For-profit College Group APSCU Has Consistently Harbored Fraudulent Schools

Companies in your sector and your trade association are opposing a rule that would motivate career colleges to provide higher quality programs, at more affordable prices. Your opposition to the gainful employment rule is hurting students, taxpayers, and our economy.
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I mailed this letter today to Mr. Arthur E. Benjamin, Vice Chair, American Institutes Holdings LLC; Mr. Donald E. Graham, Chairman and CEO, Graham Holdings Company; and
Mr. Steve Gunderson, President and CEO, Association of Private Sector Colleges and Universities.

Dear Mr. Benjamin, Mr. Graham, and Mr. Gunderson:

I am writing regarding the career college sector and the gainful employment rule. The Obama administration's proposed rule, implementing a congressional requirement, would, eventually, remove federal student aid from some career education programs that consistently leave their students with debt they cannot afford to repay.

Companies in your sector, and your trade association, the Association of Private Sector Colleges and Universities (APSCU), are aggressively opposing a rule that measures the debt of former career college students -- a rule that would motivate career colleges to provide higher quality programs, at more affordable prices. Your opposition to the gainful employment rule is hurting students, taxpayers, and our economy.

Just to be clear, I am not one of those people whom Mr. Gunderson regularly asserts are "ideologically opposed" to your sector. I don't oppose the idea of for-profit companies providing higher education. There are some good programs today in for-profit education, and there are many outstanding teachers even at poorly-performing schools. Students enrolled in career education programs deserve respect for pursuing their dreams and better lives for their families. With appropriate rules in place, for-profit schools could provide innovative competition for the more traditional higher education sectors, to the benefit of all. But there need to be real rules governing the provision of federal aid, sensible rules that give career training schools incentive to compete and make money by helping students, rather than the current rules, under which profits are maximized instead by abusing students.

I want to lay out a few facts that are in the public record and suggest a few conclusions. I would be grateful to hear your responses, through written replies, or a meeting, or a discussion in a public forum. (I have posted this letter online at with links to source materials.)

1. Arthur Benjamin was the CEO of ATI Career Training Center from 2005 to 2011. The company had campuses in Florida and Texas and offered programs in fields including health care, information technology, and auto repair.

2. After repeated media investigations of ATI exposed troubling behavior, the Justice Department joined a federal whistleblower lawsuit and charged that ATI engaged in systematic fraud against students and taxpayers. According to the whistleblower lawsuits, ATI, driven to sign up students and cash their federal financial aid checks, looked for recruits in homeless shelters and strip clubs, falsely promising jobs with big salaries. ATI signed up non-English speakers for classes conducted in English. An ATI staffer said, "the ATI culture... was to recruit anyone with a pulse." The lawsuits allege that ATI falsely told students who had previously dropped out that their current federal loans would be forgiven if they re-enrolled, but ATI in fact had no intention of paying off such debt. ATI falsified student transcripts and attendance records. ATI deceived state officials monitoring the school's job placement rates by making up false jobs and false employers, for example: inducing a worker at a trailer manufacturer to falsely tell authorities that ATI graduates worked there; creating fake business cards for students that the school couldn't place; counting business administration graduates as placed in their field if they worked as cashiers; and employing graduates for a single day past graduation at ATI itself and then counting them as placed.

3. ATI's interim CEO, Michael Gries, told the Miami Herald last year that all of the alleged misconduct at ATI happened under Mr. Benjamin's term as CEO.

4. About $236 million in federal student aid went to ATI starting in 2005.

5. ATI was, until it was shut down, a member of APSCU.

6. Arthur Benjamin, during the period that he was ATI's CEO, served on the board of directors of APSCU, which was then called the Career College Association. He also served as co-chair of APSCU's political action committee.

7. Arthur Benjamin remains the vice chair of the three-member board of directors of American Institute. American Institute is a member of APSCU. The company is based in White Plains, New York, and runs health, beauty, and technical training programs in Florida, Connecticut, and New Jersey. According to Mr. Benjamin's LinkedIn profile, he has been vice chair of the American Institute board since February 2008 and "he was one of its founders and a partner in its forerunners Fox Institute, School of Health, and American Institute of Massage Therapy."

8. FastTrain College, raided by the FBI in 2012 amid allegations of fraud, was a member of APSCU until it was shut down.

9. American Career Institute, sued last year for fraud by the Massachusetts attorney general, was a member of APSCU until it shut down.

10. Corinthian Colleges, now being sued for fraud by the attorneys general of California and Massachusetts, and also under investigation by at least 14 other state attorneys general and at least four federal agencies, is a member of APSCU.

11. Graham Holdings Company, whose CEO is Donald Graham, owns about 4.5 percent of Corinthian Colleges.

12. Kaplan Higher Education, wholly owned by Graham Holdings, is a member of APSCU.

13. Kaplan is under investigation by the attorneys general of Delaware, Illinois, and Massachusetts. Two weeks ago, Kaplan resolved an investigation by Florida's attorney general by entering into an agreement to make clear disclosures to students on matters including program costs and accreditation. Also, according to the Florida attorney general, "During the course of the investigation, Kaplan voluntarily waived tuition and fees for more than 2,400 Florida students at a cost of more than $6,000,000." In 2012, Kaplan College's Charlotte campus surrendered its state license to operate a dental assistant program following allegations that its officials misled students about the credentials they would receive after graduating.

14. Steve Gunderson is the CEO of APSCU.

The facts concerning ATI, FastTrain, American Career Institute, Corinthian, and other schools suggest that APSCU has engaged in a pattern of harboring companies that engage in systematic fraud and abuse of their students. Bad for-profit college companies tend to remain APSCU members until they cease to exist. The idea that Arthur Benjamin, whose institution was caught committing egregious fraud on his watch, remains affiliated with APSCU through another for-profit college, shows how little APSCU cares about appearances, let alone the welfare of students.

At the same time, Donald Graham and Steve Gunderson have been among the most persistent advocates against reforms that would hold accountable such schools that repeatedly disserve their students. By pressuring the executive branch and Congress to weaken or cancel the gainful employment rule, the incentive compensation rules, and other accountability measures, and by going to court with the aim of striking these rules down, APSCU has pushed to retain a status quo under which institutions like ATI, FastTrain, and Corinthian can act with impunity, until the weight of student and staff complaints and financial irresponsibility bring them down.

Donald Graham and his company are now engaged in another round of Washington meetings, arguing that Kaplan has greatly increased its value to students. If that is so, why would Kaplan work so hard to block a regulation that penalizes only those career education programs that consistently leave students with heavy debt? In that regulatory environment, quality schools would have a decided advantage.

For decades, some for-profit colleges have engaged in a race to the bottom, combining sky-high prices with low or mixed quality programs, and admitting thousands of students who would be highly unlikely to benefit from a given program, just to cash their financial aid checks. It may only be because the Obama Administration got serious about imposing some accountability on career training programs, and because of the corresponding public awareness of abuses, that some in your sector have moved toward certain reforms. And widespread abuses continue to this day. If you do manage to defeat these accountability measures, there is a serious risk that at least some actors in your sector will return wholeheartedly to deceptive and coercive recruiting, overpriced and low quality programs, misleading and stonewalling of regulators, and other bad acts.

Had a strong gainful employment rule been in effect by now, instead of being delayed by the pressure of APSCU, Steve Gunderson, Donald Graham, and others, Corinthian and other schools might have long ago decided it was time to reform their operations, and students at Corinthian campuses and elsewhere might have been much better served.

Given APSCU's record of harboring bad colleges, APSCU, and institutions that remain members of APSCU, have undermined their credibility as participants in debates on the gainful employment rule or any other issue in higher education.

I look forward to your response.


David Halperin

A copy also appears on Republic Report.

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