Troubled College Operator Drops Lawsuit Against DeVos. Why?
The Center for Excellence in Higher Education, operator of a chain of colleges repeatedly caught deceiving and short-changing students, has quietly dismissed its lawsuit against the Department of Education, a case aimed at reversing the Obama administration’s 2016 rejection of the company’s bid to be treated as a non-profit institution. It’s unclear from the court record why the case was dismissed, and whether the Department, under Betsy DeVos, has agreed to make any concessions to CEHE, which operates Stevens-Henager College, California College San Diego, CollegeAmerica, and ubiquitous TV advertiser Independence University.
A December 21, 2018, filing in the United States District Court for the District of Utah states simply that the two sides “hereby stipulate to the dismissal of this action with prejudice, each party to bear its own fees and costs.” Earlier filings by CEHE and the Justice Department, which represents DeVos, informed the court that they “had reached an agreement on a means of resolving this matter without further litigation.” So what’s in the agreement? There’s been no statement from the parties about the resolution of this dispute. (I’ll ask on Monday, and I hope some reporters out there will, too.)
The college chain, which in 2012 converted from a for-profit enterprise to a non-profit organization, wanted to benefit from the somewhat lighter regulatory burden that falls on non-profit schools, but the Obama education department determined that the operation was being run primarily to benefit Carl Barney, the prior for-profit owner, rather than to benefit students. The conversion to non-profit was so favorable financially to the wealthy Barney, and so troubling to observers, that it was a major focus of two lengthy New York Times stories. Yet the Trump-DeVos education department, which has worked consistently to eliminate protections for students from predatory college behavior, indicated a year ago that it might reverse the Obama decision.
Recognition as a non-profit would free the Barney chain from some legal rules aimed at curbing for-profit college abuses, such as the requirement that for-profits get at least 10 percent of their revenue from sources other than Department of Education student grants and loans, and some of the provisions of the gainful employment rule, an anti-student debt regulation that DeVos is working to undo but remains on the books for now.
The CEHE schools have faced multiple lawsuits from former staff and several law enforcement actions. In late 2017, CEHE went to trial on fraud charges brought by the attorney general of Colorado. More than a year 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, with the title acting under secretary of education. (Jones also previously was senior vice president at for-profit Career Education Corp., which settled charges of deceptive and abusive practices with the attorneys general of 48 states last week.)
In September, the largest accreditor of for-profit schools, ACCSC, 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 at the time that ACCSC’s decision “may have been issued in reaction to external or other inappropriate influences.” I’m still not sure what those influences were.
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 the Colorado case, that state’s Republican attorney general, Cynthia Coffman, took the Barney chain 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.
An example: The school, according to the AG’s office, hyped its “Medical Specialties” associate degree as leading to lucrative careers in a range of medical jobs. The program cost $42,000 — more than four times as much as comparable degree programs at community colleges. But most of the jobs that graduates had a chance to get were low-level, low-paid positions did not require a college degree at all. Once students had completed the program, CollegeAmerica employees would then sometimes disparage the value of the program and hype the next expensive program — a bachelor’s degree in Healthcare Administration. But again, most graduates could only get low-rung jobs that did not require an associate’s degree, let alone a bachelor’s.
Devastating evidence at trial backed up these claims. For example, there was a student whom CollegeAmerica managed to a sign to enrollment agreements for three separate programs, including a bachelor degree in computer science, even though, it turns out, the student has a “permanent and total” cognitive disability and thus was unlikely to benefit from the programs. One of the degrees cost $56,000. The ex-student now works at a dishwashing job set aside for disabled people. At trial, this student was presented with a “Satisfactory Academic Progress” appeal that he purportedly filed with the school, asking to remain in a program he was flunking; he testified that he didn’t write it.
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, Keith Zakarin.