June 9, 2019

In NY Times, DeVos Aide Claims She Blew Whistle on Her For-Profit College

A New York Times article published this evening includes a tantalizing claim from Diane Auer Jones, Betsy DeVos’s top higher education aide: that she blew the whistle on for-profit Career Education Corp. (CECO), where she worked from 2010 to 2015 as senior vice president. The Times piece reports, referencing Jones, “She was the one who reported the improprieties found at its schools to the schools’ accreditor and the Education Department, she said.”

Jones’ claim, not further addressed in the Times story, certainly deserves deeper investigation by Congress and others. For which of the many investigations of CECO was Diane Jones the whistleblower?  (I have been told in the past by Department officials that Jones has claimed she turned in CECO, but I never confirmed it.)

Career Education Corp. has been the subject of multiple federal and state law enforcement probes and actions over the past six years, including a $494 million settlement in January with 49 state attorneys general over alleged deceptive practices.

Yet, in February CECO’s CEO Todd Nelson bragged to Wall Street of big increase in profits: “2018 was a watershed year for our company, with operating income the highest it has been in almost a decade.” He added, “Our balance sheet is expected to further improve in 2019…”

CECO’s renewed profit surge has come precisely as DeVos, guided by Diane Jones, has rescinded virtually every Obama-era reform aimed at protecting students against predatory for-profit college abuses.  Yet at the same time Jones says, apparently, that she was so disturbed by CECO’s conduct that she took the extraordinary step of alerting authorities to her own company. (Todd Nelson didn’t join CECO until 2015, the year Jones left, but he surely was not the best choice to put a troubled for-profit college operation company on the path to compliance.)

CECO, which has received billions in taxpayer-funded student grants and loans, has been under investigation in recent years by the Federal Trade Commission, Securities and Exchange Commission, and the attorneys general of numerous states. The predatory practices at overpriced CECO schools have ruined the financial futures of thousands of veterans, single mothers, immigrants, and others seeking to build better lives through career training. 

In 2013, CECO agreed to pay $10.25 million to resolve New York’s claims that the company, in its student recruiting and reporting to overseers, exaggerated its graduates’ job placement rates.  CECO’s alleged bad acts included: counting as placed in a permanent job a student who worked one day at a health fair created by CECO; counting graduates of criminal justice programs as placed “in field” if they obtained retail sales jobs; and claiming placement rates as ranging from 55 percent to 80 percent, when the actual figures were 24 percent to 64 percent. CECO was also accused of failing to inform prospective students that some of its programs lacked programmatic accreditation, meaning that graduates would have no opportunity to apply for the kinds of jobs for which they thought they were training. 

In 2010, CECO agreed to pay $40 million to settle a class action lawsuit brought by students who said its San Francisco-based California Culinary Academy had misled them by claiming that 97 percent of graduates were hired for culinary jobs. The school failed to explain to applicants that that figure included graduates working as baristas, prep cooks, and waiters, jobs for which a degree was not required. The students also alleged that CECO invented fake job placements. (In all these settlements, CECO admitted no wrongdoing.)

Jones’ claim about being the CECO whistleblower deserves scrutiny, especially, because other claims she has made are hard to believe.

Jones indicated to a House oversight subcommittee last month that a federal court decision compelled the DeVos Department of Education to reinstate the controversial for-profit college accreditor ACICS as a validator of schools’ eligibility for federal student grants and loans.  That was false.  DeVos and Jones made the decision; the court had only directed them to review additional evidence.

Jones also has minimized her role in overseeing the ugly collapse of the Dream Center Education Holdings (DCEH) chains of career schools, and the transfer of some of those schools to entities controlled by Colbeck Capital Management.

The Department has denied a claim, made to me by a source close to DCEH management, that Jones’ team told DCEH officials early in 2018 that it was okay to falsely claim on their website that two of DCEH’s Art Institutes campuses “remain accredited,” even though the the schools’ accreditor, Higher Learning Commission, had taken action effective January 20, 2018, to change the status of the two schools from “Accredited” to “Candidate” and explained, “During candidacy status, an institution is not accredited….”

Indeed, Jones and the Department now claim that Jones did not know about DCEH’s false statement until July 2018 — even though Republic Report had exposed that false statement in May 2018, the Pittsburgh Post-Gazette had reported it in June, and Senator Dick Durbin had in June written a letter about it to HLC, copied to the Department of Education’s top enforcement official. Jones further claims that when she found out, she directed DCEH to fix the false statement and made sure it did so — even though DCEH had already fixed it in June. Jones and the Department now also claim, despite asserting that they directed DCEH to fix the false statement, that the statement was in fact true.

There’s something wrong with that picture.

Jones’ efforts to remove herself from the Dream Center debacle are also called into question by a December 2018 email sent to DCEH officials by the company’s outside lawyer, a message I read to the subcommittee at the same hearing where Jones testified:

——
I just got a call from Diane. We have been summoned for a meeting on Wednesday from 1-5 to resolve the transaction once and for all. The people that will be there are:

Lenders
ECPI
Helms College
John South
Eastern Gateway
Colbeck
DCEH

The Department wants to resolve the situation and is concerned that Eastern Gateway will take too long to get a new entity to purchase the schools. I was told that ECPI, the lenders and South have put deals in front of us and can’t get documentation to due diligence or any response. I neither know nor care how true that is, but I mention it so we know where the DOE is coming from.

So, we need to get these folks in the room. I will email John Altorelli for Colbeck and Tim Ligon for Helms. Can someone tell Eastern Gateway? By the way, if they want the school I’d bring as much firepower as they can muster now.

——–

My source said the date of that meeting was December 19, 2018, and that at the meeting, the Department of Education team led by Diane Auer Jones gave Jason Beckman of Colbeck Capital Management control of all Title IV money for the Dream Center schools. Colbeck kicked off its new Jones-blessed role by concealing from the public that it was behind both the non-profit company acquiring DCEH schools and the for-profit company that would get paid millions monthly by taxpayers to service those schools. Colbeck then engaged in an ugly squabble over the schools with DCEH and other parties.

Jones has repeatedly minimized her roles in awful decisions by the DeVos Department regarding for-profit college abuses, yet now claims that her five years of highly-paid service at predatory Career Education Corp. were marked by a principled stand to expose abuses.  The public deserves to know more.