November 9, 2021

California Opens Fraud Trial Against College Now Owned by Arizona

California Opens Fraud Trial Against College Now Owned by Arizona

California’s attorney general this week began presenting evidence in his office’s long-awaited fraud trial against for-profit Ashford University. In the case, filed in 2017, the state alleges that Ashford engaged in unfair and fraudulent business practices, with school recruiters fueled by a “boiler room” culture that demanded they meet enrollment quotas. The recruiters, in turn, allegedly told prospective students falsehoods, including that federal financial aid would cover all of their costs and that Ashford programs would prepare students for careers in fields requiring certification, such as teaching and nursing. 

California also alleges that Ashford’s deceptive practices drove many low-income students deep in debt and that the school used illegal loan collection practices to get former students to pay up. Ashford has denied the charges and called them “politically-motivated.” 

The trial is proceeding in California state Superior Court in San Diego, with the presiding judge, Eddie C. Sturgeon, rather than a jury, charged with deciding the facts.

What’s amazing is this: Despite the mountains of evidence, from California’s lawsuit and multiple other law enforcement and media investigations, that Ashford has been and remains a low-quality, over-priced, deceptive college, the University of Arizona — that state’s flagship public university — purchased the school last year, and launched an arrangement whereby it pays hefty fees to Ashford’s former owner, a company called Zovio, to run recruiting and other aspects of the school operation.

Under the deal, Ashford has now been renamed University of Arizona Global Campus (UAGC).

How could one state buy a college that a neighboring state has declared to be a fraud?

In a statement Monday, California Attorney General Rob Bonta said, “Californians enrolling in higher education deserve more than empty promises and mounting debt, yet that is all that Ashford University had to offer them…. I’m committed to fighting for the students defrauded by this predatory for-profit college and its parent company, and to making sure that they can never take advantage of vulnerable Californians again.”

Bonta charges that, despite the sale and rebranding of the school, the abuses against students are ongoing. “Zovio,” Bonta says, “continues to provide the same misleading enrollment and marketing services to the University of Arizona Global Campus as it previously provided to Ashford….” 

California is not the only actor calling out abuses at Ashford/UAGC, which previously had some ground campuses but is now entirely an online institution. WASC, the private accrediting agency whose approval is required to keep the school eligible for federal student grants and loans, notified UAGC by letter dated July 30 that it “has strong concerns that the targets set for academic improvement” at the school “are seriously inadequate to reach levels of student outcomes that should be expected at an accredited institution.” WASC demanded that UAGC explain its plans for improvement.

WASC already had put Ashford on notice in July 2019, citing “longstanding concerns regarding Ashford University’s student persistence and completion rates and performance on other student success metrics.”

WASC’s 2021 letter, signed by the agency’s president, Jamienne S. Studley, says that the accreditor “expects that this action letter will be posted in a readily accessible location on the University of Arizona Globalwebsite.” But I haven’t been able to find the letter anywhere on the UAGC site, including on the page explaining that the school is accredited by WASC.

The WASC letter says a team from the accrediting body will soon visit the UAGC headquarters in Chandler, Arizona, to evaluate the operation. The Arizona Daily Star reports this week (paywall), that the visit will occur next month.

WASC’s patience with Ashford’s decade-plus of abuses against students, and the Department of Education’s tolerance of WASC’s patience with Ashford’s decade-plus of abuses against students, are pretty standard conduct in the genteel world of higher education. But with the Biden administration now promising to get tougher on predatory colleges, there is a chance that bad actors like Zovio/Ashford/UAGC may face greater scrutiny and risk. 

They should. According to U.S. Department of Education data, only 25 percent of first-time, full-time undergraduate students return to Ashford University after their first year (compared with 82 percent at the main University of Arizona), and only 25 percent of Ashford students graduate within eight years. So the vast majority of students lured by Ashford’s deceptive pitches leave without a degree, but can nevertheless incur tens of thousands of dollars in debt.

“If it wants to eliminate the concern about its performance,” Studley told the Daily Star, UAGC “needs to show it’s making improvements in student outcomes.” WASC says it will reconsider UAGC’s status in February.

In June 2020, faculty at the University of Arizona’s UA’s Eller College of Management called the proposed deal for UA to buy Ashford a “catastrophic mistake” that would risk “litigation, impede our ability to compete in the high-quality online space, and harm relationships with current and prospective donors and faculty.”

In a statement to the Daily Star, a UA spokesperson defended the deal with Zovio as one that enhanced “educational opportunities to nontraditional students” by means of a “high-quality online education,” and a UAGC spokesperson told the paper that “retention and graduation rates are our No. 1 priority — because our students deserve nothing less,” and that the school is “fully committed to working with” WASC to address the concerns the accreditor has raised.  

While it apparently is failing to improve quality, Ashford also is losing business. Ashford/UAGC’s enrollments and revenues have taken a nose dive since last year’s acquisition. Zovio last month reported that earnings over the past quarter were $62 million, compared with $101 million a year ago. The company’s interim CEO, George Pernsteiner, told investors that new enrollments remained “challenging,” even though the company has been spending 34 percent of its revenue on marketing and communication, meaning, largely, advertising — well above the 23 percent it was spending a year ago.

As we have reported, UAGC is advertising heavily on online lead generation sites, many of which engage in deceptive practices to lure new students.

In March, Andrew Clark, Zovio’s founder and CEO for eighteen years, made an abrupt departure from the company, leaving barely a week after the company announced his resignation. Clark got a $3.1 million severance payment; as CEO he received compensation of as much as $20.5 million in a single year (2009). 

Under Clark, Zovio and Ashford University had a long history of misleading students into enrolling in high-priced, poor-quality programs that leave many with overwhelming debt and without the career advancement they sought. After conducting a hearing on the school in 2011, then-Senator Tom Harkin (D-IA) declared Ashford “a scam, an absolute scam.” 

Ashford’s enrollment ballooned in the first decade of this century after Zovio, then called Bridgepoint Education, bought a tiny religious college in Iowa, grabbed its accreditation, and created a heavily-advertised online behemoth, with 78,000 students by 2012. Enrollment had dropped substantially by 2019, but it still stood at 32,000. For 2018-19, Ashford had $423 million in revenue, 78 percent of that from taxpayer-funded student grants and loans from the U.S. Department of Education alone.

Ashford University’s abusive practices — directed at a student population heavy with people of color, single moms, veterans, immigrants, and others struggling to build better lives — have repeatedly gotten the school in trouble with federal and state law enforcement agencies.

In 2014, Bridgepoint agreed to pay $7.25 million to settle claims by Iowa’s Attorney General that Ashford violated the state’s Consumer Fraud Act. 

In 2016, Bridgepoint entered into a consent order with the federal Consumer Financial Protection Bureau in which that agency found that Ashford “engaged in deceptive acts and practices” and ordered the company to discharge all outstanding private loans the institution made to its students and to refund loan payments totaling $23.5 million and pay an $8 million civil penalty. 

Earlier this year I reported on a current Zovio employee, who asked that I not reveal their identity but described ongoing deceptive practices, including: recruiters failing to correct students who seem to believe they are being accepted into the main division of the University of Arizona; recruiters identifying UAGC as a non-profit school, even though the institution has signed an agreement with the U.S. Department of Education where it commits not to do that; recruiters misleading students about the costs of attending;  recruiters telephoning students who have asked that they stop calling; and students on the line saying they thought they were applying for jobs, not seeking education — the hallmark of a common, and illegal, for-profit college industry bait-and-switch scam. If the U.S. Department of Education “knew what was going on” at Arizona Global Campus, this recruiter told me, “they would shut it down.” 

The recruiter we spoke with, and the informants underlying California’s lawsuit, are far from the only sources about bad practices and poor performance at Ashford/UAGC.

Navy veteran Eric Dean quit working as an Ashford recruiter in 2017, and two years ago told NBC News that he had been “pressured into essentially selling my soul to throw fellow veterans under the bus” by deceiving them about the school’s graduation and job placement rates. Dean told NBC that, with veterans and their GI Bill benefits a lucrative target, his bosses pushed him to reach monthly quotas and sign up new students “no matter what.” Dean said recruiters aimed to keep students enrolled for three weeks until they were no longer eligible for a refund. “It was all unethical, the way we were misleading students, he concluded. (Speaking with NBC, Ashford rejected Dean’s allegations.)

The advocacy group Veterans Education Success has received more than 100 complaints from Ashford students, with concerns covering recruiting, the quality of education, tuition costs, transferability of credits, and job placement.