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Federal officials curtail probe into fraud at for-profit colleges

The DeVry Education Group, now known as Adtalem Global Education, was among several for-profit institutions under federal investigation over their advertising, recruitment practices, and job placement claims.
The DeVry Education Group, now known as Adtalem Global Education, was among several for-profit institutions under federal investigation over their advertising, recruitment practices, and job placement claims. (J. Pat Carter/Associated Press/File)

WASHINGTON — Members of a special team at the Education Department that had been investigating widespread abuses by for-profit colleges have been marginalized, reassigned, or instructed to focus on other matters, according to current and former employees.

The unwinding of the team has effectively killed investigations into possibly fraudulent activities at several large for-profit colleges where top hires of Betsy DeVos, the education secretary, had previously worked.

During the final months of the Obama administration, the team had expanded to include a dozen or so lawyers and investigators who were looking into advertising, recruitment practices, and job placement claims at several institutions, including DeVry Education Group.

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The investigation into DeVry ground to a halt early last year. Later, in the summer, DeVos named Julian Schmoke, a former dean at DeVry, as the team’s new supervisor.

Now only three employees work on the team, and their mission has been scaled back to focus on processing student loan forgiveness applications and looking at smaller compliance cases, said the current and former employees, including former members of the team, who spoke on the condition of anonymity because they feared retaliation from the department.

Education Secretary Betsy DeVos scaled down the inquiry.
Education Secretary Betsy DeVos scaled down the inquiry.(Erin Schaff/New York Times/File 2018)

In addition to DeVry, now known as Adtalem Global Education, investigations into Bridgepoint Education and Career Education Corp., which also operate large for-profit colleges, went dark.

Former employees of those institutions now work for DeVos as well, including Robert S. Eitel, her senior counselor, and Diane Auer Jones, a senior adviser on postsecondary education.

Last month, Congress confirmed the appointment of a lawyer who provided consulting services to Career Education, Carlos G. Muñiz, as the department’s general counsel.

The investigative team had been created in 2016 after the collapse of the for-profit Corinthian Colleges, which set off a wave of complaints from students about predatory activities at for-profit schools.

The institutions had been accused of widespread fraud that involved misrepresenting the benefits of their programs, which could leave students with huge debts and no degrees.

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Corinthian’s bankruptcy affected more than 2,000 Massachusetts students who had accumulated loans while attending the company’s Everest Institute campuses in Brighton and Chelsea. In 2016, the closure of ITT Tech, another for-profit institution, affected more than 550 students who attended campuses in Norwood and Wilmington. Most of those students were low-income.

Elizabeth Hill, a spokeswoman for the Education Department, attributed the reduction of the investigative group to attrition and said “conducting investigations is but one way the investigations team contributes to the department’s broad effort to provide oversight.”

She said none of the new employees who had previously worked in the for-profit education industry had influenced the unit’s work.

She also said the team’s deployment on loan forgiveness applications was an “operational decision” that “neither points to a curtailment of our school oversight efforts nor indicates a conscious effort to ignore ‘large-scale’ investigations.”

Aaron Ament, a former chief of staff to the office of the department’s general counsel who helped create the team under President Obama, said it had been intended to protect students from fraudulent for-profit colleges.

“Unfortunately, Secretary DeVos seems to think the colleges need protection from their students,” said Ament, who is president of the National Student Legal Defense Network.

Senator Elizabeth Warren, Democrat of Massachusetts, also criticized the team’s new direction.

DeVos has taken a number of actions to roll back or delay regulations that sought to rein in abuses and predatory practices among for-profit colleges — actions that Warren and other Democrats have said put the industry’s interests ahead of those of students.

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“Secretary DeVos has filled the department with for-profit college hacks who only care about making sham schools rich and shutting down investigations into fraud,” Warren said.

DeVry did not respond to requests for comment, and Schmoke declined to be interviewed. Schmoke recused himself from matters involving DeVry, according to the department.

DeVry agreed to pay $100 million in 2016 to settle a separate Federal Trade Commission lawsuit alleging that it misled prospective students with ads about employment and salaries after graduation.

The Education Department announced a limited settlement with DeVry the same year after finding that the school could not substantiate claims that 90 percent of its alumni since 1975 were employed in their field of study within six months of graduating. But the investigative team continued to look into its job placement claims and other recruiting practices.

Hill confirmed the investigation, but said it had been suspended early last year before President Trump took office.

The former and current employees disputed Hill’s account and said the group and its work had become an issue of contention during meetings with the Trump transition team.

Several of the employees said that there had been a staff push to continue the investigation as recently as this year, with no result.

The group had also been looking into similar issues of recruiting and advertising at Bridgepoint and Career Education during the latter part of 2016, the employees said. Hill declined to comment on those cases.

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In a statement, Bridgepoint said the company was aware of a review beginning in 2015 but had “not been made aware of any investigation or involvement by the enforcement unit.” Career Education did not respond to requests for comment.

Eitel, the senior adviser to DeVos, last year recused himself from issues involving both Bridgepoint and Career Education, where he was a top lawyer.

Jones, the senior adviser on postsecondary education, has not recused herself from matters involving Career Education, where she previously worked. The department did not say whether Muñiz had recused himself from issues involving the company.

Jones worked for about five years as a senior vice president at Career Education after serving as assistant secretary for postsecondary education for President George W. Bush. She joined the Trump administration early this year.

In a letter to DeVos last week, Warren and nine other Democratic senators called on the department to reveal the extent of Jones’s ties to the industry, suggesting she had worked “on behalf of bad actors.”

The department issued an extensive statement defending Jones, calling her background an “asset” that would advance the department’s goals. Jones has had “vast higher-ed experience in community colleges, research universities, and for-profit colleges,” it said in the statement, adding that she had spent only a fraction of her career in the for-profit industry.

The investigative team emerged in the wake of Corinthian Colleges’ shutdown as the Obama administration faced criticism for providing loans to students attending other for-profit schools that had also been accused of illegal activity, substandard practices, or predatory behavior.

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The remaining investigators have been examining student requests for loan forgiveness, like one filed by Josue Perez.

Perez, 30, said he was persuaded by an admissions officer at Corinthian Colleges’ Everest Institute in Massachusetts to take out a $5,000 loan to attend the school for massage therapy.

He said the officer told him the college would help him find a job when he graduated. But Perez said he never received the help and he still has not worked in the field. The loan has since tripled to more than $15,000.

Perez has been waiting for more than a year for the Education Department’s decision on his claim to forgive the $15,000, he said.

In the meantime, he worries about the department’s new direction.

“They’re basically removing the police force that keeps these colleges in check,” he said.