change of ownership. We remain accredited as a candidate school seeking accreditation under new ownership and our new non-profit status” — even though the schools’ accreditor, Higher Learning Commission (HLC), had taken action effective January 20, 2018, to change the status of the two schools from “Accredited” to “Candidate”; explained to DCEH, “During candidacy status, an institution is not accredited….”; and expressly directed DCEH to inform students of this change.

The withdrawal of those schools’ accreditation greatly diminished the value of credits and degrees, yet DCEH did not inform current or prospective students until after Republic Report, and later other media, had reported on the issue, and Senator Dick Durbin (D-IL) had written to the accreditor and the Department of Education to express concerns.

Scott’s new letter to DeVos says he found evidence that her Department shared responsibility for this failure: “The Committee has … come across newly-obtained documents that raise questions about whether the Department took steps to allow Dream Center to mislead students…. Department officials were made aware of Dream Center’s false claims of accreditation, but the Department did not immediately require Dream Center to take corrective action. Instead, the Department informed Dream Center executives that it would work to retroactively accredit the institutions during the period they had lied to students—rewriting history to erase Dream Center’s deceptive marketing practices.”

Scott adds, “The documents further suggest that Department officials were not forthcoming to Congress and the public about the information they had about Dream Center’s status and practices.”

Internal DCEH documents obtained by Scott’s committee show that the company did not appeal HLC’s decision to suspend accreditation and that its decision, as Scott’s letter put it, appears to have been “strategic.” When DCEH’s outside lawyer, Ronald Holt, emailed company executives on April 19, 2019, asking whether to press HLC or “just let the matter lie silent,” David Harpool, the president of online Northcentral University, who was advising the DCEH team, responded, “I’d let it sit. Provides more runway to operate.”

Later, on May 29, 2018 (soon after Republic Report had disclosed DCEH’s false statements to students), with DCEH on verge of shutting down numerous Art Institutes campuses, Randall Barton, Managing Director of the parent Dream Center Foundation and Co-Chairman of the DCEH board, emailed executives asking: “why appeal if we are going to close these schools?”

As Scott’s letter to DeVos points out, a successful appeal would surely have mattered to students who wanted to have credits and degrees from an accredited school.

Instead of appealing, Barton suggested that DCEH executives go to HLC’s Chicago office and tell the accreditor “that you deceived us, that we never would have closed [on the purchase of the schools from for-profit EDMC] with this condition as full accreditation was a condition precedent to closing and we have no choice but to close all HLC schools and if HLC cooperates and give maximum flexibility we will agree not to sue them for what will be a multi million dollar suit.”

Scott’s letter also attaches a June 1, 2018, email to DCEH senior executives from an official (whose name as been redacted) announcing their resignation from the Art Institute of Colorado. This person addresses DCEH’s handling of the HLC accreditation issue, writing, in part:

The events of the last six months have made it impossible for me to continue my employment. I can no longer continue enrolling students without compromising my ethics and morals. When the admissions department was initially told about our “Change of Status Candidacy” it was presented as a misunderstanding with HLC that would quickly be resolved. Our team was told to “punt” on any questions we received about that status and to change the conversation to a more favorable topic. We believed what we were told and dutifully continued to enroll for the July class. As time went on, I began to realize that perhaps we were not given the full story, and concerns began to arise about our upcoming July start. What was presented as a glitch that would quickly be resolved is now obviously something much bigger.

My heart breaks for the students who have trusted us so completely. Our July class has students who have shelled out money for plane tickets to visit the campus, turned down scholarships to other institutions, and left other stable opportunities for the reputable education they believe we will give them. These students have not been given all of the necessary and appropriate information they need to make the best choice for their own futures. If our HLC visit does not result in our accreditation being restored, these students will have tangible damages against the school and I want no part in that legal debacle.

Perhaps if I had been given legitimate reassurance from The Dream Center Leadership in less than two weeks time, I would be able to continue my employment. Unfortunately, instead of reassurance, the only actions taken have been to increase our July start goal. It is now public knowledge, as disclosed in the Republic Report, that our accreditation is lacking and there has yet to be any communication from DCEH. It is only a matter of time before the story is disseminated across more mainstream sources.

The resigning employee was right — after Republic Report exposed DCEH’s false statements to students about its accreditation, the Pittsburgh Post-Gazette and then Senator Durbin publicly addressed the issue. On June 20, DCEH finally notified the affected students.

Other materials obtained by Scott suggest that Diane Auer Jones, DeVos’s Acting Under Secretary, gave false statements to Congress regarding the Department’s role in DCEH’s accreditation issues.

Documents indicate that DCEH executives were in discussions with the Department of Education regarding the possibility of HLC restoring the schools’ accreditation retroactively, back to the time it was suspended, something that Department guidelines then prohibited.

A July 3, 2018, email from Barton to Holt suggests the topic came up on a phone call he had with Jones. (“We just got off the phone with DOE. It appears HLC is in sync with retro accridation and teach out plans. Dianne at all 3 accriditors on and they will all agree to one plan with Department blessing and hopefully funding from the LOC.”)

A July 11, 2018, audio recording obtained by Scott (and first obtained and reported on last July by Republic Report) reveals that DCEH’s Chief Operating Officer, John Crowley, told a group of faculty at the Illinois Institute of Art that the Department “went so far as to change a regulation at DOE to make it easy for HLC to help us” and, later, that accreditation, if restored, would be retroactive because “the DOE changed their regulation over here to open the door to letting it happen.” He added that DCEH had talked with “Diane Jones, who is the Undersecretary of Education who pulled them all together, all the accrediting bodies, all six, there are six in the country and said work with these guys. The last, we had a conversation with her on Thursday last week, she said everybody was going to be accommodating.”

On July 25, 2018, Jones issued a guidance document reversing prior Department policy and allowing agencies to restore accreditation retroactively.

The obtained material, as Scott says in his letter, “raises questions about recent representations made by Undersecretary Jones to the Senate that she first learned about Dream Center accreditation problems on July 10, 2018.” Other evidence Republic Report has previously cited adds to the case that Jones‘s claim is untrue.

Worse, the documents Scott cites indicate, as he writes, “that the Department worked to ensure retroactive accreditation of the Dream Center institutions,” which is, as he notes, “a fact that Undersecretary Jones has repeatedly denied in response to congressional and media inquiries.” When Jones testified on May 22, 2019, before the House Committee on Oversight and Reform, Rep. Donna Shalala (D-FL) asked her whether her issuance of the guidance allowing retroactive accreditation was aimed at helping DCEH. Jones replied, “Absolutely not. It had nothing to do with the Dream Center.” In addition, in written responses to questions from Senator Durbin, the DeVos Department stated that Jones “held bi-weekly calls with accreditors (excluding ACICS) to share information and hold DCEH accountable for providing information or taking actions requested by accreditors” and that “these calls were not to intervene on DCEH’s behalf.”

The New York Times, which today reported on Scott’s letter to DeVos, obtained a statement from the Department of Education saying that its story “is based entirely on a wrongful premise,” adding, “The full and complete timeline shows Dream Center did not receive any unique benefits from policy decisions made by the department. We simply worked to try and get as many students into a new program as possible. While we did not achieve a perfect outcome, our actions helped thousands of students land on their feet.”

Jones also provided the Times with a written statement: “The retroactive accreditation policy — which had been under discussion long before I arrived at the department — decided not whether Dream Center would live or die, but whether or not students could transfer their credits for the hard work they had completed.”

Additional documents obtained by Scott reveal that in October 2018, DCEH executives created a “DoE Ask List” that they presented to Jones on or around October 30, 2018. Most of all, it appears, DCEH wanted the Department to release $75 million held in an escrow account, which the Department had required the predecessor operator of the schools, EDMC, to post in 2015, in order to protect taxpayer funds in case the schools suddenly closed.  One DCEH document  suggests the company would use this money to pay for expenses connected with closing 32 campuses. But an email from one of DCEH’s outside lawyers, Dennis Cariello, suggests that DCEH executives were also interested in paying out bonuses. Sending a message entitled “I’m seeing Wayne tomorrow” to DCEH CEO Brent Richardson and DCEH general counsel Chris Richardson, Cariello wrote about a planned meeting with DeVos aide A. Wayne Johnson: “Going to give him the list of the asks. Also, he asked that I review the draw requests – there are a few things we can’t have in there – bonuses (maybe one at the of the teach out, but not interim) and future rental payments (not monthly rent – rent for future periods) were issues for him.”

Scott’s letter demands from DeVos that Jones and Johnson, along Department aides Michael Frola and Donna Mangold, an acting deputy assistant general counsel, sit for transcribed interviews with the House committee. Scott also asked the Department to provide within two weeks all emails and texts between key Department officials and various entities involved in the DCEH debacle, including Colbeck Capital Management, as well as between those Department officials and another collapsed for-profit college operation, Education Corporation of America. (I previously reported that Jones refused to communicate with DCEH leadership by email; she wanted texts or phone calls only, and she asked that she communicate with Brent Richardson through an intermediary, his aide Shelly Murphy.)

UPDATE 07-24-19: The Department of Education’s acting general counsel, Reed Rubenstein, responded to Scott’s letter to DeVos with a letter, dated July 22, that resists submitting to the requested interviews, at least initially. Rubenstein writes that “[t]o protect the public fisc and facilitate the timely resolution of this matter, the Department suggests a staged response — first, production of the requested emails and text records, and then such transcribed interviews as may be necessary and appropriate.” Rubenstein also offers evidence that the Department has been considering the issue of retroactive accreditation for more than a decade. And, in a Trumpian flourish, Rubenstein defends the DeVos Department’s handling of the Dream Center and accreditation matters, saying it prevented “a repeat of the catastrophic Obama Administration Corinthian College collapse that spilled 30,000 students on the street.”