SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a lawsuit against Corinthian Colleges, Inc. (CCI) and its subsidiaries that operate Everest, Heald and WyoTech colleges for false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.
The complaint alleges that CCI intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs. CCI deployed these advertisements through persistent internet, telemarketing and television ad campaigns. The complaint further alleges that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers.
“The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state’s most particularly vulnerable people—including low income, single mothers and veterans returning from combat,” Attorney General Harris said.
“My office will continue our investigation into the for-profit college industry and will hold accountable those responsible for these illegal, exploitative practices.”
According to Harris’ complaint, CCI’s predatory marketing efforts specifically target vulnerable, low-income job seekers and single parents who have annual incomes near the federal poverty line. In internal company documents obtained by the Department of Justice, CCI describes its target demographic as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.”
According to the complaint, CCI advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame.
The complaint further alleges that CCI runs millions of online and mobile ads offering ultrasound, x-ray, radiology, and dialysis technician programs at their California campuses—when, in fact, CCI does not offer those programs. CCI’s call center agents are disciplined if they tell callers that CCI does not offer these programs. Additionally, according to the complaint, CCI includes official Army, Navy, Air Force, Marine Corps, and Coast Guard seals in mailings and on web sites without authorization and in violation of California law.
The complaint alleges that CCI committed securities fraud by reporting a nationwide job placement rate of 68.1% in presentations to investors, when senior executives knew this percentage was false. The complaint describes internal audits emailed to CCI executives that show job placement data error rates between 53% and 70%. The complaint references an email from a CCI executive which explains that in 2011, two Everest College campuses (Hayward and San Francisco) paid a temporary employment agency “to place students to meet the accreditation deadline and minimum placement %.” The complaint also states that CCI double-counted job placements and failed to maintain required records of reported job placements.
According to a recent CCI securities filing, the average tuition for a CCI associate’s degree is $40,000 and the average tuition for an online CCI associate’s degree is $34,000. The average tuition for CCI’s non-degree healthcare programs is $17,000.
CCI is based in Santa Ana and currently operates 24 Everest, Heald and WyoTech campuses in California, 111 total campuses in North America and three online programs. Out of the 81,000 students who attend CCI colleges, approximately 27,000 (33%) are in California.
Corinthian opened a controversial Everest campus in Milwaukee, Wisconsin in 2011. The city provided the campuses' developer with $11 million in interest free bonds. Milwaukee's Everest campus closed a year and one half later with a drop out rate of more than 50% and a job placement rate of less than 6%. CCI promised to pay off the federal financial aid loans of the students who had not completed their degrees.
CCI is a publicly traded corporation with assets of over $1 billion. Federal funds account for almost all of CCI’s annual revenue.
In July 2013, Attorney General Harris filed a separate lawsuit in Sacramento Superior Court to enforce an investigative subpoena against Bridgepoint Education Inc., operator of Ashford University, as part of an investigation of that company’s practices.
A copy of the complaint is attached to the electronic version of this release at: http://oag.ca.gov/news
Monday, October 14, 2013
Monday, September 23, 2013
How For-Profit Colleges Stay in Business Despite Horrible Track Records
Last week the Huffington Post ran an in-depth expose on how for-profit colleges like Everest College (Corinthian College Inc.) and Sanford Brown (Career Education Corp.), who recently closed Milwaukee campuses, have created an accreditation system that ensures their continued operation and access to billions in federal funds despite dismal job placement and graduation rates.
It's a classic case of the fox guarding the chicken coup or, as they say in more polite company, a blatant conflict of interest that allows the hucksters who open these diploma mills to rake in millions while leaving students with nothing but broken dreams, credits that don't transfer and life-long debt.
It's worth the read:
Over the past decade, Corinthian's schools have remained fully accredited, enabling the publicly traded company to tap federal student aid coffers for nearly $10 billion, or more than 80 percent of its total revenues, according to a Huffington Post review of securities filings and disciplinary records maintained by its accreditors.
By every available indication, Corinthian Colleges Inc., one of the country's largest chains of for-profit colleges, stands out as an institution whose students face especially long odds of success. At nearly half of Corinthian's schools, more than 30 percent of students default on their federal loans within three years of leaving campus, according to the most recent federal data.
California last year cited excessively high default rates in denying access to state tuition grants at 23 of the company's campuses. Over the last three years, attorneys general in eight states and the federal Consumer Financial Protection Bureau have probed Corinthian's recruitment claims and financial aid practices, raising the prospect of lawsuits. Yet by the reckoning of the accrediting bodies that are supposed to scrutinize Corinthian's 97 U.S. campuses, its schools are meeting standards on student debt and adequately preparing graduates for jobs.
Corinthian's success in maintaining accreditation even as its students sink into default typifies the state of play in the for-profit college industry and underscores both the incentives and the provenance of the people doing the accrediting work: Accrediting agencies receive their funding from fees paid by the very colleges they monitor. The review teams they dispatch to visit and rate schools are composed of volunteers from other schools accredited by the same agencies.
During a congressional hearing on higher education policy held earlier this year, one expert likened this arrangement to the cozy practices that fueled the last financial crisis, when Wall Street banks hired credit-rating agencies to certify the sanctity of the bonds they forged from risky mortgages. "This is like bond ratings firms giving AAA ratings to mortgage-backed securities sold by the same firms that pay their fees," Kevin Carey, the director of education policy at the New America Foundation, said at the hearing. "It does not work out well in the long run."
The entire expose is linked here.
It's a classic case of the fox guarding the chicken coup or, as they say in more polite company, a blatant conflict of interest that allows the hucksters who open these diploma mills to rake in millions while leaving students with nothing but broken dreams, credits that don't transfer and life-long debt.
It's worth the read:
Over the past decade, Corinthian's schools have remained fully accredited, enabling the publicly traded company to tap federal student aid coffers for nearly $10 billion, or more than 80 percent of its total revenues, according to a Huffington Post review of securities filings and disciplinary records maintained by its accreditors.
By every available indication, Corinthian Colleges Inc., one of the country's largest chains of for-profit colleges, stands out as an institution whose students face especially long odds of success. At nearly half of Corinthian's schools, more than 30 percent of students default on their federal loans within three years of leaving campus, according to the most recent federal data.
California last year cited excessively high default rates in denying access to state tuition grants at 23 of the company's campuses. Over the last three years, attorneys general in eight states and the federal Consumer Financial Protection Bureau have probed Corinthian's recruitment claims and financial aid practices, raising the prospect of lawsuits. Yet by the reckoning of the accrediting bodies that are supposed to scrutinize Corinthian's 97 U.S. campuses, its schools are meeting standards on student debt and adequately preparing graduates for jobs.
Corinthian's success in maintaining accreditation even as its students sink into default typifies the state of play in the for-profit college industry and underscores both the incentives and the provenance of the people doing the accrediting work: Accrediting agencies receive their funding from fees paid by the very colleges they monitor. The review teams they dispatch to visit and rate schools are composed of volunteers from other schools accredited by the same agencies.
During a congressional hearing on higher education policy held earlier this year, one expert likened this arrangement to the cozy practices that fueled the last financial crisis, when Wall Street banks hired credit-rating agencies to certify the sanctity of the bonds they forged from risky mortgages. "This is like bond ratings firms giving AAA ratings to mortgage-backed securities sold by the same firms that pay their fees," Kevin Carey, the director of education policy at the New America Foundation, said at the hearing. "It does not work out well in the long run."
The entire expose is linked here.
Thursday, September 19, 2013
Politifact aims and misses on Wisconsin Minnesota economic comparison
Politifact did it again. Minnesota
is superior to Wisconsin on all economic performance measures except business
climate indices.
So how does Politifact rate a Minnesota Legislator’s claim that Minnesota is outperforming Wisconsin?
Rather than acknowledge that Minnesota is experiencing faster growth (3.5% to 1.5%) with higher incomes (Minnesota's per capita income is $4500 more than Wisconsin's), more jobs (between July 2012 and July 2013 Minnesota created twice as many jobs as Wisconsin) , and lower unemployment (5.2 percent, nearly one-quarter lower than Wisconsin’s 6.8 percent.), Politifact rates the statement half true because Wisconsin scores better on some business climate and competitiveness indices.
Since Minnesota leads Wisconsin in all the economic measures that matter. what this really tells us is that business climate and competitive measures which are subjective and heavily weighted toward states with low tax rates and minimal regulations are of virtually no value.
So how does Politifact rate a Minnesota Legislator’s claim that Minnesota is outperforming Wisconsin?
Rather than acknowledge that Minnesota is experiencing faster growth (3.5% to 1.5%) with higher incomes (Minnesota's per capita income is $4500 more than Wisconsin's), more jobs (between July 2012 and July 2013 Minnesota created twice as many jobs as Wisconsin) , and lower unemployment (5.2 percent, nearly one-quarter lower than Wisconsin’s 6.8 percent.), Politifact rates the statement half true because Wisconsin scores better on some business climate and competitiveness indices.
Since Minnesota leads Wisconsin in all the economic measures that matter. what this really tells us is that business climate and competitive measures which are subjective and heavily weighted toward states with low tax rates and minimal regulations are of virtually no value.
Monday, September 9, 2013
Assembly's leadership threatens shared governance
A meeting between the University of Wisconsin Board of Regents and state legislators last week was designed mainly to find common ground in the wake of recent disputes over cash reserves. But discussions during the meeting about rethinking shared governance had some faculty feeling like they were left holding the bag for administrators' actions – and that their decision-making authority within the system was under threat.
The conference, “Finding Common Ground: Regent Governance, Funding, and Partnerships for Wisconsin’s Public University System,” was initiated by the board, following a state audit this spring that showed the university system had cash reserves of $648 million, about a quarter of its annual appropriation. The funds were distributed among many accounts across the system and the funds had gone virtually unmentioned to state officials. While many state higher education systems use reserves, the issue highlighted legislative-board relations. System President Kevin Reilly, who has been in office since 2008, recently announced that he will be stepping down in January.
Mchael Falbo, the board's president, told legislators they needed to “reboot” the longstanding partnership between Wisconsin and its public universities.“We need to remember that we are all in this together, and we need to look at ways to strengthen that partnership.”
During a panel discussion on board governance, however, legislators took the opportunity to start a discussion about the role of the faculty in decision making.
General Assembly Speaker Robin Vos, a Republican, said governance changes within the system were a matter of “when, not if,” and that university chancellors should be empowered to “truly be the chief executive officers.”
Vos added: "Does the role of allowing faculty to make a huge number of decisions help the system or hurt the system?"
Some faculty advocates present, including Sara Goldrick-Rab, associate professor of educational policy studies and sociology at the Madison campus, where the meeting took place, called those statements troubling.
“Vos, in his remarks, very explicitly stated that we need to look into this issue of perceived inefficiency,” stemming from faculty involvement in decision making, she said. “I attended this meeting very interested to hear the conversation, but I did not expect to hear any of that.”
Taking faculty out of the decision-making process to save time and money is misguided, she said, citing a 2012 American Enterprise Institute study that will be included in a forthcoming volume from Harvard Education Press on stretching the higher education dollar. The study, by Robert E. Martin, Centre College emeritus professor of economics, shows that college costs continued to grow even as faculty say in institutional priorities declined, nationwide, from 1987 to 2008.
It’s also against tradition, said Goldrick-Rab, noting that Wisconsin professors have long enjoyed a strong governance "partnership" with administrators and students, thanks to state statute, under which faculty are guaranteed active participation in shaping institutional policy and responsibility for academic and personnel matters.
"The reason I've stayed at Wisconsin is shared governance," Goldrick-Rab said. "It's really important to faculty worklife and quality of education."
But the principle has eroded over time, Goldrick-Rab said. And the current political environment in Wisconsin, in which Governor Scott Walker, a Republican, has proposed linking funding for higher education to "performance," doesn't bode well for its future.
In public remarks last year, Walker said: "In higher education, that means not only degrees, but are young people getting degrees in jobs that are open and needed today, not just the jobs that the universities want to give us, or degrees that people want to give us?"
William Tracy, professor of agronomy at Madison and president of Madison's Public Representation Organization of the Faculty Senate, said he was concerned about Vos's comments, and blamed them in part on what he called a "misunderstanding" of the faculty role in governance.
"We've been effective in many, many ways," he said, including increasing graduation rates and decreased time-to-degree for graduate students in recent years. "It's hard to see that we're being inefficient or inflexible or not 'nimble,' or stodgy, if you will."
Like Goldrick-Rab, Tracy said that while including faculty in governance can slow down the decision-making process, it often leads to better decisions.
Randy Olson, professor of astronomy and chair of the Stevens Point campus Faculty Senate, said in an e-mail that Madison faculty members "are not the only ones that are upset."
"Most of my colleagues believe that one of the real strengths of the University of Wisconsin System is its shared governance where we have a collaborative approach with faculty and administrators in providing our students the best education possible," he said, adding that the legislature -- "in its earlier days" -- agreed.
He compared Vos's wish to make chancellors more like CEOs to making governors more like CEOs, diminishing the role of the legislature in governance.
Julie Schmid, chief of the staff for the American Federation of Teachers in Wisconsin, including its higher education component, said in an e-mail that the state law enshrining faculty governance in the university system has "been in both University of Wisconsin System administration's and the Republican lawmakers' sights for a while now."
Proposed changes need to be seen as "part and parcel" of Walker's 2011 overturning of collective bargaining for public employees, including faculty and staff, said Schmid, who will soon be the head administrator of the American Association of University Professors. "This is all about the further corporatization of public higher ed in this state and the further privatization of a common good [...] and it puts the [university] outside of the norm for U.S. higher ed."
Tracy said he believed that Wisconsin's system of shared governance wouldn't let faculty down, and that he was looking forward to a dialogue with legislators and administrators going forward.
Following Thursday's meeting, Falbo said: “We will organize our administration in a way that strengthens the institutions, and enhances their service to students, families, businesses, and communities." In doing so, he added, "we will focus on effective resource management, high-quality education, and competitive compensation for the faculty and staff who deliver the goods.”
Vos did not immediately respond to requests for comment. Reilly could not immediately be reached for comment.
State Senator Sheila Harsdorf, chair of the body's Committee on Universities and Technical Colleges, last week agreed with Vos that governance practices needed to be reexamined and that "the system needs to be driven by the campuses with the campuses driving what services the system provides." In an interview, she said that she was more interested in rethinking the higher education funding model than the role of the faculty in governance, but that better systems of "accountability and measurement" are needed.
Lots of communication between on and off-campus constituencies, including "those who are creating the jobs and providing job opportunities for graduates," is needed to develop those systems, Harsdorf said.
Some of the board's meeting pertained to links between universities and businesses. Keynote speaker Charles Reed, chancellor emeritus of the California State University System, said, "[We] want to understand what employers need from our graduates and what legislators expect from our institutions so we can prepare our students to be successful in their workplace." Goldrick-Rab and others said they believed it was an unofficial endorsement of a more outcomes-based curriculum that focuses on job preparation at the expense of the liberal arts.
State Rep. Janet Bewley, a Democratic member of the Assembly’s Education Committee, challenged some of her fellow legislators' opinions last week, saying to those gathered: "What I want to prevent is a whole new set of cooks going into your kitchen, people who are not academics trying to run your campuses."
In an interview, Bewley said Walker's vision for higher education enjoys more than marginal support in the legislature, and that shared governance -- along with support for the liberal arts -- is potentially vulnerable. She didn't know of any specific threats, she said, but "I think right now all of us are going to be wise enough to carefully watch what happens in the months to come."
Some faculty advocates praised Richard Wells, chancellor of the Oshkosh campus, for telling those gathered last week that campuses are communities, not corporations. In an e-mail, Wells said shared governance "is and will be increasingly under threat in Wisconsin and throughout the nation in large part because the higher education financial model is broken resulting in, among other things, the affordability and student debt crises. "
Faculty, staff, students and administrators must defend the principle through efficient and effective service of the system's mission and values, he said. "I am confident we will be successful together in the long run because we have a long Wisconsin legacy of addressing very difficult challenges," Wells said. "However, the short run ride is going to be tough. Stay tuned."
Read more: http://www.insidehighered.com/news/2013/09/09/wisconsin-faculty-object-idea-shared-governance-should-change#ixzz2eOjCr122
Inside Higher Ed
Friday, September 6, 2013
U.S economic policy: a horrifying failure
Five years after Lehman Brothers collapsed, Nobel Prize winning economist, Paul Krugman concludes that: ".. by any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure."
Read his column here.
Read his column here.
Wednesday, August 28, 2013
Dr. King's' "I have a dream" speech and Labor Day
50 years ago today, 250,000 Americans marched for jobs and freedom. When Dr King gave "the speech," the unemployment rate was 5% for whites and 10.9% for blacks, Today, it is officially 6.6% for whites and 12.6% for blacks. Middle class union jobs are vanishing. The fastest growing jobs pay poverty wages.
In the tradition of Dr. King and those who marched fifty years ago, fast food workers will conduct a national strike for higher wages and a union tomorrow, Thursday, August 29. And immigrant workers and youth, dreamers, are engaged in a righteous struggle for immigration reform with a path to citizenship. And Wisconsin's public sector workers are fighting to restore their basic rights at work.
We have unfinished business in this country. Dr. King understood that "without struggle there is no progress."
That is no less true today than it was fifty years ago.
One way to honor the legacy of the march on Washington is to support the low wage, public sector and immigrant workers today by attending the Milwaukee march and picnic on Labor day, Monday, September 2nd. There are two marches. One leaves from South 5th Street and Washington, the Voces de la Frontera offices, and will march across the viaduct to Zeidler Park, 6th and Michigan. The other leaves from Martin Luther king Drive and Vine and also ends at the picnic at Zeidler Park. The struggle continues. Both begin at 11 am.
font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 13px; line-height: 18px;">
font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 13px; line-height: 18px;">
In the tradition of Dr. King and those who marched fifty years ago, fast food workers will conduct a national strike for higher wages and a union tomorrow, Thursday, August 29. And immigrant workers and youth, dreamers, are engaged in a righteous struggle for immigration reform with a path to citizenship. And Wisconsin's public sector workers are fighting to restore their basic rights at work.
We have unfinished business in this country. Dr. King understood that "without struggle there is no progress."
That is no less true today than it was fifty years ago.
One way to honor the legacy of the march on Washington is to support the low wage, public sector and immigrant workers today by attending the Milwaukee march and picnic on Labor day, Monday, September 2nd. There are two marches. One leaves from South 5th Street and Washington, the Voces de la Frontera offices, and will march across the viaduct to Zeidler Park, 6th and Michigan. The other leaves from Martin Luther king Drive and Vine and also ends at the picnic at Zeidler Park. The struggle continues. Both begin at 11 am.
font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 13px; line-height: 18px;">
font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 13px; line-height: 18px;">
Tuesday, August 20, 2013
Sanford Brown's parent company agrees to $10 million settlement
One of the largest U.S. for-profit college corporations agreed to pay more than $10 million Monday to settle the state of New York's claim that the company systematically deceived students by advertising bogus job placement rates at its career-oriented schools.
New York Attorney General Eric Schneiderman announced a $10.25 million settlement agreement with Career Education Corp., which includes a $1 million penalty and assurances that the school will establish a $9.25 million restitution fund for students who were misled from the 2009-2010 school year to 2011-2012.
The company which owns Sanford Brown which closed its West Allis campus in the spring admitted no wrongdoing.
Monday's announcement concludes a more than two-year investigation by the New York Attorney General's office into what it said were misleading advertisements and inflated job placement statistics at Career Education Corp., a Chicago-area company that operates more than 90 college campuses across the world.
The company and other for-profit colleges have come under intense government scrutiny in recent years, amid evidence that many students are left with crushing debts and poor job prospects.
Sanford Brown was one of the Milwaukee area's most notorious diploma mills. Several Milwaukee Area Technical College students' compelling testimonies regarding Sandford Brown's exploitative practices were presented at the U.S. Department of Education's Minneapolis Gainful Employment hearing in June.
According to the findings in Monday's settlement document, Career Education lied to prospective students and to regulators when advertising the percentage of students successfully placed in jobs after graduation -- a marketing technique that allowed the company to boost enrollments and revenues to record highs in recent years. The settlement claims that the company advertised job placement rates of 55 percent to 80 percent at its schools in New York, when the placement rates were actually 24 percent to 64 percent.
In addition to Sanford Brown, the schools included Briarcliffe College and online enrollments through American Intercontinental University and Colorado Technical University, according to the settlement.
Career services employees at the company received bonuses if they could achieve certain job placement rates, creating incentives for employees to cut corners when documenting how many students got jobs after graduation, according to the settlement documents.
For example, some career services employees counted students as being "placed" if they participated in a one-day community health fair, even if they weren't hired by companies at the fair. A criminal justice graduate who worked as a data processor for a company that handled parking ticket data was counted as being employed in that "field" because the graduate dealt "with the courts" when processing parking ticket data, according to the settlement documents.
The settlement alleges that "high-level" career services managers at the company's headquarters "explicitly condoned and even encouraged" such gimmicks to boost placement rates.
By inflating the job numbers, Career Education Corp. avoided scrutiny from outside college accrediting groups, which require schools to meet certain thresholds. Accreditation is a key requirement for colleges to remain eligible to receive federal student loan and grant money -– crucial revenue for the for-profit firms.
The settlement also said that Career Education Corp. failed to tell students that degrees from certain programs would not allow them to take state licensing exams after graduation, significantly hindering a student's ability to get jobs in fields like medical ultrasound.
The job placement scandal has led to significant changes at Career Education Corp. After the New York Attorney General's office issued a subpoena in 2011, the company hired an outside legal firm to audit its career placement office. Auditors found widespread problems, which led to the resignation of the company's chief executive, Gary McCullough, in November 2011, and the firing of 15 career services employees.
McCullough nevertheless received more than $3.6 million in severance.
A spokesman for Career Education Corp., Mark Spencer, wrote in an email Monday that the company was "pleased to have reached a settlement."
"This agreement closes an important chapter and allows us to move forward with a heightened focus on student outcomes," Spencer said. "We remain committed to continually advancing our culture of adherence to legal, regulatory and accreditor requirements, and we're a stronger organization for having addressed these concerns."
In addition to the financial penalties, Career Education Corp. agreed to hire an outside auditor to independently verify all job placement rates for three years at its New York schools and report back to the New York Attorney General's office. The company must provide new disclosures for its New York programs that clearly state job placement rates, and must phase out any New York programs in which degrees do not allow students to take licensing exams after graduation.
The company will provide a list of students who attended certain New York programs from the 2009 through 2012 school years, and they will be eligible to claim money from the $9.5 million settlement fund the company is creating.
The settlement is one of the largest restitution funds created for students allegedly defrauded by a for-profit college. The California Attorney General's Office reached a settlement with Corinthian Colleges Inc. in 2007 that resulted in a $5.8 million restitution fund.
Enrollments at Career Education Corp. schools have plummeted over the last two years, from more than 114,000 at the end of 2010 to 76,000 at the end of last year, according to securities filings.
New York Attorney General Eric Schneiderman announced a $10.25 million settlement agreement with Career Education Corp., which includes a $1 million penalty and assurances that the school will establish a $9.25 million restitution fund for students who were misled from the 2009-2010 school year to 2011-2012.
The company which owns Sanford Brown which closed its West Allis campus in the spring admitted no wrongdoing.
Monday's announcement concludes a more than two-year investigation by the New York Attorney General's office into what it said were misleading advertisements and inflated job placement statistics at Career Education Corp., a Chicago-area company that operates more than 90 college campuses across the world.
The company and other for-profit colleges have come under intense government scrutiny in recent years, amid evidence that many students are left with crushing debts and poor job prospects.
Sanford Brown was one of the Milwaukee area's most notorious diploma mills. Several Milwaukee Area Technical College students' compelling testimonies regarding Sandford Brown's exploitative practices were presented at the U.S. Department of Education's Minneapolis Gainful Employment hearing in June.
According to the findings in Monday's settlement document, Career Education lied to prospective students and to regulators when advertising the percentage of students successfully placed in jobs after graduation -- a marketing technique that allowed the company to boost enrollments and revenues to record highs in recent years. The settlement claims that the company advertised job placement rates of 55 percent to 80 percent at its schools in New York, when the placement rates were actually 24 percent to 64 percent.
In addition to Sanford Brown, the schools included Briarcliffe College and online enrollments through American Intercontinental University and Colorado Technical University, according to the settlement.
Career services employees at the company received bonuses if they could achieve certain job placement rates, creating incentives for employees to cut corners when documenting how many students got jobs after graduation, according to the settlement documents.
For example, some career services employees counted students as being "placed" if they participated in a one-day community health fair, even if they weren't hired by companies at the fair. A criminal justice graduate who worked as a data processor for a company that handled parking ticket data was counted as being employed in that "field" because the graduate dealt "with the courts" when processing parking ticket data, according to the settlement documents.
By inflating the job numbers, Career Education Corp. avoided scrutiny from outside college accrediting groups, which require schools to meet certain thresholds. Accreditation is a key requirement for colleges to remain eligible to receive federal student loan and grant money -– crucial revenue for the for-profit firms.
The settlement also said that Career Education Corp. failed to tell students that degrees from certain programs would not allow them to take state licensing exams after graduation, significantly hindering a student's ability to get jobs in fields like medical ultrasound.
The job placement scandal has led to significant changes at Career Education Corp. After the New York Attorney General's office issued a subpoena in 2011, the company hired an outside legal firm to audit its career placement office. Auditors found widespread problems, which led to the resignation of the company's chief executive, Gary McCullough, in November 2011, and the firing of 15 career services employees.
McCullough nevertheless received more than $3.6 million in severance.
A spokesman for Career Education Corp., Mark Spencer, wrote in an email Monday that the company was "pleased to have reached a settlement."
"This agreement closes an important chapter and allows us to move forward with a heightened focus on student outcomes," Spencer said. "We remain committed to continually advancing our culture of adherence to legal, regulatory and accreditor requirements, and we're a stronger organization for having addressed these concerns."
In addition to the financial penalties, Career Education Corp. agreed to hire an outside auditor to independently verify all job placement rates for three years at its New York schools and report back to the New York Attorney General's office. The company must provide new disclosures for its New York programs that clearly state job placement rates, and must phase out any New York programs in which degrees do not allow students to take licensing exams after graduation.
The company will provide a list of students who attended certain New York programs from the 2009 through 2012 school years, and they will be eligible to claim money from the $9.5 million settlement fund the company is creating.
The settlement is one of the largest restitution funds created for students allegedly defrauded by a for-profit college. The California Attorney General's Office reached a settlement with Corinthian Colleges Inc. in 2007 that resulted in a $5.8 million restitution fund.
Enrollments at Career Education Corp. schools have plummeted over the last two years, from more than 114,000 at the end of 2010 to 76,000 at the end of last year, according to securities filings.
Subscribe to:
Posts (Atom)