The Monitor Insists Perdoceo is Doing OK. Whistleblowers’ Evidence Shows Otherwise.
Republic Report has obtained the second annual report of the lawyer hired to monitor the compliance of giant for-profit college company Perdoceo with its January 2019 $494 million settlement with 48 state attorneys general, plus the District of Columbia. The AGs alleged that the company engaged in widespread deceptive practices against students. For the second year in a row, the monitor, Robert McKenna of the large corporate law firm Orrick, Herrington, and Sutcliffe, concludes that Perdoceo is in “substantial compliance” with a “substantial majority of its obligations” under the settlement agreement.
I’ve been told (see below), that this conclusion by McKenna, a former attorney general of Washington state, might not remain his view, or that of the AGs, forever. But the finding, echoing the conclusion of McKenna’s first annual report, should concern anyone who has listened, as I have, to six currently- or recently-employed recruiters, five of whom worked for Perdoceo’s Phoenix area-based admissions operation for the company’s American Intercontinental University (AIU) and one of whom worked for the company’s Chicago area-based Colorado Technical University (CTU). All six reached out to me last year.
What Perdoceo whistleblowers say
As we detailed in an article last June, based on interviews with four of those CTU and AIU recruiters, all said that their supervisors 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 that were 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.” Another described the sales environment there as “manipulative and just downright unethical.”
At least some of the recruiters who spoke with me have since, I understand, spoken with McKenna’s team. But, based on the report, McKenna seems to have viewed them as outliers.
However, a source close to the case tells me that that McKenna’s team, and state AG lawyers, continue to engage with these whistleblowers, and they may take a tougher stance going forward.
One of the Perdoceo recruiters described to me the endless calls they made to prospects as “bullying” and “harassment.” The recruiters said the bosses expected them to sign up at least eight new students per month, or else risk getting fired.
The employees, all of whom asked that I not reveal their identities over concerns about their jobs or careers, said the prospective students 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 African-Americans from southern states: North Carolina, South Carolina, Florida, Alabama, Texas.
These AIU and CTU recruiters said they knew the programs they sold 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 felt he was “forcing down someone’s throat programs that they are not interested in, and not capable mentally, physically, or emotionally to handle.”
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.
One Perdoceo staffer said AIU managers direct staff to do “whatever it takes to get them enrolled, after that they don’t care.” Both admissions and financial aid staff are trained to overcome prospective students’ objections to enrolling and to be vague about the total costs of a degree — “keep the student in the dark as much as possible.” None of this predatory playbook is written down anymore, likely because companies were caught in the past; now at Perdoceo schools it’s all told to staff orally.
The school is even enrolling people who have previously defaulted on student loans, hoping they can fix their default issues and then backdate the findings. Many students often don’t understand what’s going on finance-wise, other than the $680 per semester stipend pocket money which recruiters dangle at them. Often AIU students drop out after 10 weeks, by which time Perdoceo has banked a semester’s worth of federal aid, and the students are on the hook for huge federal loans they can’t afford to repay.
One of the AIU staffers said that just before officials from the school’s accreditor, Higher Learning Commission, visited the admissions operation in 2019 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.
Combined enrollment at AIU and CTU has been around 35,000 students, the vast majority now studying exclusively online, in programs including business, information technology, engineering, health care, and criminal justice. (In 2019, Perdoceo acquired another online for-profit school, Trident University International, which it has folded into AIU.)
What the monitor found
The new McKenna report shows a date of October 2020, but the version we obtained is marked “REDACTED FOR PUBLIC RELEASE” and dated yesterday, February 23. Extensive passages are blacked out.
McKenna’s report does acknowledge that “a small number of employees reported incidents of potential recruitment and admissions violations that have occurred during interactions between Prospective Students and Admissions Advisors. More specifically, certain former PEC [Perdoceo] Admissions Advisors reported they were pressured to enroll prospective students in PEC programs even when it was not in the best interests of the student. The specific examples focused on Admissions Advisors feeling pressured to improperly redirect prospective students from programs not offered by PEC to programs offered by PEC.”
That sounds like the Perdoceo recruiters who spoke with me.
McKenna, though, concludes, “The reported incidents are inconsistent with PEC’s training program and other written rules and directives. In addition, PEC’s compliance program… demonstrates that PEC has imposed consistent and appropriate discipline when Admissions Advisors are not in strict compliance with PEC’s rules and directives.”
Contrast that with what all the CTU and AIU recruiters told me: that they would face negative consequences from managers, instead, when they didn’t make student enrollment expectations.
Still, McKenna agrees that the recruiters’ allegations are “of substantial concern” to him, and he calls on Perdoceo to “ensure there is no pressure put on” recruiters to engage in unfair practices.
All six Perdoceo recruiters who talked with me wanted last year to speak with McKenna when I suggested they might want to do so, and I connected them to his team through the attorneys general group. Whether a subset of those recruiters constitute the entire universe of employees who told McKenna of abuses, and whether McKenna made additional efforts to evaluate their claims, I don’t know — McKenna did not provide a comment in response to my request.
The source close to the case says that McKenna’s staff had not connected with all six of the whistleblowers who spoke with me by the time they completed the October report. “Where this was in October is different from where it is today,” this person said. “Since the time of this report’s creation there have been additional interviews, and the monitor and states are willing to speak with any individuals with knowledge of admissions violations. The work continues.”
That’s good, because I cannot square the Perdoceo recruiters’ entirely credible accounts — reporting on remarkably similar deceptive and abusive practices between the CTU and AIU operations — with McKenna’s conclusion that Perdoceo is doing a pretty good job.
Also not satisfied is Carrie Wofford, president of the group Veterans Education Success (VES), which has carefully monitored abuses at and law enforcement probes of Perdoceo. After I shared the findings of McKenna’s report, Wofford said, “It’s a ridiculous conclusion, given the very credible whistleblowers who are armed with documentary evidence, hundreds of screenshots, and other materials.” She added, “The 48 states plus the District of Columbia who brought this suit need to make clear to the monitor the standards needed to protect students and that he needs to investigate more fully.”
Perdoceo’s record of abuses
One of the recruiters has continued to provide me and VES, as recently as this week, with voluminous details and documentations of additional deceptive practices. This recruiter texted me, explaining, “Trying to make right to the best of my ability the real life damage I know I contributed to in regards to students. It doesn’t sit right with me until I do what I can to correct it.” The recruiter described Perdoceo enrolling homeless students without computers, falsifying students’ states of residency, and “making people with associate degrees take intro courses they have already taken just to make more money.” The recruiter added, “Not going to lie, broke my heart going through all those again and seeing the names of the folks whose lives are destroyed and how I was a part of it.”
Perdoceo changed its corporate name from Career Education Corporation in January 2020, just as in recent years it shut down its old school brands — Sanford-Brown, Briarcliffe, Harrington, Brooks, Gibbs, Le Cordon Bleu — escaping the toxic legacy of those old labels.
Perdoceo’s CEO also has migrated over the years. He is Todd Nelson, who has bragged to Wall Street about the company’s resurging revenues. Previously, Nelson ran the predatory college giants EDMC and, before that, the University of Phoenix, in each case leaving major law enforcement problems in his wake.
Todd Nelson received $7.5 million in total compensation from Perdoceo in 2019. The company had revenues of about $687 million in 2020. About 85 percent of those revenues came from federal student aid provided by U.S. taxpayers.
BA programs at AIU and CTU can cost in excess of $60,000, even $75,000. 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.
Perdoceo 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.
The 49 attorneys general settlement is not the only law enforcement challenge Perdoceo has faced.
Back in 2013, the company 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.
And in August 2019, the company agreed to pay $30 million to settle charges brought by the Federal Trade Commission that its schools have recruited students through deceptive third-party lead generation operations. 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.
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 Trump VA eventually withdrew the penalty.
Despite Perdoceo being caught by the FTC, recruiters have told me they believe, based on their conversations with prospective students and on company documents, that the company is still buying leads — names and contact information of prospective students — from deceptive lead generation companies.
The media outlet Capitol Forum published a report in 2019 also describing recruiting abuses at AIU and CTU, based on accounts by former employees.
Perdoceo has not responded to my request for comment.
During the 2020 campaign, Joe Biden pledged to protect students and taxpayers against predatory colleges. Kamala Harris noted in her Democratic convention speech that as California’s attorney general she took strong action against for-profit college abuses. Perdoceo, which over the years has taken in billions in taxpayer dollars while leaving many students worse off than when they started, should be a focus of Biden-Harris administration concerns, if the candidates’ promises meant anything.