January 29, 2024

For-Profit College Operation Perdoceo Fails to Halt Fraud Lawsuit

For-Profit College Operation Perdoceo Fails to Halt Fraud Lawsuit

Seeking dismissal of a lawsuit alleging that it abused students and defrauded taxpayers, the for-profit college company Perdoceo Education Corp. argued that a whistleblower’s allegations were stale because the same assertions were already made public — including in two articles published here on Republic Report. Unfortunately for Perdoceo, the federal judge hearing the case concluded that the whistleblower, in fact, has made specific claims about abuses at Perdoceo’s Colorado Technical University that go beyond what we and others have alleged. 

The January 4 decision by Colorado-based federal trial judge R. Brooke Jackson, allowing the whistleblower’s case to move ahead, adds to the troubles confronting Perdoceo, a company that has received billions in taxpayer dollars but has repeatedly faced law enforcement investigations and actions over predatory abuses at its schools. 

In 2021, a former academic program director at Colorado Technical (CTU) filed the lawsuit against Perdoceo under the federal False Claims Act, which allows individuals with knowledge of fraud against the federal government to effectively sue on behalf of the government; any award in a successful case is then shared between the whistleblower and the government. 

The whistleblower, whose name remains undisclosed to the public at this point, started at CTU as a faculty member in the College of General Education and Psychology and rose to become program director in that department. In her complaint, the whistleblower claims that, as she moved up in the company, she realized that CTU was manipulating its proprietary Intellipath education software to allow students to navigate through course requirements while putting in only a fraction of the hours of instruction that federal law requires, thus making it easier for students to pass their courses and stay enrolled — and for CTU to keep hauling in millions in taxpayer-funded student grants and loans provided through the U.S. Department of Education. 

Perdoceo and CTU moved to dismiss the case, arguing, in part, that someone already had exposed the company’s Intellipath-aided abuses — namely, me. We had previously reported, based on accounts from Perdoceo employees, that “classes at Perdoceo schools . . . are poor quality, rudimentary, low on instructor involvement, and almost impossible to flunk, because the company wants to keep students enrolled until they graduate or run out of financial aid” and that “AIU and CTU programs are not terribly difficult to get through, because many of the exams are multiple choice, using the schools’ ‘intellipath’ system, and students have opportunities to correct their answers.” 

I was grateful to learn that Perdoceo, or at least its lawyers at the big firm Husch Blackwell, read and appreciate our work at Republic Report

After the lawyers for the whistleblowers, seeking to minimize the relevance of my reporting to the case, referred to my articles as “blog posts,” Perdoceo and its lawyers came to my rescue, writing in a reply brief, “Relator dismissively refers to these disclosures as mere ‘blog posts,’ (Doc. 47 at 6). Defendants disagree with this characterization of the Republic Report articles, but the point is irrelevant: blog posts qualify as public disclosures.”

Thanks Perdoceo!

(We also consider Republic Report to be a news website, not a “blog”; we are mindful of the teachings of then- (now-ex) president of Webber International University Keith Wade: “Republic Report is a blog; anyone can have a blog.”)

Judge Jackson seemed to agree with Perdoceo that this author is not a total rando — “a self- employed lawyer with history of government service” — but found, appropriately, that the whistleblower’s claims did not copy ours, because our articles did not directly address Intellipath’s alleged distortion of credit hours. 

The whistleblower case against CTU will therefore proceed, although its chances of success may have been reduced somewhat by the government’s failure to officially enter the case and help prosecute it.  Every False Claims Act case that gets filed in court is also submitted to the Justice Department for an investigation and decision as to whether to join — which can be influenced by the strength of the case and by government priorities for its scarce resources. That government decision is often a central factor in determining whether a False Claims Act case succeeds, and frequently a whistleblower’s lawyers will drop the lawsuit if the government doesn’t join. But that’s not always what happens, including in suits against for-profit colleges, where whistleblowers have still achieved settlements for taxpayers without the government formally joining at trial. Sometimes, in fact, even if the government declines to join in prosecuting the case, it remains involved, to a degree, behind the scenes.

In this case, in fact,  the Justice Department never formally declined to join the lawsuit. It instead asked the judge for extensions of time to decide what to do, and the judge finally said it was time to move ahead with the case without a DoJ decision. 

One particularly compelling aspect of this case against CTU is allegations that the whistleblower repeatedly made efforts to alert various company executives to the Intellipath credit hour issue, but they forcefully shut her down, telling her to “let it go,” and eventually relieved of many of her job duties, until she eventually resigned.

I spoke with the whistleblower’s lawyer, Marlene Koury of the firm Constantine Cannon, an experienced False Claims Act litigator (whose effort to highlight abuses at awful Perdoceo led me to easily forgive her for, in service of her client’s case, calling us a blog). 

“The whistleblower attempted several times over a year and a half period to put a stop to the alleged credit hour fraud scheme and, as alleged in the complaint, was rebuffed and subsequently stripped of most of their job responsibilities for speaking up,” Koury says.

Koury noted that CTU’s alleged fraud harmed not only taxpayers but also students: “Many of CTU’s students come from underserved communities and most are eligible to receive Pell Grants and federal student loans. The case alleges that through the credit hour fraud scheme, CTU has allegedly failed to provide tens of thousands of students with the education the students signed up for and the federal government paid CTU to provide.”

Abuses of students, and ongoing deceptions, are not new to Perdoceo Education Corp.

Perdoceo is one of the nation’s largest taxpayer-funded for-profit college operations. The company shut down most of the its troubled school brands in the previous decade in favor of recruiting students to CTU and a separate school it operates, American Intercontinental University, and in 2020 the company changed its name from Career Education Corp. to Perdoceo.

The name changes, though, don’t erase the company history: It has faced multiple law enforcement actions for predatory conduct. In 2019, the company entered into a $494 million settlement with 48 state attorneys general, plus the District of Columbia, over allegations that it engaged in widespread deceptive practices against students. Later that same year, Perdoceo 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. In each case, the company did not admit guilt.

Recent Perdoceo employees have told media outlets USA Today and Capitol Forum, as well as Republic Report, that company recruiters continue to feel pressure to make misleading sales pitches and to enroll low-income people into programs that aren’t strong enough to help them succeed. Some of those former employees also have spoken with federal investigators.

USA Today reported in 2022 that the U.S. Department of Education, in December 2021, requested information from Perdoceo; the Department also asked Perdoceo to retain records regarding student recruiting, marketing, financial aid practices, and more. Perdoceo confirmed the probe, while seeming to minimize its significance, in a February 2022 SEC filing. Perdoceo also acknowledged in May 2022 that it received a request for CTU documents and information from the U.S. Justice Department.

The Department of Education provided AIU and CTU with more than $570 million in student grants and loans in the 2020-21 school year, the most recent year reported. A bachelor’s degree from CTU is priced at about $65,000.But data released last spring by the Department show that Perdoceo’s two schools, AIU and CTU, deliver poor results for students, with low graduation rates and graduate incomes and high levels of student debt.

Before joining Perdoceo, company CEO Todd Nelson ran two of the other biggest for-profit colleges operations: the University of Phoenix and now-demised Education Management Corp. Both of those chains, like Perdoceo, ran into major law enforcement issues because of deceptive recruiting practices and other abuses that occurred on Nelson’s watch.