As we reported this morning, the U.S. Department of Education today rejected the request of the CollegeAmerica/Stevens-Henager college chain to have its status changed from for-profit to non-profit for purposes of federal financial aid rules. The Department concluded that the chain's conversion to non-profit status appeared primarily to benefit the for-profit chain's owner, Carl Barney, rather than students. The chain has responded by calling the decision "wrong and derived solely from this administration's political agenda against private colleges."
Republic Report has been covering this predatory college chain, and questioning the terms of its conversion to non-profit status, since 2013. The chain is now facing major fraud lawsuits pursued by the U.S. Justice Department and the state of Colorado for allegedly violating recruiting rules and deceiving students. But despite all the research and reporting about this college chain in recent years, there is more to learn.
CollegeAmerica/Stevens-Henager has sued a former employee, Debbi Potts, of Fort Collins, Colorado, claiming that the chain is entitled to the return of $7000 because Potts breached a severance agreement with the company under which Potts "specifically agreed to not disparage the reputation of" the college chain.
The agreement between CollegeAmerica and Potts also contained a remarkable provision prohibiting Potts "from personally (or through the use of any third party) contacting any governmental or regulatory agency with the purpose of filing any complaint or grievance that shall bring harm to CollegeAmerica, Denver Inc. and any of its related companies."
In the amended complaint filed in the case in 2014, CollegeAmerica/Stevens-Henager asserts that Potts violated the agreement "when she published written statements to a former employee" of the chain and "also violated the contract by filing a complaint with the ACCSC."
The ACCSC is the accrediting agency for CollegeAmerica/Stevens-Henager schools. (Earlier this year, the chain was seeking to move to a different accreditor, ACICS, but that accreditor is now at risk of losing its recognition from the Department of Education.)
In February 2013, Potts, who had been the campus director of CollegeAmerica's Cheyenne, Wyoming, campus until she resigned in 2012, reported to ACCSC multiple alleged violations by the school -- explosive allegations that are detailed below.
Potts had also filed a federal age discrimination claim, joined by the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC charged that CollegeAmerica illegally retaliated against Potts by filing its lawsuit seven days after learning she filed the discrimination charge. In June, after a three day trial, a Colorado federal jury rejected the EEOC's claims. Eric Juhlin, CEO of the nonprofit Center for Excellence in Higher Education (CEHE), which owns the CollegeAmerica and Stevens-Henager schools, said, "EEOC's decision to bring this lawsuit was a travesty and blatant abuse of its authority... This was a huge waste of taxpayer money, abusive litigation by the EEOC, and an example of the EEOC's obvious bias against employers."
Last month, Potts sent the next volley in the dispute, filing a lawsuit in federal court in Denver against CollegeAmerica/Stevens-Henager, asserting that the chain fraudulently received hundreds of millions of dollars in federal aid and directed her to lie in financial aid reports to the Education Department. The suit also claims that the chain illegally retaliated against Potts by suing her for complaining to their accreditor. (In testimony in the EEOC case, Eric Juhlin appeared to acknowledge that a provision barring a former employee from complaining to a government or accrediting authority was illegal.)
- Ms. Potts' complaint to ACCSC explained that she was instructed by CollegeAmerica's Chief Operating Officer (COO) to deceive ACCSC during an accreditation visit by hiding the bookroom from ACCSC personnel and by removing brochures, usually available to the public, advertising CollegeAmerica's "free" GED program. The COO told Ms. Potts that ifACCSC found out about the bookroom or the brochures, ACCSC would want to investigate those aspects of the school's operations and that CollegeAmerica did not want that. Ms. Potts' complaint to ACCSC explained that she was upset during the ACCSC visit because although she wanted to deal honestly with ACCSC, she was sure she would be fired for doing so.
- Ms. Potts' complaint to ACCSC also identified numerous examples of CollegeAmerica failing to maintain working and up-to-date instructional equipment, including centrifuges, electrocardiogram machines, basic graphic arts supplies, and essential computer software, even though ACCSC's Standards of Accreditation require schools to have equipment and supplies that are properly maintained, current, and similar to what is used in the associated occupational fields.
- Ms. Potts's complaint to ACCSC further disclosed that CollegeAmerica placed advertisements in the "Help Wanted" section of local newspapers, even though ACCSC's Standards of Accreditation expressly forbade CollegeAmerica from doing so. When confronted about the violation of the Standards of Accreditation, CollegeAmerica's management, which is the same as the Center's current management, said they would do whatever they wanted regardless of the Standards of Accreditation and "ask for forgiveness later."
- Ms. Pott's complaint explained that CollegeAmerica's management silenced her when she raised questions about whether CollegeAmerica's offering of "free" certified nurse assistant (CNA) courses complied with the Standards of Accreditation. Indeed, ACCSC later required CollegeAmerica to cease offering those courses.
- Ms. Potts' complaint revealed that CollegeAmerica provided misleading information to prospective students about the likelihood that they would have to take some of their classes online (aka "distance education"). Although CollegeAmerica told prospective students that it was merely possible that they would have to take some of their classes online, CollegeAmerica's actual practice was to use distance education courses whenever possible to save money. Indeed, CollegeAmerica instituted a policy of reducing the number of on-campus instructors so that it could shift more students to online courses.
- Ms. Potts' complaint to ACCSC also disclosed concerns about the nature of CollegeAmerica's advertising for its scholarship program. Just three weeks earlier, CollegeAmerica and the Colorado Department of Private Occupational Schools Board entered into a stipulated agreement after the Board had found that CollegeAmerica's advertising campaign inappropriately used student aid as an inducement to enroll in violation of the deceptive sales and trade provision of the Board rules. The Standards of Accreditation required CollegeAmerica's advertisements to be entirely honest and forthright.
- In her complaint to the ACCSC, Ms. Potts correctly predicted that the Center would retaliate against her for making the complaint, explaining to ACCSC that others with knowledge of violations are "in fear of coming forward" because of the "propensity for [CollegeAmerica's] owner to litigate anyone who dare speaks the truth."
UPDATE 08-11-14: CEHE CEO Eric Juhlin just tweeted this statement to me:
This article also appears on Republic Report.
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