INVESTIGATING HOW MONEY CORRUPTS DEMOCRACY
Three career college chains with troubling records have become the first institutions to object to a landmark court settlement that would provide some $6 billion in debt relief for about 264,000 former students who claim they were deceived by their schools.
Keiser University (through its parent organization Everglades College), and, jointly, Lincoln Educational Services and American National College, filed motions Wednesday in federal court in San Francisco seeking to intervene in the lawsuit and objecting to the settlement between students and the U.S. Department of Education.
Higher education observers had predicted that for-profit and career colleges would oppose the settlement of the lawsuit, which was brought by students objecting to Trump education secretary Betsy DeVos’s wholesale rejections of their claims to debt relief under a federal law that provides cancellation of federal loan obligations where schools have deceived their students.
The settlement, announced two weeks ago, would cancel loans for students who attended 153 institutions, many of which have faced law enforcement or accreditor action for bad behavior. The schools on the list are many of the industry’s worst offenders, including demised operations like Corinthian Colleges, Globe University, ITT Tech, Independence University, Kaplan College, and campuses of the Art Institutes.
In a court filing supporting the proposed settlement, which requires approval by federal district judge William Alsup, the government and the lawyers for the students explain that the schools on the list have “strong indicia regarding substantial misconduct… whether credibly alleged or in some instances proven, and [a] high rate of class members with applications” to the Department for loan relief.
The for-profit college industry is worried about the stigma of its members being on the new list, and also about the possibility of the Department taking a step that the law envisions, but has never been used: seeking recoupment from a school for the tuition payments that taxpayers purchased with the now-forgiven loans.
Jason Altmire, the former Democratic congressman who heads the career college lobby group CECU, had already claimed that the Department accepted the settlement “in its haste to respond to outside political pressure,” resulting in approval of “wide swaths of claims without regard to individual merit.” Arthur Keiser, the self-styled “Chancellor and CEO” of Keiser University, is a board member and long-dominant figure in CECU.
In its brief filed Wednesday, Keiser University, which offers a wide range of college programs, from nursing to criminal justice to business, calls the settlement “a farce—the stuff of the Star Chamber.” It claims that the inclusion of Keiser on the list of schools whose former students are entitled to have their claims granted “is already causing reputational harm…”
The brief filed by Lincoln and American National similarly claims their schools face “both the potential and the reality of negative consequences following the resolution of borrower-defense claims under the current iteration of the proposed settlement.” Lincoln offers career programs including automotive, culinary, and cosmetology, while American National has a range of health and business programs.
Keiser, Lincoln, and American National may not want to be on a government-approved list of schools implicated in bad behavior, but all three have been implicated in bad behavior.
Keiser University has settled investigations over alleged deceptive and predatory practices pursued by both the U.S. Department of Justice and Florida’s attorney general. It also engaged in a controversial conversion from for-profit to non-profit status that ultimately resulted in the Internal Revenue Service finding that lease agreements Arthur Keiser had with the school he runs were above fair market value; the IRS imposed additional taxes as a result. Republic Report has exposed whistleblower accounts of ongoing deceptive and predatory practices, and abuse of non-profit status, at Arthur Keiser’s schools, and this year numerous senior leaders in Congress have called on the Department of Education to investigate those institutions.
The Keiser schools’ conduct, and that of the school’s accreditor, SACS, will also be addressed next week at the semi-annual meeting of NACIQI, the Department of Education’s outside advisory committee on accreditation; in a demonstration of how higher education oversight has been rigged against students, the chairman of that committee, appointed to the panel by Republicans in the U.S. House of Representatives, is none other than Arthur Keiser.
Lincoln Technical Institute in 2015 agreed to a million-dollar settlement with Massachusetts’ attorney general over charges by the state that the school fudged its job placement rate and engaged in coercive and deceptive recruiting; according to a statement by the AG office, “Lincoln … allegedly used an admissions manual that instructed recruiters to ‘bring out the pain’ in potential students so that they would feel pressure enroll. Lincoln’s recruiters used scripted questions to ‘establish unhappiness, create urgency.’”
American National University, meanwhile, faced a lawsuit brought by Kentucky’s attorney general alleging that the school provided deceptive information on its web site regarding job placement statistics for graduates. The trial court’s finding that the school engaged in legal violations was sustained by appeals court review.
Although schools on the list may not like being held accountable for predatory abuses, the Biden administration’s decision to agree to this settlement makes good sense. In a pandemic era where people have faced severe hardship, and the government has for more than two years paused all federal student loan obligations, and is considering significant debt cancellation for all borrowers, it is appropriate to target additional relief to people — many of them veterans, single parents, immigrants, and others struggling to build better futures — who attended a constellation of schools that have been revealed by law enforcement actions, student complaints, and other documentation to likely have been engaged in predatory practices.
The Department of Education lacks the resources to comb through every debt cancellation application to find and reject the claims of students who did attend a badly-behaving school but cannot provide documentation that they were personally scammed. There is far more justice in the settlement’s approach than in the DeVos approach — condemned as “disturbingly Kafkaesque” by Judge Alsup — of flatly rejecting, or refusing to act on, claims without offering legitimate reasons. It’s about time the Department, which has long heavily favored the due process rights of schools over the interests of students and taxpayers, takes a step in the direction of accountability.
Eileen Connor, a lawyer for the students and director of Harvard’s Project on Predatory Student Lending, said, “It is disappointing but not surprising that these companies are, as always, looking out for their bottom lines at the expense of students who have suffered serious harm and waited years for justice.”
Keiser University is represented in the new filing by Jesse Panuccio of the powerful law firm Boies Schiller. Panuccio, a former top official in the Trump Justice Department, has, in this same lawsuit, represented DeVos, who was sued as an original defendant in the case when she was secretary, in her lengthy and ultimately successful effort, as the ex-secretary, supported by the Biden Administration, to dodge a deposition by the students’ lawyers.
Lincoln Tech and American National University’s legal team includes attorneys from the big law firms McGuire Woods and Gibson Dunn, both of which have represented awful predatory colleges in the past.
Lawyers for the students have filed a brief opposing intervention in the case by the schools. They write that the schools “were content to sit on the sidelines while members of the class fought tirelessly to vindicate their rights. Now, they attempt to force their way into this case not because they have a legal claim or defense to assert, nor because they are suffering any imminent threat to a legal interest, but because they think they should have a veto over their former students’ settlement. They do not.” The students’ brief cites, as we did above, evidence that the complaining schools have engaged in bad behavior, as does the brief filed today by the government (“inclusion on the settlement agreement list is not the first adverse publicity that the would-be intervenors (and/or their affiliates) have experienced”).
Republic Report is dedicated to rooting out the corruption that is so corrosive to American values. We investigate and uncover the buying and selling of politicians and of institutions entrusted with upholding the public interest. We expose how big money distorts major policy decisions – harming our economy and our people.
INVESTIGATING HOW MONEY CORRUPTS DEMOCRACY