A network of U.S. marketing companies run glossy websites promising jobs, health benefits, food stamps, and heating assistance -- sites with names like localemploymentnetwork.org or medicaidinsurancebenefits.com. But according to former employees of a company connected to these operations, the real purpose of these sites is a classic bait-and-switch: to get low-income people, single mothers, veterans, and unemployed older people on the telephone and push them into high-cost for-profit college programs.
Based on the accounts of these employees, and documents they have provided to Republic Report, the operations may well be in violation of federal statutes prohibiting deceptive marketing and unwanted telephone sales calls, as well as Department of Education laws and regulations barring payment of sales commissions to college recruiters. At the very least, they are guilty of using sleazy tactics to sell poor-quality products.
The for-profit college companies that have obtained leads on prospective students from these questionable operations include many of the biggest industry players: the University of Phoenix, Education Management Corp., Corinthian Colleges, ITT Tech, Kaplan, Career Education Corp., Bridgepoint, and Stevens-Henager -- all of which are currently under investigation by federal and / or state law enforcement for their own alleged internal fraudulent activities.
But these bait-and-switch websites reveal another layer of deceit in the web of companies that find new for-profit college enrollees, each of whom can bring with them tens of thousands of dollars in federal education aid, all financed by U.S. taxpayers.
A Shady Website Leads To a Boiler Room
One such phishing website is localemploymentnetwork.org, which promises visitors they can "Discover the Latest Job Opportunities in Your Area." [UPDATE 11-12-14 2:30 pm and 5:25 pm: Functionality on that site appears to have been disabled 90 minutes after I posted this article. The links in the rest of this paragraph now go to screenshots we saved before we posted. Republic Report also made a functional backup copy of the scam site.] A visitor to the site is prompted to enter her chosen job and zip code. If she does, some job listings may appear on the screen, but they are grayed-out and the the visitor cannot access them without filling out a "Get Started" pop-up box, requiring a phone number and email address, and offering a vague small print legal notice of consent to be contacted "regarding education details."
And with that, the visitor's phone will ring, and someone like Jack Suenram will be on the other end. Suenram worked from 2010 until earlier this year at an operation called EdSoup, whose parent company is called EduTrek LLC, based in Sandy, Utah. As an EdSoup phone rep, Suenram had only one objective: to sell people programs, mostly online programs, at for-profit colleges.
Suenram resigned because he felt that being part of a deception operation was "demoralizing and disgusting." But at the EdSoup call center in Salt Lake City, scores of telemarketers still dial the numbers that visitors enter into websites advertising jobs and other services unrelated to college programs.
Suenram, a retired U.S. Army captain, had worked for Pentagon contractors for a period and then began working in call centers. But he says he had "never seen anything even remotely like EdSoup before."
When Suenram started in 2010, EdSoup employed 20 telemarketers, but by 2013 the ranks had grown to over 100, making some 20,000 calls a day.
The former EdSoup employees report that about 95 to 97 percent of those people called reject the pitch to discuss education opportunities. (Although the localemploymentnetwork site pop-up has a check box to express an interest in education, former EdSoup reps say that people were routed to them whether or not they checked such a box.) The former employees supplied me with the names and contact information for numerous people who complained, often in frustration or anger, that they were not seeking college programs, along with notes of complaints -- "Laquinta ... just wanted housing assistance stop calling please!"; "Mike ... I asked to be put on the DNC [Do Not Call] list and I have been called 14 times I want health insurance"; "Demetri - looking for job on cruise ship ... no ed interest." Some complained of getting 10 to 20 phone calls in a single morning.
The 3 to 5 percent who agree to discuss education opportunities are often steered, in a coercive way, by EdSoup reps toward the programs being sold by client for-profit colleges. For example, Suenram says, if a single mother in Atlanta expressed interest in a hands-on automotive repair course in her area, but the EdSoup marketers had no such program to sell at the moment, they were directed by managers to push the woman into an online business degree. Indeed, most of the programs pitched are purely online, for degrees including medical assisting and criminal justice.
The former employees say they were instructed to make one attempt to change a person's mind after the person said he or she was uninterested in education and didn't want to be called by a school rep.
At least one class action lawsuit has been filed against EdSoup, earlier this year in federal court in northern California, for violation of the federal Telephone Consumer Protection Act, which includes the Do Not Call prohibitions.
Most of the people who agree to EdSoup's push to speak with a rep for one of the colleges, according to Suenram, are low-income African Americans, to whom the pitches seem tailored. EdSoup would have been fine "to screw anyone," Suenram says, "but, in the end, that's who you screw." (Nearly all of the EdSoup telemarketers over the past five years have been white.) Dave Madsen, who worked at the company from 2010 until April 2104 and was promoted to "team leader," says of EdSoup, "They are carpet-bombing the poor, poor South." Others on the receiving end of EdSoup college sales calls included people who were terminally ill or suffering from permanent brain damage.
Sharon Ewer, who worked at EdSoup from 2012 until September 2014, left because "I didn't feel what they were doing is ethical." She says she "felt like I wanted to throw up every single day," because her job was selling "ridiculously overpriced" for-profit college programs to people who often had ended up on the phone because "they don't have enough money for food."
The EdSoup calling operation spoofed outgoing phone numbers, frequently so they appeared on caller ID to come from the prospective student's local area. One person who had given his information on one of the fake jobs sites told the EdSoup rep that the caller ID said "Walmart."
Sometimes the eager rep from the for-profit college, having received electronic notification from an EdSoup rep that the person on the phone had agreed to talk, was already dialing the prospective student before the EdSoup marketer had even wrapped up the initial call.
Madsen says many of the client for-profit college companies listened in to EdSoup calls, micromanaging the pitches, and always pushing in one direction -- for the EdSoup reps to be more aggressive in selling. With one caveat: The schools sometimes expressed concern that the reps not violate the FTC's Do Not Call rules.
In addition to traffic from the jobs and welfare sites, EdSoup got leads on people who responded to scams promising $1,000 Target and Best Buy gift cards, according to the employees. And beyond peddling predatory colleges, the marketers pushed an online GED program to people who said they had no high school degree and thus weren't eligible for college.
The EdSoup telemarketers were not told by management that many of their leads were coming from the bait and switch sites, but based on their conversations with bewildered and annoyed people in the field, they quickly figured it out. Doing their own research, internally and on the Internet, they found the bogus sites that fueled their boiler room operation.
Who's Behind These Deceptive Operations?
The localemploymentnetwork.org website and similar sites, according to Suenram and Madsen, are operated by a Salt Lake City company called Neutron Interactive. Clicking the "contact us" button on the localemploymentnetwork site brings up "mailto:email@example.com." Copies of call sheets that Suenram provided me show that many of EdSoup's leads came from Neutron Interactive.
Neutron Interactive's website highlights the company's membership and active participation in the for-profit colleges' main trade association, APSCU. On one page, Neutron brags that "Some Of Our Biggest Fans" include Corinthian's Everest University, Education Management's Art Institutes, and Bridgepoint's Ashford University.
Another bait-and-switch site is medicaidinsurancebenefits.com, which invites visitors to "Find and Seek Medicaid Benefits In Your Area." Here, again, before proceeding, the user must provide an email address and phone number, and "agree" to a small print notice "to be contacted to discuss job openings, career alerts, legal services, and educational opportunities." The contact address listed on the site is in the Philippines.
The jobs or other actual information on such sites appear to simply be scraped from legitimate sites operated by other companies. Other sites that EdSoup employees believe were used for college lead generation in the past include the now-deactivated americanrecoveryresources.com and getmedicaljobs.com.
The shady world of online lead generators seems to have met its perfect mate in predatory for-profit colleges, which take billions annually in taxpayer money and leave tens of thousands of students with worthless degrees and mountains of student loan debt. While celebrities and pillars of the Washington, D.C., establishment -- like Trent Lott, Dick Gephardt, and Colin Powell -- have been paid to be the public face of for-profit colleges as they have fought to avoid accountability for their abuses, the real work of the industry often takes place behind the scenes, in the deceptive, high-pressure boiler rooms of the lead generators and the for-profit colleges themselves.
One former EdSoup employee says of the people the company preys on, "It's really sad because all these folks wanted in the first place was a job, and now they are in a program reluctantly that they will probably never graduate from and have now racked up thousands of dollars in debt that will shackle them the rest of their lives and will not lead them to a job anyway."
If EdSoup employees brought concerns to management about ethical and potential legal violations, says Sharon Ewer, "they would say we were being negative."
Do These Operations Break The Law?
EdSoup telemarketers were driven to herd people into for-profit college programs by a powerful motivator -- cold hard cash, sometimes, apparently, in the form of commissions. The former employees allege that some EdSoup telemarketers were paid a commission for connecting people with colleges, and that client colleges paid EdSoup a commission for each student who provided information about study areas of interest and eligibility for financial aid and then engaged in a phone "interview" with a school rep. The former employees have provided me extensive information about how these commissions functioned. According to their account, managers told new employees that they could not receive commissions because the U.S. Department of Education had changed the rules, barring lead generators like EdSoup, in most cases, from paying marketers based on the number of students signed up. But the managers claimed that some longer-tenured employees were grandfathered and able to keep getting paid on commission.
Federal statutes, plus 2010 regulations and 2011 guidance issued by the Department of Education, provide that third party recruiters may not receive a payment from a college based on a targeted solicitation of a potential student, and nor may such third party lead generators pay sales commissions to their own employees. There is no grandfathering of employees. These incentive compensation regulations also make client schools responsible for violations of the rules by lead generators acting on their behalf.
I don't know what compensation system actually appears on EduTrek's books -- company officials have not responded to my requests for comment (see below) -- but some employees clearly believed they were being paid on commission, and for purposes of the law -- aimed at preventing students from being subjected to high-pressure, commission-driven sales tactics -- that should be what matters.
Other laws are implicated by the bait and switch operations. The Federal Trade Commission Act, as well as state consumer protection laws, prohibit deceptive business practices. In 2012, a group of state attorneys general led by Kentucky's Jack Conway shut down the website GIBill.com, which gave the appearance of being an official government site but actually was operated by the lead generation company QuinStreet and steered veterans to predatory for-profit colleges. QuinStreet, an APSCU member, also paid $2.5 million in penalties.
EdSoup logs show that QuinStreet is the name of one of the "portals" or partners where EdSoup can find additional outgoing college leads with which to connect students. EdSoup documents also list an "eStomes MSPortal"; eStomes, is the name of a marketing company whose founder is also the co-founder, with EduTrek's president, of Call Criteria, a company (with operations in the Philippines) that monitors the quality of call centers, including EdSoup. EdSoup employees say eStomes also provided incoming leads of potential customers for EdSoup reps to call.
I reached out to the following for comment but have not yet received a response: Chad Tatton, president and part owner of EduTrek; Christopher Sower, founder and part owner of EduTrek; Raymond Fitzgerald, a New York lawyer and part owner of Edutrek; Dan Caffee, founder and CEO of Neutron Interactive; and Shaun Ritchie, co-founder and partner of Neutron Interactive. (EduTrek was required to disclose its owners and creditors in a court filing in the California Do Not Call lawsuit, for which their lawyer is Raymond Fitzgerald. Another notable investor in EduTrek is Utah's David T. Cumming.)
I did manage to engage in a lengthy online chat with Ryan Stomel, founder of Los Angeles-based eStomes, when I was visiting the company's website and got a pop-up saying, "I see you've been here a few times before. Would you like to chat with Ryan?" My answer was yes, please. Stomel, who has an MBA from the University of Southern California and has made presentations at APSCU meetings, told me he has "no knowledge of how EdSoup runs its operation." When I asked if the company he runs with EduTrek's Chad Tatton, Call Criteria, did call center quality assurance for EdSoup, as former EdSoup employees told me, he said he could not disclose the firm's clients due to "privacy contracts that we have in place." When I asked Stomel, "What is quality assurance in this context of selling college admissions? What are you looking to verify -- speaking generally, and not about EdSoup, if you prefer?" he offered jargon: "Call Criteria verifies the score card generated by our clients." Stomel also says that eStomes has no college sales portals connecting from call centers like EdSoup, and he says he does not know where EdSoup gets its incoming leads.
Presented with information about EdSoup's and Neutron's operations, higher education policy expert Barmak Nassirian said about America's predatory for-profit colleges, "The industry's recidivism is matched only by its creativity in devising new ways to prey on unsuspecting victims. The for-profit sector seems intent on delivering new and innovative examples of misrepresentation, deception, and unfair practices on a continuing basis, and will keep doing so until agencies of jurisdiction step in and enforce the law. It would be outrageous to let taxpayer-supported for-profits and their agents so openly victimize people and get away with it."
An education technology executive who has worked with for-profit colleges said these schemes were not surprising in the least. "The biggest misconception about for profits," this executive says, "is that they are schools. They are call centers that happen to have a school built around it."
Since many of the big for-profit colleges get around 85 to 90 percent of their revenue from federal student aid, and since they spend a large percentage of that revenue on marketing and recruiting, including through lead generators, we taxpayers are funding all these scams. What do you think about that?
And are you proud of this industry you've been representing, Don Graham, Mitt Romney, Marc Morial, Lanny Davis, Anita Dunn, Jeffrey Leeds, Suze Orman, and Steve Gunderson?
This article also appears on Republic Report.