June 8, 2022

The 17 Questions The Education Dept. Asked A University President Before He Resigned

The 17 Questions The Education Dept. Asked A University President Before He Resigned

On May 19, Michael Frola, a career official of the U.S. Department of Education, sent a letter to the president of the University of Phoenix, which, with a total enrollment of some 90,000 students, is one of the largest higher education institutions in the United States. In the letter, first reported on last Friday and posted by USA Today, Frola said he had questions about the past employment history of the school president, George Burnett, who had joined Phoenix in January 2022.

“According to the Department’s records,” Frola wrote, “you were the Chief Executive Officer… of Westwood College… from 2006 until 2011.”

Frola recounted in the letter that the Department previously determined that Westwood, from 2002 through 2015, gave prospective students false information about matters including the job prospects of school graduates and students’ ability to transfer Westwood credits to other schools. Frola noted that this conduct violated Department regulations for schools receiving federal aid, as well as other laws, and has caused the Department, to date, to cancel about $130 million in federal loans to former Westwood students.

Westwood shut down in 2015. Its parent company, Alta Colleges, of which George Burnett was CEO, had been getting as much as $338 million a year — more than a third of a billion dollars — from U.S. taxpayers for student grants and loans.

The Department letter asked Burnett to answer seventeen questions regarding his tenure at Westwood/Alta. The questions were provided in a separate document, which Republic Report has obtained.

As Republic Report was the first to report, last Thursday, Burnett resigned the previous day as the University of Phoenix’s president.

USA Today on Friday quoted Andrea Smiley, a spokeswoman for the University of Phoenix, explaining that Burnett’s resignation was prompted by the Department’s letter: “Because Mr. Burnett believes this request could take some time to address, and not wanting to distract from the university’s mission of providing career-relevant higher education to working adults, he has stepped down as president and board member of the university, effective June 1, 2022.”

So what were the questions from the Department of Education that led to Burnett’s abrupt departure?

On January 28, the day the University of Phoenix announced its appointment of Burnett, Republic Report posted an article recounting Burnett’s troubling record at Westwood. (Disappointingly, various news outlets reported that week on the Burnett hiring basically by parroting the company’s press release, with no mention of the abuses at Westwood.) Westwood College was a for-profit institution, operated by Alta Colleges, which was owned by a private equity firm, Housatonic Partners. Westwood engaged in egregious predatory abuses against students, notably low-income students, largely people of color, who attended a criminal justice program in Chicago.  Westwood recruiters told the students the school was highly selective, and that staff celebrated every time a student was admitted. Those were lies.  Westwood promised the students careers as police officers, but the program did not position them for those jobs. Westwood also lied to students about the costs of attending the school.

In 2015, Westwood paid $15 million to settle a lawsuit brought by Illinois’s attorney general, based on the Chicago campus abuses, much of which occurred during Burnett’s tenure.

But that wasn’t the only law enforcement problem that Westwood’s misconduct created.

Earlier, in 2009, Alta had agreed to pay the U.S. government $7 million to resolve allegations that the company’s schools in Texas misrepresented to the state that they complied with job placement reporting requirements and that their interior design programs met requirements for a professional license. Also, in 2012, Westwood paid $4.5 million to settle claims by Colorado’s attorney general that it had engaged in deceptive business practices — misleading prospective students, engaging in deceptive advertising, and failing to comply with Colorado’s consumer lending laws.

The U.S. Senate HELP committee reported that Burnett stepped down as Alta’s CEO in 2011 “following a number of problems involving the college’s accreditation and certification as well as lawsuits brought by former students.”

The Department’s seventeen questions focused on Westwood’s abuses and Burnett’s role in and awareness of them. Among the questions:

— “Did you approve Westwood’s advertisements? Have knowledge of them?”

— “Did you direct Westwood’s policies and/or procedures for its admissions representatives?
Approve them? Have knowledge of them?”

The Department document recounts the evidence that Westwood made false statements to prospective students about the selectivity of the school, the urgency of enrolling in order to gain admission, and the availability of police jobs for graduates; that “admissions representatives were trained, directed, or encouraged to not take ‘No’ for an answer from the prospective student; that “admissions representatives were trained, directed, or encouraged to overcome any requests by the prospective student for more time to think about the decision.”

The document then directs Burnett to explain his role in directing or approving those practices.

These were entirely appropriate questions for the Department of Education to ask George Burnett and the University of Phoenix, and they had the entirely appropriate effect of driving Burnett out of a job to which he never should have been appointed. Presumably, the University of Phoenix was concerned that a responsive letter could lead to more trouble, whether Burnett and the company provided truthful answers or evasive ones.

But this chain of events should not end the Department’s efforts to scrutinize the University of Phoenix — or to hold other for-profit college executives accountable for their past abuses at previous schools.

For a long time the University of Phoenix has been the largest for-profit school; at its peak in 2010, enrollment topped 470,000 students, and the school was getting about $4 billion annually in federal student aid, nearly one out of every seven dollars in taxpayer aid going to for-profits. While the school once had campuses along highways across the country, University of Phoenix programs are now almost entirely online. Enrollment has slipped more than 80 percent from the peak level, but the company still received more than $784 million in taxpayer dollars in the most recent reported year (2019-20).

With Burnett gone, Phoenix has named as its new acting president Chris Lynne, who has been the company’s Chief Financial Officer since November 2018. Lynne, according to his LinkedIn profile, was CFO at for-profit Northcentral University from 2010 to 2014, overlapping there with the school’s then-president and CEO, George Burnett. In addition, from 2003 to 2010, Lynne was a senior executive of Education Management Corporation (EDMC), another of the biggest for-profit college operations. EDMC collapsed after in 2015 it settled, for about $200 million, major fraud investigations pursued by both the U.S. Department of Justice and more than a dozen state attorneys general, brought over alleged deceptive practices and other illegal conduct that extended back into Lynne’s tenure at the company. At that time of the settlements, U.S. Attorney General Loretta Lynch called EDMC “a high pressure recruitment mill.”

So the Department should also be directing questions to Mr. Lynne.

But there is even more.

The University of Phoenix is operated by a company, Apollo Education Group, Inc., that was acquired in 2017 by the private equity firms Apollo Global Management and the Vistria Group. The CEO running Apollo Education Group for these owners is Gregory Cappelli, who previously … ran Apollo Education Group for the previous owners. Cappelli joined Apollo in 2007 as executive vice president, became co-CEO in 2009, and CEO in 2012. That year Cappelli’s annual compensation was reported as $25.1 million.

The University of Phoenix during Cappelli’s tenure has repeatedly engaged in deceptive, predatory, and illegal practices, leading to investigations and actions against it by the Federal Trade Commission, Department of Justice, Department of Education, VA, Department of Defense, and various state attorneys general.

So the Department should also be directing questions to Mr. Cappelli.

In fact, while a few owners of strip mall scam schools have actually gone to prison, other executives at disgraced predatory schools not only have walked away without major penalties but actually, like George Burnett, have soon gotten back into the game, running other for-profit colleges getting big taxpayer money from the Department of Education.

One example was Florida socialite Arthur Benjamin, the CEO of for-profit school ATI Career Training Center from 2005 to 2011. The company, which had campuses in Florida and Texas and offered programs in fields including health care, information technology, and auto repair, in 2013 paid $3.7 million to settle a U.S. Justice Department fraud suit based on whistleblower complaints alleging the school pursued recruits in homeless shelters and strip clubs, falsely promised jobs with big salaries, signed up non-English speakers for classes conducted in English, lied to students about financial aid, falsified student transcripts, deceived authorities about job placement outcomes, and more. ATI then shut down, but not before it had hauled in about $236 million in federal student aid starting in 2005.

Remarkably, in 2014 I found Arthur Benjamin in plain sight listing himself on LinkedIn as the vice chair of the three-member board of directors of American Institute, a New York company that was running for-profit health, beauty, and technical training programs in Florida, Connecticut, and New Jersey. In 2014 American Institute was receiving millions in federal student aid.

But perhaps the most egregious case of this taxpayer-funded recidivism concerns a man named Todd Nelson, who previously was CEO of both EDMC and Apollo, the University of Phoenix‘s parent company. Nelson’s tenures at the helms of both for-profit giants were marked by predatory practices and law enforcement troubles. Yet somehow Nelson is now the executive chairman, and until recently was the CEO, of another for-profit giant, Perdoceo Education Corp., which has been exposed by numerous law enforcement investigations and whistleblower accounts by recent employees as engaged in wholesale deceptions and abuses against students, yet continues to get hundreds of millions in federal aid every year, and continues to be entrusted by the Department of Education with the futures of tens of thousands of students.

So the Department should also be directing questions to Mr. Nelson.

On occasion, the Department of Education has taken steps to hold individuals accountable for predatory school abuses. Last year, the Department suspended Eric Juhlin, CEO of the awful Center for Excellence in Higher Education schools, from federal contracting, after the school lost its accreditation over deceptive practices. And when the Department last year announced debt cancellation for some students of Westwood and two other deceptive for-profits, Marinello Schools of Beauty and Court Reporting Institute, it named names of some of the executives in charge, including Westwood’s Burnett and Kirk Riedinger. (Alta’s Jamie Turner may have felt left out.)

But the Department’s recent announcement of broad debt relief for students of collapsed, disgraced Corinthian Colleges did not name that company’s CEO, Jack Massimino, or any other Corinthian executives, and thus far Massimino appears to have escaped from the whole scam with a paltry $80,000 fine from the Securities and Exchange Commission — nothing compared to the tens of millions, mostly taxpayer money, he got from running the company. Department officials discussed how “Corinthian” ripped off students and taxpayers, but corporations are people, my friend. Human beings inflicted these abuses on other human beings.

Much more needs to be done to hold executives of predatory colleges accountable — and to keep them from ever again running schools funded by taxpayers.

UPDATE 06-10-22:

Bloomberg Opinion columnist Michelle Leder reports:

Virginia Democrat Bobby Scott, Chair of the US House Committee on Education and Labor, first asked that question last August in a letter to Education Secretary Miguel Cardona. Scott, citing a law dating back to 1992, argued that the Department had the ability to go after former executives and directors, including those at Corinthian. But a spokesman for the Department of Education says the department disagrees with Scott’s interpretation and has no plans to go after the company’s former executives and directors.

At a March 2022 hearing, Rich Cordray, the Department’s COO of Federal Student Aid, had told Rep. Scott that the Department heard Scott “loud and clear” and agreed on the issues that Scott raised in his August 2021 letter.

UPDATE 06-13-22:

Politico reports that the Department of Education is taking the position that it cannot seek to hold college executives personally accountable for loan cancellation recoupment unless they signed a school’s Program Participation Agreement.

The Department in March 2022 announced that it would continue to require a PPA to “be signed by the official at the institution who has the authority to sign on behalf of the institution… typically the institution’s chief executive officer, president, chancellor, or other designated official,” but in addition it  would require going forward that any entities “that have, or could have, a direct or indirect effect on the institution’s financial responsibility” must also sign the PPA. The Department’s announcement creates a presumption that an entity has “substantial control” of a school and thus would be required to sign the PPA if it had an ownership stake of 50 percent or more. The Department’s selection of a 50 percent threshold is puzzling, given that under existing regulations the Department “generally considers a person to exercise substantial control over an institution or third-party servicer if the person directly or indirectly holds at least a 25 percent ownership interest in the institution or servicer.” Based on past conduct by the Department, its officials will likely now tell themselves they can’t require an owner to sign unless it owns 50 percent or more. (I hope that prediction is wrong.)