Federal Lawsuit Accuses For-Profit Schools of Fraud
Ohanian Comment: I usually try to limit my postings to matters impacting PreK-12 public schools. One can't do everything, and so. . . . I do what I can. That said, I found the behavior of Harris School of Business, et al so outrageous, I couldn't let it go unnoticed. With the help of our tax dollars and the collusion of the US Department of Education student loans department, they prey on the desperate--and put them in the position of being far worse off than ever after their college [sic] experience.
And if you wonder why Public Agenda comes to the defense of these outfits, put 'Public Agenda' into a 'search' on this site.
Reader Comment: I am always astonished when I speak with someone attending these schools and find out they didn't look into the programs at our local community colleges. Community college programs are much cheaper, and focused on actually educating the student. Invariably, the person will tell me they saw an advertisement, called the school and then went to a high-pressure visit at the school.
Public Agenda Comment:
. . . While the problems raised here are very real and require attention, the for-profit higher education sector contains a wide range of institutions that should not all be painted with the same brush.
by Richard Perez-Pena
LINWOOD, N.J. -- It was the electronic monitor around a student's ankle that first gave Kelli J. Amaya serious doubts about the Harris School of Business.
The young man with the monitor was studying to be a pharmacy technician, and Ms. Amaya, who worked at Harris, a for-profit chain of trade schools, knew that the most widely recognized certification for pharmacy technicians excludes anyone convicted of a felony or even a low-level drug offense.
But the student received federal financial aid, and for the school to keep collecting it, he had to remain in the program and complete an internship. So Ms. Amaya said she was told to find him an internship, even if that meant deceiving the employer.
"I saw students who never should have been there, students with whopping gaps in learning abilities and major psychiatric problems who were just not capable of doing the work," said Ms. Amaya, an administrator at Harris's Linwood campus, and then at its Wilmington, Del., campus, from 2009 to 2011. "The bosses were always like, 'Stop asking why theyÃ¢ï¿½ï¿½re enrolled, just get them to graduation however you can.'"
Her charges are part of a federal lawsuit filed by seven former employees against Harris and its parent company, Premier Education Group, which owns more than two dozen trade schools and community colleges operating under several names in 10 states. The suit contends that while charging more than $10,000 for programs lasting less than a year, school officials routinely misled students about their career prospects, and falsified records to enroll them and keep them enrolled, so that government grant and loan dollars would keep flowing.
Though they vary widely in quality, for-profit schools have drawn scrutiny in recent years for aggressive recruiting, high prices, low graduation rates and heavy borrowing by students who often have poor job prospects afterward. They have been a particular target of overhaul efforts by the Obama administration. Much of the attention has gone to a handful of large, visible national chains, like the University of Phoenix, DeVry University and Corinthian Colleges, that are publicly traded. But like Premier, which had 17,000 students in 2012, most are privately owned and receive far less scrutiny.
In a separate case in New Jersey, dozens of former Harris students say that the school lied about what professional certifications they would qualify for after completing their courses; some were given a brochure saying they could sit for a dental assistant certification exam -- an exam that had not been offered for years. Premier settled a similar case a few years ago before it went to trial.
The former employees' federal suit also charges that the school enrolled people who should not have been in its programs -- like a student enrolled for massage therapy, though he had been convicted of a sex crime, which would prevent him from being licensed. They say the schools enrolled students who had not graduated from high school, though their programs required it, including some who presented diplomas from known fraudulent "diploma mills."
The company's lawyers and executives flatly denied many of the charges, and said others, like phony diplomas, reflected only isolated instances resulting from having a hard-to-serve clientele.
"It's a frivolous lawsuit," said Gary Camp, chief executive of Premier. "We're proud of the record we have. When you employ 1,500 people, you can't always make the best of decisions in the people you hire."
Jonathan D. Farrell, a lawyer for the company, said some of the people suing the company "may have financial motives," while others are resentful over being dismissed, and "some are misguided."
Some of the complaints against Harris, which has eight campuses in New Jersey, Delaware, Pennsylvania and Connecticut, echo those made against other for-profit schools, and were documented in investigations directed by the Government Accountability Office, Senator Tom Harkin, an Iowa Democrat, and others. Those include high-pressure enrollment tactics and misleading promises about job prospects upon graduation.
Compared with traditional, nonprofit schools, both public and private, for-profit schools disproportionately enroll low-income and minority students who qualify for significant government aid, and the schools rely far more on that aid for revenue. Federal records show that in 2011-12, Premier collected $112 million in federal Pell grants and federal student loans. For-profit schools also spend heavily on advertising, their students are far more likely to borrow money to pay for tuition, and those who borrow rack up more debt and are more likely to default.
Students at for-profit schools often do not realize that cheaper alternatives exist through public community colleges and trade schools. A study published this month found that the majority of people who had attended for-profit colleges and trade schools did not understand the distinction, learned of their schools through advertising and did not consider any other schools.
The most striking allegations against Premier involve students who were not capable of doing the work because they lacked the mental stability, academic skills or English proficiency, yet were kept on the books so the schools could collect their federal aid, which requires that a certain percentage of students make progress toward completion. When teachers gave them failing marks, the former employees charge, administrators changed the grades and falsified the attendance records.
Ms. Amaya said she was promoted by Harris, and then fired for insisting on following the rules.
The former employees contend that school executives often skewed aptitude tests used to screen applicants by giving students extra time, letting them keep smartphones that could be used to help answer questions, and faking the scores by filling in correct answers after students had turned the tests in.
Several students interviewed outside Harris campuses said that when they took the tests, they were told not to worry because the results did not matter, and one said that she was surprised that she was accepted because she had not understood or answered most of the questions. Most of the students said they found Harris through ads or by word of mouth, then met with recruiters who sometimes pressed them to enroll immediately, saying that space was limited.
Premier's lawyers noted that no government agency requires the use of any aptitude test. "Maybe what they want is for Premier to discriminate based on disability," Mr. Farrell said. "We deny passing anyone who didn't deserve to be passed at a Premier school."
The lawsuit is unusual in that it is filed under the federal False Claims Act, charging that the conduct of Harris and Premier defrauded the federal government. Under that law, a defendant can be found liable for triple the actual damages, potentially enough to put Premier out of business, and the whistle-blowers can reap hefty paydays, collecting as much as 30 percent of any verdict award, which Premier's lawyers say is a motive for the suit.
The case against Premier was filed in 2011, but was unsealed and available to the public last fall.
Premier is bigger than most for-profit chains but its name is not well known; it operates under eight different school names like Harris School, Branford Hall and Salter School, each relatively small and operating and recruiting in a limited region.
And Premier, like most for-profit school companies, is privately held, making information about its structure and finances hard to come by. The company is controlled by a single family based in the Philadelphia area; it is a limited partnership whose members are family trusts and individuals.
At one time, a central figure in the company was a man named Andrew N. Yao, an entrepreneur who owned several companies -- including one making and servicing student loans -- and was headed to a spectacular downfall. Mr. Yao had airplanes, multiple estates, a wife, and a girlfriend who was a former centerfold model in men's magazines and would later testify against him.
In two separate federal cases, in 2008 and 2009, Mr. Yao was convicted of fraud linked to the financial collapse of his businesses. Federal records show that he was released from prison last year; attempts to find him were unsuccessful.
The Premier partners, including Robert L. Bast, a lawyer, and trusts for which his nephew, W. Roderick Gagne, was trustee, had invested millions of dollars in Mr. Yao's companies, and lent them millions more at high interest rates before they went into bankruptcy. It is not clear if that is how the family of Mr. Bast and Mr. Gagne, as creditors, gained control of Premier.
Court documents and records filed with state regulators say that at one time Mr. Yao, or a company wholly owned by him, was the general partner of Premier -- in other words, its principal owner. Yet Mr. Camp, who acknowledged that as chief executive he used to report to Mr. Yao, insisted that Mr. Yao was never an owner of Premier, and Mr. Farrell, the lawyer, said he knew nothing about the company's ownership
Richard Perez-Pena with Ohanian comment
New York Times