October 14, 2020

DeVos Must Cut Off Taxpayer Dollars to College Chain Hit With Fraud Verdict

DeVos Must Cut Off Taxpayer Dollars to College Chain Hit With Fraud Verdict
CollegeAmerica’s shut-down Fort Collins, CO, campus


Nineteen organizations, and I, just sent a letter to U.S. Secretary of Education Betsy DeVos, asking her to obey the law and cut off taxpayer dollars to colleges operated by a non-profit organization called the Center for Excellence in Higher Education (CEHE). We’re also asking DeVos to cancel the federal student debt of people who attended CEHE schools, and then force CEHE, which runs online Independence University and other career training schools, to give back the money it obtained from those loans.

As Republic Report was first to report, in August a Colorado judge issued a $3 million verdict against CEHE, some of its schools, and its top executives, Carl Barney and Eric Juhlin, for blatantly defrauding students in violation of the state’s consumer protection law.

Ruling after a trial pursued by Colorado’s attorney general, Judge Ross Buchanan’s 160-page decision and order documents how the CEHE schools used a detailed playbook to manipulate vulnerable students into enrolling in high-priced, low-quality programs; how the school directed admissions representatives to “enroll every student,” regardless of whether the student would likely graduate; how the schools’ recruiters and advertisements greatly overstated starting salaries that graduates could earn; how the schools falsely inflated graduation rates; and how students suffered as a result. Judge Buchanan concluded that CEHE’s conduct was “unconscionable.”

Why DeVos Must Penalize CEHE

Federal law compels the Department of Education to drop schools hit with a fraud verdict from eligibility for student grants and loans. The Department cut off aid to for-profit Globe University in 2016 after a similar court decision against that school. Federal law also provides loan relief for borrowers who attended a school determined to have scammed its students — and a mechanism for the Department to recover those lost amounts from the school itself.

Emails obtained by Republic Report reveal that Juhlin has told CEHE employees that the Colorado court decision was “political,” and that CEHE plans to appeal. But the law, and fundamental fairness, demands that DeVos act now to protect students and taxpayers, rather than waiting for a long appeals process to conclude.

The Century Foundation’s Yan Cao has more on why the Department of Education should take these steps.

The Colorado court’s decision is not only a searing indictment of Barney and Juhlin’s schools, which have taken hundreds of millions in taxpayer dollars, while ruining the financial futures of thousands of students. It’s also another mark against DeVos and her top higher education aide, the thoroughly dishonest Diane Auer Jones, who, while a private consultant, gave implausible testimony as an “expert witness” paid $50,000 by CEHE in the Colorado case. Jones then joined the DeVos Department in early 2018 and became the architect of DeVos’s efforts to eliminate accountability for predatory colleges.

In late 2018, the DeVos Department granted CEHE a big benefit by reversing a 2016 Obama-era decision that rejected CEHE’s application to be treated as a non-profit school for the purpose of Department regulations. The Department in 2016 had concluded that the CEHE schools, even though formally converted to a non-profit operation, continued to operate primarily to benefit Carl Barney, rather than the schools’ students, but the Department under DeVos and Jones threw that decision away and gave Barney’s schools the preferential status they sought.

Jones should now step aside and let serious Department professionals, who actually have concern for students, decide on the new petition against CEHE.

Battered by federal and state law enforcement actions, and disciplinary measures imposed by its accreditor and Colorado’s state higher education agency, CEHE is in the process of shutting down almost all of its CollegeAmerica and Stevens-Henager ground campuses. It has shifted almost all its recruiting and programs to its entirely online, heavily advertised Independence University. But that school continues bringing in thousands of new students and millions in taxpayer dollars.

A former employee speaks out

How badly have the Carl Barney schools behaved? Debbi Potts can shed some light on that, and I spoke with her recently. Potts, who from 2009 to 2012 was the director of the Cheyenne, Wyoming, CollegeAmerica campus, sparred with CEHE in a series of legal disputes after she complained about abuses at the school, including speaking with  the Colorado attorney general’s office, which then pursued the investigation that led to its lawsuit and Judge Buchanan’s ruling.

Potts was hired at CollegeAmerica, then a for-profit school owned by Barney, after working in a series of education jobs — at a community college, a day care center, a medical school. She says she took the CollegeAmerica position as part of a commitment to “change people’s lives.” But soon after she took the job, she says she realized, “Wow, I think I’m in a sales job.”

CollegeAmerica, says Potts, held Friday calls for its campus directors, and the first topic was always admissions — i.e., how many new students had been enrolled, and how many drop-outs had been re-enrolled. CEHE was focused on making numbers, and cashing federal financial aid checks, and “it was a hard sell” to students.

Admissions officers were better paid than faculty; they could make $100,000 a year, while teachers got $22 an hour, and effectively much less than that, given all the extra hours many of them committed. But admissions reps lived in constant fear of losing their jobs if they didn’t enroll enough students.

CollegeAmerica-Cheyenne had no entrance exam for students, just a requirement to write a personal statement. Recruiters used a script focused on finding an emotional connection to the prospective student, finding their “pain points.”

“Education,” Potts says, “took a back seat.” The campuses, where students were supposed to train for health care jobs and other specialties, often had “crap old equipment, EKGs that don’t work, a centrifuge that I can’t afford to replace.” 

CollegeAmerica was charging many students $43,000 for an associates degree, and many ended up deep in debt, “left worse off,” Potts says, “than when they came in the door.”

“It was hard to look students in the face,” Potts told me, and, after a while, “I secretly prayed that no one would enroll.”

School owner Carl Barney was a regular presence on calls and staff retreats. The ideas of Barney’s hero, author Ayn Rand, were “shoved down our throat,” Potts says. 

The company directed Potts and other employees to write letters to then- Senator Tom Harkin (D-IA), to protest his investigation of for-profit colleges. 

Eventually, Potts says, she couldn’t take the “abusive” climate — abuse of staff and abuse of students. She left without another job lined up.

Afterwards, Carl Barney called her and asked about her future plans. She recalls: “He kept saying, I never asked you to do anything unethical, did I?  And I said, you did. He said, I wish you would have to come to us when you were unhappy.” She says that Barney was polite and measured on the call, but in subsequent emails over a contested $7000 bonus, their discussion became “nasty.”

Barney and Juhlin eventually gave Potts the $7000, but the school later sued her for allegedly breaching her promise not to disparage the company. Last year a jury agreed that Potts had indeed crossed the line by urging another former employee to cooperate with the Colorado attorney general. But the jury awarded CollegeAmerica just $1 in damages.

I emailed Eric Juhlin, CEHE”s CEO, seeking to speak with him and Carl Barney regarding Debbi Potts’s allegations. He sent me this reply:

As I think you know, Ms. Potts quit her job with CollegeAmerica over eight years ago! Since that time, she has pursued an irrational and unjustified vendetta against CollegeAmerica – directly and covertly.

I have no interest in discussing Ms. Potts’s never-ending, baseless, irrational, and stale allegations from over eight years ago.

If you think Ms. Potts’s rantings and screeds are newsworthy or legitimate – I suggest you consider enrolling in a journalism program.

Potts responded in turn by telling me, “It was CEHE under Juhlin’s guidance that pursued me after I left the company despite my many attempts to request to be left alone. They have chased me for eight years and accomplished absolutely nothing except for shining more light on their fraud.”

Despite Juhlin’s accusatory response — comparable to CEHE’s prior attacks on Colorado’s attorney general office, Judge Buchanan, and the school’s accreditor, ACCSC — Judge Buchanan’s powerful opinion, and recent repeated findings by ACCSC of shortcomings at CEHE colleges, reinforce Potts’ position.

A current employee speaks out

In addition, recent conversations I’ve had with, and documents I’ve received from, a current CEHE employee indicate that CEHE’s aggressive, predatory recruiting practices continue to this day.

The employee, who asked to not be identified by name out of career concerns, works on recruiting and processing new entrants to CEHE’s Independence University. Independence’s most popular program has been a business degree, but ACCSC, questioning the program’s quality, has ordered the school to stop enrolling students in some business programs. So now, Independence admissions reps push online programs in medical assisting, graphic arts, cybersecurity, and computer networking.

Independence recruits students into programs that can cost $74,700 for a four-year degree. 

The employee says that Independence admissions and financial aid staffers are “trained to overcome objections” to enrolling that prospective students may present. The employee says staff are pushed by managers “to get the student finished” — signed up for an associates or bachelors degree program — “in one call, or in two days max.”  Half the time, the employee says, the student will back out after being transferred from the admissions rep to the financial aid office.

The employee says that admissions and financial reps are directed by their supervisors to tag team hesitating students, calling them multiple times a day, and refusing to stop unless the student expressly says, “Do not call me.”

The employee shared with me an internal CEHE document offering scripts for “Overcoming…Objections.” Scripted answers include, “I know that loans can be intimidating but don’t let them!”

Another scripted answer comes under the title, ” Investment in yourself.” It says, “What made you decide you wanted to go(back) to school to begin with? You’re wanting to invest in yourself & your future. Part of an investment is monetary. What are you willing to put as the value of your education & future?” It then adds, referring to a reluctant student, “If still not budging you can use the car loan, home loan, gym cost, (essentially anything they spend money on to better themselves) example.”

Another part of the script sells CEHE’s “EduPlan” cash disbursements, essentially private student loans: “Identify something they spend their money on & explain how if they cut that cost it could go towards EduPlan. EX: Student goes to Starbucks 2x’s per week & each time orders a $7 drink. That’s $56/month. Would they be able to cut back their Starbucks to once a week to be able to afford the minimum monthly payment?” (Judge Buchanan’s recent decision prohibits CEHE schools from issuing “EduPlan” disbursements in circumstances where students are being deceived or disadvantaged.)

The current employee told me, as I previously reported, that staff have been directed by managers to tell recruits that the schools are currently on probation by ACCSC; one of the terms of the long-standing probation, which the accreditor imposed because of findings of poor education quality and other issues, is that CEHE is required to make that disclosure to prospective students. But, this employee says, staff have been instructed by management to tell prospective students that the CEHE schools “aren’t worried” about the probation status.

A script that the employee shared with me indicates that CEHE directs admissions reps to tell students, “Probation is not a negative or adverse action by the accrediting agency.”

It’s not?

The employee describes the students recruited by Independence as “very rural, southern,” from smaller communities in states like Alabama, Mississippi, and Texas, many low-income, and a mix of Blacks, Latinos, and whites. They vary in age from 18 to into their 70’s. Many say they have poor wifi or mobile phone reception. The CEHE employee has found that many struggle to use basic features on their phones.

This employee describes Independence University’s career training programs as rudimentary. Students are tasked with answering multiple choice questions, writing comments on other students’ posts, putting together a simple spreadsheet. Grading is easy: “You get an A if you do your homework.”

Most of the time, the employee says, students are interacting with an automated system, rather than a live instructor. When this employee took an Independence University course and tried to reach out to an instructor, that teacher was “not helpful in any way.”

The CEHE employee summed up: “I’m working this job, but I don’t think I’m helping the students. There’s a very strong chance that enrolling won’t help their lives. Instead, it hurts them. We use up their federal loans and then they have to sign up for an extra loan from the school.” Students may then owe $25,000 in these private loans on top of the $40,000 they borrow from the Department of Education.

Sometimes students call this employee three months into their programs, asking when they’ll get a refund check they somehow believe is coming. “It’s clear,” the employee says, that many students “don’t know what they are getting into.”

The employee concluded that practices at Independence University are “downright unethical.”

Eric Juhlin has not responded to a request to hear and comment on the current employee’s allegations.

It’s time for the Department of Education to protect students against these abuses, by ending the flow of taxpayer dollars to CEHE schools.

UPDATES 11-06-20:

Independence University CEO Tells Staff School Will Fight Effort to End Taxpayer Funding, 10-16-20

Accreditor Says Court Ruling Raises New Doubts About Carl Barney Schools, 10-28-20

Durbin, Senators Call for Borrower Defense Relief for Student Borrowers Harmed by CEHE, 11-06-20: “You would be failing in your responsibility to allow CEHE to continue to defraud students and Mr. Barney and Mr. Juhlin to continue to line their pockets with taxpayer money during a lengthy appeal process. In addition, CEHE’s unfair, deceptive, and abusive practices are the types of fraud that Congress envisioned making students eligible for relief when it wrote the borrower defense provision of the Higher Education Act. I urge you to use the Colorado court’s findings as the basis for automatic borrower defense relief for students harmed by CEHE’s misrepresentations
and fraud.”