June 15, 2020

As Perdoceo Fights VA Suspension, Employees Say Recruiting Abuses Persist

As Perdoceo Fights VA Suspension, Employees Say Recruiting Abuses Persist

The U.S. Department of Veterans Affairs must decide in the coming weeks or months whether to stand by its determinations to throw five universities out of the G.I. Bill program for deceptive advertising or recruiting practices, or instead to reverse one or more of those actions and allow student veterans to keep enrolling in those schools with VA dollars. Any such reversal, the VA has indicated, would be based on evidence the schools submit that they have taken sufficient corrective action to warrant another chance. 

Two of the schools waiting on this VA decision, American Intercontinental University (AIU) and Colorado Technical University (CTU), are owned by the for-profit company Perdoceo Education Corporation, which until January was called Career Education Corporation. Perdoceo schools have repeatedly been in trouble with law enforcement and sued by former students for deceptive and abusive marketing and recruiting.

Losing the GI Bill money could be a disaster for Perdoceo, because of the federal 90-10 rule, which requires for-profit colleges to obtain at least 10 percent of their funding from sources other than grants and loans provided by the Department of Education, or else get kicked out of the financial aid program. The Perdoceo schools, especially AIU, have hovered perilously close to the education department’s 90 percent ceiling. They may well need the G.I. Bill money to stay in business. 

Yet according to current and former recruiters at Perdoceo schools who have contacted me in recent months, all of whom either still work at the company or worked there until earlier this year, egregious recruiting abuses at the company’s two schools, AIU and CTU, are still happening. Their accounts suggests the schools may not deserve a reversal of the VA’s decision to throw them out of the G.I. Bill program.

Ongoing abuses at Perdoceo schools

As Perdoceo Fights VA Suspension, Employees Say Recruiting Abuses Persist

The four admissions representatives — three based in the Phoenix area and recruiters for AIU and one recruiter for CTU in the Chicago suburbs — asked that their names not be used, out of concern for their careers.

All said that their supervisors relentlessly pressured them to aggressively push people into low-quality college programs — often pitting recruiters against each other in a struggle to keep their jobs. Two of the AIU reps had worked at other for-profit schools also considered predatory operations; each said AIU is far worse in terms of deceptive and coercive recruiting tactics. One of the reps said that AIU made her former school, which was part of a collapsed predatory chain, “look like Harvard.” 

This AIU recruiter told me, “I have found many fraudulent practices and have been expected to prey on vulnerable people. I hardly sleep at night.” She added, “This is heartbreaking to me. What I’m seeing is not educators. I’m seeing predators.”

The CTU recruiter said, “Each time classes start, it gets harder for me to push students to do something that doesn’t help them. Students come first, until they don’t, and they don’t every five weeks when classes start. It’s profits over people.”

Another of the AIU reps described the sales environment there as “manipulative and just downright unethical.”

The third AIU rep said, “As a human being, I felt like I was required to set people up for failure.  Enroll people knowing they wouldn’t be able to get through their first day, let alone a whole program. If they couldn’t even read, we told them, that’s OK, [in the course] you can watch videos.” 

Combined enrollment at AIU and CTU has been around 35,000 students. CTU has two physical campuses in Colorado, and AIU has campuses in Atlanta and Houston, but more than 90 percent of the students at the two schools take classes entirely online. The schools offer programs in a wide range of fields including business, information technology, engineering, health care, and criminal justice. They grant degrees from associate and bachelor’s to master’s and doctorates. 

One of the AIU reps said that when she interviewed to work there, she expressed concern about the high pressure sales tactics at her previous for-profit college job. She asked the manager who interviewed her, I’m an educator; is this a sales job or an education job? The manager replied, we focus completely on education. The rep soon came to believe, however, that this reply was “a blatant lie.”

A second AIU rep told me about the same — he was assured “this is not a sales job.” But he quickly learned otherwise.

Based on their conversations with prospective students and on company documents, the recruiters say Perdoceo has been buying “leads” — names and contact information of prospective students — from third-party lead generation companies. Some lead generation websites deceptively promise jobs, food stamps, veterans information, and other things low-income people need, especially in the COVID-19 climate, but in reality are run mostly to sell these leads to for-profit colleges.

According to the AIU and CTU recruiters, many of the prospects on the phone say they entered their contact information online thinking they were applying for jobs, and are confused or upset to find themselves on a sales call about college programs. Others are single moms who say they responded to Facebook ads offering welfare “grants.” 

Schools pay handsomely for such leads, sometimes as much as $100 or more per name.

One internal document I obtained, from this spring, shows that Perdoceo student leads came from lead generation operations including Media Spike, Classes USA, Banner Edge, BirdDog Media, Course Advisor, and Education Dynamics

The AIU recruiters say they make 75 phone calls a day to prospects; the CTU recruiter said they are expected to make 125. The recruiters call many people who had asked to be placed on a “do not call” list. They call at all times of the day, routinely spoofing their outgoing numbers, so the prospect sees what looks like a local call coming in, or at least a different number from the previous one. If a prospect declines to continue the conversation, the recruiter will call back, every hour for hours, sometimes ten calls to a single prospect. Or managers re-assign the lead to a different recruiter, who starts all over again, or even assign two recruiters to call the same person on the same day. If a prospect refuses to enroll, they will sometimes be transferred to a supervisor who will push even harder. 

If a prospect enters her information on the CTU website itself, the CTU recruiter said, she will “get hammered with calls” from the admissions operation. 

“It’s bullying and it’s harassment,” said one of the AIU recruiters.

The reps say they learn to use the familiar coercive recruiting pitch of a predatory college, aimed at making the prospect ashamed. They ask: How do you expect anything in your life to get better if you don’t make changes now? How can you pay your bills or take care of your family without an education?  

The employee training process, one AIU recruiter says, is focused on overcoming objections to enrolling — objections about cost, time, child care, transportation to campus. She also was told that a great way to turn prospects into enrollees was to “flirt to convert.”

If a prospect raises concerns, the CTU and AIU recruiters say, they are told not to worry about the cost, at least for now. If they say, isn’t community college cheaper, the rep will respond, you can take one class at a time. 

The CTU representative said that management tells recruiters that if a prospective student does not have a computer, just a mobile phone, they shouldn’t enroll, but if a student says they plan to get a computer, “you are supposed to enroll.” During weeks when classes are about to start, or just starting, and enrollment numbers are critical, reps will push students to enroll through the school’s mobile app, which doesn’t adequately warn that a computer is needed.

The AIU recruiters say they will enroll students who have no computer, only a phone.

The recruiters said they are directed to follow a written script, and if they veer off it, they can get in trouble.

One of the AIU reps says that when he complained about the high-pressure recruiting tactics, a manager replied, “If you don’t like sales, go to a nonprofit.”

The AIU recruiters said the bosses have expected them to sign up at least eight new students per month, or else risk getting fired.

The CTU representative said that managers pressure recruiters into falsely telling prospects, at the crucial sales period right before new classes start, that they have a small, urgent window to enroll, or lose their chance to attend the school. In fact, CTU will accept enrollment at any time, for nearly any high school graduate. 

For sales calls from either CTU or AIU, the people on the other end of the phone tend to be low-income, or single parents, or older people on Social Security and disability, or people who have had strokes and seizures, or a homeless man living in his car, or people with serious intellectual disabilities, or people who can’t read, or immigrants who speak little English.

Many are people “trying to make ends meet,” said one of the reps. Some have too many previous loan defaults to be eligible for federal loans. Many have criminal convictions; some are on parole or still living in halfway houses.

Many are African-Americans from southern states: North Carolina, South Carolina, Florida, Alabama, Texas. 

By contrast, according to the AIU recruiters, almost all the managers there are white men, with no African-Americans among the leadership. 

One of the recruiters told me she spoke with an 82-year-old man who seemed “confused.” She started him on an enrollment application, but he didn’t complete it. She wanted to stop, saying the man would not benefit from the school program, but her boss told her, who are you to judge?

Everyone deserves a chance at educational opportunities to improve their lives. But these AIU and CTU recruiters know the programs they are selling aren’t strong enough to help many of the students; that online programs are often an especially a poor fit for people without significant college experience; that the programs will instead make them worse off, buried in student debt — tens of thousands, sometimes more than $100,000 — and with no improved career prospects. One AIU rep said he feels he is “forcing down someone’s throat programs that they are not interested in, and not capable mentally, physically, or emotionally to handle.”

Another of the reps said that one of the last people she signed up “is in nursing home, she can’t use her arms or legs, she uses a stylus with her mouth, she’s in her 60’s.” The recruiter pushed her into a bachelor’s degree in business — “that’s our go-to.”

Recruiters said that if the prospect wanted a program that AIU didn’t offer, they would pressure them into enrolling for a business degree: If you want to be a hair stylist, get a business degree and you can open a salon; if you want to be a chef, get a bachelors in business and you can own a restaurant. Some prospects wanted a nursing degree, but AIU doesn’t offer them, so reps would push them into a “healthcare management” program.

Discussing this strategy, one of the AIU reps said, “I’m ashamed of myself.”

The goal is always to get the student to enroll and attend two classes. “Then,” said one AIU rep, “they are locked in” — Perdoceo can bank the students’ federal grants and loans. 

In the COVID-19 era, CTU is pushing health care degrees — and pushing recruiters even harder. “If you’re away from your desk for five minutes, they just start questioning you,” the CTU rep said. Managers are “listening to every single call — and the main purpose is not to see if you did anything wrong,” meaning unethical, “it’s to see if you did everything to overcome objections and make the students convert.” Recruiters are telling prospective students, “You’re not working; what else do you have to do but sit at home?” 

One of the AIU staffers said that just before officials from the school’s accreditor, Higher Learning Commission, visited the admissions operation last year for an inspection, managers removed large bulletin boards tallying representatives’ sales figures. When asked why, a manager explained they didn’t want to bog down the accrediting team with details.

The AIU reps described a toxic office culture: managers playing favorites with young, attractive new hires; recruiters who used hard drugs; employees drinking, smoking weed, and having sex in the office parking lot. “Everything is HR inappropriate,” one said, describing how managers have shared derogatory personal information about employees who were fired. It is, he said, “like a big ol’ high school.” The CTU staffer reports a similar office climate; once two people were having sex in a room designated for nursing mothers. 

The CTU rep noted that the top Perdoceo management, including CEO Todd Nelson, “work in a glass tower a mile away” from the CTU call center. The Perdoceo headquarters is located in Schaumberg, Illinois, 

A corporate lawyer and former attorney general of Washington state, Robert McKenna of Orrick, Herrington, and Sutcliffe, was hired to monitor a January 2019 $494 million settlement between Perdoceo and 49 state attorneys general who alleged the company engaged in deceptive practices. In October 2019, the extensive first report of that monitor concluded that the company had made major corrections to its practices and that AIU and CTU were in “substantial compliance” with their obligations under the settlement.

But the admissions representatives who called me said that recruiting practices had, in fact, gotten worse since the 2019 settlement agreement. 

BA programs at AIU and CTU can cost in excess of $60,000, even $75,000. One of the reps said, “You always push the bachelor’s degree; it’s about the money.”

According to Department of Education data, American Intercontinental University’s graduation rate for first-time, full-time online students is just 28 percent, with starting salaries for graduates ranging from $18,000 to $43,000. For Colorado Tech, the graduation rate is 25 percent, with salaries ranging from $23,000 to $72,000. 

The reps say that AIU and CTU programs are not terribly difficult to get through, because many of the exams are multiple choice, using the schools’ “intellipath” system, and students have opportunities to correct their answers. There are writing requirements in some programs, but reps said that some students buy papers online or have relatives write them. 

Still, many students end up dropping out, in part because of the escalating costs. If they elect to receive personal stipends from their financial aid packages, they will run out of aid part-way through their programs, said one of the AIU recruiters, and the school will tell them they must pay cash or exit. But the recruiters say that reality is not explained to most recruits when they sign up.

Capitol Forum published a report last September describing recruiting abuses at AIU and CTU, based on accounts by former employees, who also were anonymous. The accounts of the current employees with whom I spoke indicate that the abuses continue to this day.

Perdoceo has not responded to my request for comment. 

Perdoceo’s troubling history

As Perdoceo Fights VA Suspension, Employees Say Recruiting Abuses Persist

Last August, Perdoceo, then called Career Education Corporation, or CECO, agreed to pay $30 million to settle charges brought by the Federal Trade Commission that CECO schools have recruited students through deceptive third-party lead generation operations. Veterans’ groups took the FTC settlement to the VA and argued, successfully, that federal law compelled the Department to suspend the school for its deceptive practices.

But the FTC settlement was not the only strike against the company. In January 2019, CECO reached its $494 million settlement with 49 state attorneys general over alleged deceptive practices. Back in 2013, CECO had agreed to pay $10.25 million to resolve the New York attorney general’s separate claims that the company, in its student recruiting and reporting to overseers, exaggerated its graduates’ job placement rates. In 2010, CECO agreed to pay $40 million to settle a class action lawsuit brought by students who said its California Culinary Academy had misled them by claiming that 97 percent of graduates were hired for culinary jobs. 

These law enforcement probes and lawsuits reflect decades of deceptive and abusive behavior by CECO against students and taxpayers. Unfortunately, the financial penalties for these offenses equaled only a tiny percentage of the billions — as much as $1.9 billion in a single year — that CECO/Perdoceo has raked in from taxpayers over decades. 

While other big predatory for-profit college chains, such as EDMC, Corinthian, ITT Tech, and Education Corp. of America, collapsed in recent years under the weight of their abuses, Perdoceo has so far survived, with its CEO Todd Nelson bragging to Wall Street about resurging revenues.

This is not Nelson’s first Perdoceo. Before coming to the company, Nelson ran both EDMC and, before that, for-profit giant University of Phoenix, another predatory chain that is one of the other three schools now facing potential termination by the VA. 

Todd Nelson received $7.2 million in total compensation from CECO in 2018. The company had revenues of about $628 million last year. About 85 percent of those revenues came from federal student aid provided by U.S. taxpayers. So money comes out of your paycheck each month to pay Todd Nelson to run this scam against vulnerable Americans.

Perdoceo/CECO is also the company where Trump education secretary Betsy DeVos’s two top higher education aides — Diane Auer Jones and Robert Eitel — previously worked as senior executives. At the Department of Education, Jones and Eitel have upended rules, policies, and enforcement efforts, making it possible for predatory operations like Perdoceo to thrive once again, ripping off taxpayers and ruining students’ financial futures.

Perdoceo’s board of directors includes William Hansen, who was the number two official at the Department of Education under George W. Bush. Hansen has multiple connections to people on DeVos’s team. He currently runs Strada Education Network, a dubious non-profit charity, built on student loan profits, that invests in and cheerleads for for-profit colleges, while paying its executives huge salaries. 

Another Perdoceo director is Greg Jackson, the co-founder of Ensign Peak Advisors, a Mormon Church investment fund now at the center of an IRS whistleblower complaint charging that the church hoarded a $100 billion stock portfolio using member donations that were intended for charitable purposes. Ensign also assisted in the financing for ITT Tech’s fraudulent PEAKS student loan program.

Perdoceo CEO Todd Nelson also has strong ties to the Mormon Church: In addition to Nelson’s schools — University of Phoenix, EDMC, and Perdoceo — all facing law enforcement actions for deceiving students, the U.S. Equal Employment Opportunity Commission, several months after Nelson left the University of Phoenix and its parent company, Apollo Education Group, charged that for years the school had discriminated against employees who were not members of the Mormon church. According to the Arizona Republic, “The University of Phoenix and Apollo were long dogged by murmurs of Mormon influence. Apollo’s longtime chief executive officer, Todd Nelson, was active in the church, and the company was said to heavily recruit church members as enrollment counselors.” The school settled that case by agreeing to pay $1.89 million — the largest payment to settle an EEOC religious discrimination case in the agency’s history.

AIU’s president, John Kline, worked under Todd Nelson at both EDMC and the University of Phoenix. He also serves on the board of LeadsCouncil, a lead generation industry group. CTU’s president, Andrew Hurst, also worked under Nelson at EDMC. 

In sum, Perdoceo’s American Intercontinental University and Colorado Technical University, for-profit colleges that take in billions of dollars from taxpayers and low-income students, have extensive records of predatory abuses, are run by executives who came from other schools with extensive records of predatory abuses, and have current and recent employees reporting that such abuses remain egregious to this day.

It’s a disaster and a disgrace that all this money goes to deceptive and abusive marketing and recruiting, and obscene salaries of executives like Todd Nelson, to push low-income people into high-priced, low-quality, low-value programs that will crush their dreams and condemn them to lives of debt — when that same money could be directed instead to quality education programs that actually help students build careers.

Candidate Donald Trump promised in 2016 to make things better for American veterans. Perdoceo is making things worse for American veterans. Before his VA even considers taking Perdoceo’s word for it that they have reformed themselves and are worthy of enrolling veterans, there should be a truly robust, independent investigation. And while Betsy DeVos and her revolving door advisors have proven they don’t care about abuses of veterans, single moms, African Americans, Latinos, immigrants, and other victims of these and other predatory schools, state attorneys general should re-examine Perdoceo’s compliance with its promises to reform, and so should state oversight agencies, the FTC, and a future U.S. Department of Education.