Who’s regulating for-profit schools? Execs from for-profit schools

By Annie Waldman
ProPublica

College accreditors have come under scrutiny recently for allowing for-profit schools to collect billions in federal aid despite low graduation and high default rates.

Accreditors are supposed to be watchdogs for college quality. They are not government agencies but colleges need an accreditor’s seal of approval so students can qualify for federal loans.

The agency that has received the most heat is the Accrediting Council for Independent Colleges and Schools. ACICS allowed Corinthian Colleges Inc. to keep on operating right up until the for-profit college chain collapsed after evidence emerged that the schools had lured thousands of poor students into predatory loans. The accreditor placed a Corinthian campus on its “honor roll” just months before the Education Department forced the school to shut down.

ACICS, which oversees hundreds of for-profit colleges, is now the target of two government investigations. A ProPublica analysis also found that schools overseen by ACICS had the lowest graduation rates compared with other accreditors.

So who are the people behind the beleaguered accreditor? They include executives from some of the most scandal-plagued schools in the country.

We looked at all ACICS commissioners since 2010 and found that two-thirds of them have worked as executives at for-profit schools while sitting on the council. A third of the commissioners came from schools that have been facing consumer-protection lawsuits, investigations by state attorneys general, or federal financial monitoring.

Consider Beth Wilson. Wilson, the executive vice president of Corinthian Colleges, joined ACICS in 2014, less than three months after the California attorney general had filed a lawsuit against Corinthian for deceptive advertising and falsifying placement numbers. Wilson was no stranger to accreditation, as she had previously been the chair of another accreditor of primarily for-profit schools. And she was also no stranger to Corinthian’s problems. According to the attorney general’s ongoing suit, Wilson ordered employees to alter Corinthian’s job-placement statistics.

Wilson did not respond to requests for comment.

Having the majority of commissioners be industry executives violates no federal rules. The Department of Education only requires a small fraction of commissioners to be from outside the industry, and accrediting agencies of both nonprofit and for-profit schools are largely composed of industry players.

However, some education experts argue that potential conflicts of interest in for-profit accreditation are especially troubling because of the heightened scrutiny within the industry.

Robert Shireman, a former deputy undersecretary with the Department of Education and currently a senior fellow at the Century Foundation, calls the accreditation process “a giant cesspool of corruption.” Shireman, who has long worked to bolster regulation of for-profit colleges, said the accreditation process “needs to be independent” and not overseen by the industry itself. “It would be like getting the CEOs of the airlines together to review whether the airplanes are safe,” he said.

“The scandals surrounding the for-profit college industry have thrown a spotlight on flaws in the accreditation system,” said Stephen Burd, senior policy analyst at New America, a nonpartisan think tank. “These agencies turn a blind eye to abuses, and lobby on behalf of the industry.”

ACICS’ 15 commissioners, who are all unpaid, are the ultimate decision-makers about whether a school receives accreditation. ACICS, like other accrediting agencies, is funded through membership fees from the colleges it oversees, and its commissioners are mainly peer reviewers from member schools.

Al Gray, the executive director of ACICS pictured at above at a Senate hearing last June, said the agency has a strict conflict-of-interest policy and recusal practices that do not allow commissioners to sit in on hearings that involve their own schools.

“It might appear that it’s compromised by the fact that the peer reviewers are affiliated with the institutions,” said Gray. “But while that may be an appearance, proper protections are put in place in the system to ensure that doesn’t occur.”

Here is a rundown of a handful of commissioners, their day jobs, and what their schools have been accused of:

Commissioners David Luce and Beth Wilson

When they served: Luce from 2008–2013 (his second term) and Wilson in 2014

Where they also worked: Corinthian Colleges, Inc. Luce was assistant vice president of accreditation and licensing; Wilson was executive vice president.

What their school was getting heat for: A whole lot, including deceptive marketing techniques and predatory loan practices. The list includes investigations from the Government Accountability Office, more than twenty state attorneys general, the Department of Education’s inspector general, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission. The Government Accountability Office investigation resulted in a congressional hearing and the Consumer Financial Protection Bureau secured a default judgment finding Corinthian liable for over half a billion dollars. Many of the other investigations are ongoing.

What happened to their school’s accreditation: Not much. In the years leading up to its collapse, the number of campuses that ACICS accredited increased from 35 in 2005 to 57 in 2013. By the time the Education Department finalized a deal with Corinthian to close and sell its campuses, ACICS was the school’s leading accreditor. In 2014, just months before the department took action, ACICS put a Corinthian campus on its honor roll. ACICS did not revoke the accreditation of any of Corinthian’s campuses before the department stepped in.

How much federal aid their school received: Around $1.4 billion annually.

What they say: David Luce and Beth Wilson did not respond to requests for comment. Luce left ACICS’ council at the end of his term and Wilson resigned in mid–2014, according to ACICS officials.

Commissioners John Euliano and Richard Bennett

When they served: Euliano from 2011-current and Bennett started this January

Where they also worked: Southern Technical College. Euliano is the founder; Bennett is senior vice president of financial aid.

What their school was getting heat for: Accepting invalid high school diplomas and financial compliance. The Miami Herald reported last year that Southern Technical College and others had enrolled students without proof that they finished high school. Two Southern Technical College campuses have also been flagged by the Department of Education for issues of financial responsibility as of December 2015. One campus received the government’s lowest possible financial rating for the 2012 school year (the most recent data), a score shared by only 40 of 3,400 colleges across the country. From 2011 to 2012, the college was subject to a Department of Education review to confirm that the school met Federal Student Aid requirements. In a review of two years of data, the department found over $200,000 in liabilities because of compliance issues, including incorrect financial-aid calculations and invalid high-school diplomas.

What happened to their school’s accreditation: Again, not much. None of the college’s campuses have had their accreditation suspended or revoked. And in 2012 three of the college’s campuses were put on the accrediting agency’s “honor roll.”

How much federal aid their school received: $36 million during the 2013 school year.

What they say: Euliano told ProPublica in an email that there is no conflict of interest within ACICS’ council. “Any insinuation that there is any ‘home cooking’ or that our peer review process is somehow ‘the fox running the hen house’ (it seems like that is where you are going) is absolutely 100% false,” he said. (Read his email.) Euliano also described the department review as “not out of the ordinary” and the liabilities that were found “small compared to the amount of aid processed.” Euliano sold the college in 2012, staying on for a year to help with the transition.

Bennett said in an email that the low financial score was a result of the sale and that it wasn’t a good indicator of the company’s fiscal viability. He also said that landing on the department’s list of schools with financial compliance issues is “not always representative of any wrongdoing/findings from the department.” The Department of Education has described the list as a “caution light.”

Commissioner Francis Giglio

When he served: 2009–2012

Where he also worked: Lincoln Educational Services. Giglio is vice president of compliance and regulatory services.

What his school was getting heat for: The New York attorney general opened an investigation into Lincoln Educational Services in 2011, to see whether the school misrepresented the quality of its education, tuition costs, program accreditation, and its ability to find jobs for students.

What happened to his school’s accreditation: Yet again, nothing really: None of the college’s campuses have had their accreditation suspended or revoked.

How much federal aid his school received: $200 million during the 2013 school year.

What he says: “If, in fact, in that institution there was some type of conviction or determination that there was fraud, waste or abuse, then that person would no longer be on the commission,” Giglio told ProPublica. “But in the meantime, there’s always the opportunity for that person to say, This is fiction, these students have said these things, but this isn’t truly what’s happening.” Giglio said that his company has not heard from the attorney general since the college sent in the requested documents. The attorney general’s office declined to comment.

Commissioner Jeanne Herrmann

When she served: 2009–2015

Where she also worked: Globe University/Minnesota School of Business. Herrmann is chief operating officer.

What her school was getting heat for: Job-placement numbers and marketing tactics. In 2013, a former Globe University dean won a whistleblower lawsuit against the school. The dean said she had been fired after complaining about fraudulent job-placement numbers and misleading recruiting practices. The Minnesota attorney general filed a lawsuit against the school in 2014, accusing the colleges of misrepresenting job opportunities to students. That suit is ongoing.

What happened to her school’s accreditation: Not much. None of the college’s campuses have had their accreditation suspended or revoked.

How much federal aid did her school received: $74 million during the 2013 school year.

What she says: Jeanne Herrmann did not respond to request for comment.

Commissioner Gary Carlson and Edwin Colon

When they served: 2006–2011 and 2009–2014

Where they also worked: ITT Technical Institute. Carlson was vice president of academic affairs at ITT until his retirement in late 2010. Colon was director at an ITT Technical Institute Campus until May 2014, according to his online résumé.

What their school was getting heat for: Job placements and recruiting practices. An ongoing whistleblower lawsuit, brought in 2007, alleges that the school submitted false claims to the government to receive more financial aid. In 2010, a U.S. Senate committee began an investigation into ITT, eventually finding that the company used aggressive recruiting tactics and that many of its students left without finishing their degrees. The Consumer Financial Protection Bureau also opened an investigation in 2013. It filed suit a few months later, accusing the company of predatory lending. In 2014, ITT was hit with a dozen investigations by state attorneys general. The suits from the Consumer Financial Protection Bureau and the attorneys general are ongoing, according to the company’s most recent SEC filings.

What happened to their school’s accreditation: And again … not much. ACICS has not revoked or suspended any of the college’s campuses.

How much federal aid their school received: $796 million during the 2013 school year alone.

What they say: “I don’t think that everybody that’s under investigation is always immediately guilty,” said Gary Carlson. “When we paintbrush one whole industry as being bad because of some not following the rules, it’s probably a mistake.” Edwin Colon did not respond to request for comment.

In response to the list of commissioners from scrutinized schools, Anthony Bieda, vice president for external affairs at ACICS, described the council as “highly ethical” and “committed public servants who receive no pay for their service.” Bieda said the commissioners were either nominated or appointed before the scrutiny of their companies occurred.

“If issues related to the commissioners’ institution were raised in a council meeting, the commissioners always and diligently recuse themselves from the discussion and any subsequent decision,” said Bieda. He added that “the commissioners themselves were not under scrutiny or accused of wrongdoing.”

Ultimately, the makeup of the accreditation boards reflects the industry itself, warts and all.

“The way the agency commissioners are selected, it stands to reason that an agency that covers what we’ll call at risk schools will have commissioners from at-risk places,” said Susan Phillips, the chair of a Department of Education committee that reviews accreditors.


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