February 6, 2019

Outside Monitor Found Abuses in Dream Center College Operation


Outside Monitor Found Abuses in Dream Center College Operation

The lawyer appointed to monitor the compliance of big for-profit college company EDMC with a 2015 settlement of consumer fraud charges pursued by 39 state attorneys general found a series of abuses by the operation after it had been taken over last year by a new non-profit, Dream Center Education Holdings.

In his third annual report, covering the period October 1, 2017, to September 30, 2018, the monitor, Thomas J. Perrelli, of the giant corporate law firm Jenner & Block, found, among other conclusions, that DCEH:

— told students that some of its schools remained accredited, when in fact the accreditor had suspended approval;

— failed to provide students with required disclosures about debt levels and other matters, as required by the federal gainful employment rule;

— sought to use the non-profit Dream Center operation to benefit for-profit Woz U, a coding camp in which DCEH CEO Brent Richardson had a stake and an operational role; and

— improperly intimidated holdover compliance staff from the former EDMC headquarters in Pittsburgh, punctuated by an angry rant from Richardson in which he told a meeting that Pittsburgh was the place where things went to die.

All of these matters were first disclosed by Republic Report in articles published last May, the start of eight months of new revelations we have provided about DCEH’s meltdown, the troubling involvement of the Betsy DeVos Department of Education, and the harsh impact on students, faculty, and staff.  Our work has been made possible by courageous and principled DCEH employees who reached out to me.

Perrelli found improvements in DCEH legal compliance in the months leading up to his report, but by then DCEH had announced the closure of many of its campuses. More recently, in just the past few weeks, DCEH has been placed in receivership by a federal court, announced the shuttering of more campuses, and agreed to sell other campuses to another non-profit that Republic Report soon revealed to have its own troubling conflicts of interest. Also, Brent Richardson resigned as DCEH’s CEO.

DCEH management has charged that EDMC executives misrepresented the magnitude of the schools’ financial and other problems when the company was sold early last year.

The National Student Legal Defense Network obtained Perrelli’s report through an open records request.

Among the details of the DCEH debacle described by Perrelli:

— Regarding DCEH’s failure to post online warnings regarding gainful employment rule failures, as required by law, Perrelli relates that, as Republic Report previously reported,  DCEH compliance staff say they sought to post the warning but “were overruled by DCEH management.” According to Perrelli, DCEH managers “acknowledged the disclosure requirement but told the compliance personnel expressly that they could not activate the failure warnings because the warnings would deter new students from enrolling.” As Perrelli states, “the allegation is a serious one: A DCEH manager expressly instructed employees not to comply with federal regulations because doing so would hurt enrollment.”

— A DCEH officer “called a key compliance team, the Business Practices Committee, the ‘Business Prevention Committee’ – in a meeting with the committee itself…. Employees who identified compliance questions and risks were not thanked, but accused of being obstructionist. The new tone was one that suggested compliance was a burden, not a critical element of the company’s mission.”

— “The abandoned Woz U initiative would have involved DCEH, the non-profit, making payments to a for-profit entity controlled by DCEH’s own leadership. Perhaps it was a sensible business or educational arrangement, but the rationale for it was by no means clear, and the legal and appearance issues of personal benefit to the management of the non-profit were cause for serious concern. While DCEH decided not to move forward with the Woz U initiative, DCEH also indicated that it would consider other arrangements going forward, some of which might include contracting with for-profit entities for substantial services.” Perrelli warned, “Such efforts in the future would merit close scrutiny by the Dream Center Foundation [parent of DCEH], the DCEH Board, and the Attorneys General.”

On the positive side, Perrelli’s report concluded that DCEH “has, for the most part, eliminated the incidence of high-pressure, abusive, or deceptive sales tactics that characterized EDMC and the [for-profit college] industry in the years prior to the Consent Judgment.”