February 8, 2024

Education Dept. Deal Ousts CEO Who Ran Florida Career College

Education Dept. Deal Ousts CEO Who Ran Florida Career College

The U.S. Department of Education has reached a deal with California-based International Education Corp. (IEC) that requires the “separation” from the company of its CEO, as well as its chief financial officer. The agreement, posted this morning on the Department’s website, also finalizes the termination of federal aid to IEC’s troubled for-profit Florida Career College and ends an investigation of other IEC schools, but imposes significant restrictions on their operation.

Under the deal announced this morning, IEC CEO Fardad Fateri and CFO Sanjay Sardana will leave and have agreed to never again be employed by an IEC-related entity that receives Title IV federal student aid. Other senior executives, including chief operating officer Shoukry Tiab and general counsel Aaron Mortensen, will apparently be permitted to keep their jobs.

IEC’s ownership is murky. The company boasts that it is “employee-owned,” but much of the company, according to today’s agreement, is owned by a complex web of limited liability companies, and it’s unclear how much is owned by Fateri, Sardana, and other senior executives. Untangling the chains of LLCs, it appears that American-German billionaire Nicolas Berggruen owns the majority of IEC shares. Bergguen offers this self-description on his X profile: “A believer that ideas can make a better world.”

Pursuant to the deal with the Department, IEC has agreed to forego any further appeal of the Department’s April 2023 decision to terminate Florida Career College’s certification to receive federal aid.

In announcing that decision last year, the Department cited extensive evidence that the school, which offered programs in health care, business, and other fields,“broke federal rules,” including regulations governing ability-to-benefit (ATB) tests taken by some students without a high school diploma in order to gain admission to college.

Allegations from FCC employees that the school regularly and blatantly facilitated cheating on ATB tests were first reported in a May 2020 article on Republic Report. In that article and a follow-up piece, we also described other abuses at the school, including luring prospective students to campus with false promises of jobs, and admitting students whose physical and intellectual disabilities, or prior criminal convictions, would prevent them from obtaining the jobs for which they trained.

Under the deal announced this morning, IEC also is required to post a $6 million letter of credit which, according to a press release from the Department, “the Department can use to pay for any liabilities or loan discharges related to the misconduct at issue.” But the Department also agreed, as the release explains, “that future administrative actions based on this conduct will be limited to recovery for loan discharges and other liabilities paid to the $6 million letter of credit.” 

In a statement, Richard Cordray, Chief Operating Officer of the Department’s Office of Federal Student Aid, said, “This strong agreement with International Education Corporation demonstrates Federal Student Aid’s commitment to holding schools and individuals accountable for abiding by the laws and regulations that govern the federal student aid programs. 

IEC announced on January 25 that FCC was shutting down for good, effective February 15. The Department says it has worked with state officials and FCC’s accreditor to help FCC students find options to enroll at other schools.  The Department also, according to its statement today, “provided students information about how to seek an applicable loan discharge, such as a false certification discharge if the students wrongfully were enrolled through ATB testing or a borrower defense discharge if FCC misled students or engaged in other misconduct.” 

Under the new agreement, other schools operated by IEC — UEI College and United Education Institute — will be allowed to stay in operation, but under a Provisional Program Participation that prohibits the schools from enrolling any ability-to-benefit students for at least three years, requires the schools to preserve marketing materials and recruiting phone call recordings for Departmental review, and bars them from adding new campuses. UEI currently has campuses in California, Washington, Arizona, Nevada, and Georgia.

According to a letter sent last September by accreditor ACCSC, the Department, since announcing its action against FCC, has been investigating UEI for violations of ATB rules, falsification of attendance records, and misrepresentations to prospective students. Under the new agreement, the Department will end that investigation and release IEC and UEI from any liabilities for the alleged misconduct, although the agreement doesn’t bar the Department from investigating future allegations against the schools. 

(In an apparent coincidence, the Department of Education’s inspector general office earlier this week released an audit report finding ATB programs at IEC’s UEI College to be generally in compliance with Department rules, although it said the evidence was not sufficient to confirm that conclusion in all respects.)

Inside Higher Ed this morning reports a statement from departing IEC CEO Fateri, calling today’s deal  the “very best outcome” and “a testament to IEC’s dedication to transparency, accountability, regulatory compliance, and strong student graduation and employment rates.” 

A video posted on Fardad Fateri’s YouTube page shows the IEC CEO, who was previously an executive at two other predatory, legally-troubled for-profit college chains, Corinthian Colleges and DeVry, preaching to FCC and IEC staff at a 2019 company event on the topic “Why Just Working ‘Hard’ Doesn’t Matter.” In the video, Fateri says that he always tells his team, “I don’t care how many hours you work. I care about what you produce and how you perform. You could work 14 hours a day — if your student attrition is six percent, you’re terrible!” Fateri tells the assembled staff that bottom-line results, like keeping the dropout rate low, are important “because our students deserve it.” 

We reported last September that IEC was facing additional scrutiny not only from the Department of Education, but also from California’s attorney general and from accreditor ACCSC, which oversees ten campuses of UEI College and United Education Institute. [UPDATE 03-21-24: ACCSC announced on March 20 that it has renewed, through May 2024, system-wide warning status for the IEC schools it accredits.]

Florida Career College has been accredited by the Council on Occupational Education (COE). In 2020, after I published my first report on FCC, COE’s executive director, Gary Puckett, told me the agency was investigating issues at the school.

Starting in June 2021, FCC has been on “Notification of Apparent Deficiency” status with COE for “Non-compliance with conditions, standards, and/or criteria of the Commission.”

In October 2021, ratifying recommendations by the Department’s outside advisory committee, NACIQI, the Department informed COE that it had one year to improve its own compliance with Department regulations, including that COE “must demonstrate that it has meaningfully engaged with its obligations … to enforce its accreditation standards with respect to complaints of fraud and criminal activity at Florida Career College.”

COE, at its March 2023 and June 2023 meetings, deferred action on renewing FCC’s accreditation; a December 2023 COE notice still lists FCC as a school notified of “Apparent Deficiency.” FCC voluntarily withdrew its COE accreditation last month.

A new report prepared by the Department of Education’s accreditation unit in advance of this month’s NACIQI meeting discusses COE’s oversight of FCC at length, in somewhat oblique fashion, and recommends that the Department renew recognition of COE — continuing its role as a gatekeeper for federal student aid — for a period of two years and five months. That move effectively would take renewal of COE’s status to the end of the five year period that well-performing accreditors normally receive from the Department.