Florida’s attorney general has launched a civil investigation into five for-profit higher education companies for alleged deceptive recruiting tactics, misrepresentations made to students about financial aid and accreditation, and other fraudulent and potentially illegal practices (“Florida AG Investigating Five For-Profit Schools,” The Wall Street Journal, Oct. 19, 2010).
The companies and schools under investigation include Kaplan Inc., which is owned by the Washington Post Co.; Education Management Corp. and some of its Argosy schools; Everest College and other institutions owned by Corinthian Colleges; Apollo Group’s University of Phoenix; and the privately held MedVance Institute.
Attorney General Bill McCollum is taking a closer look at these companies as a result of consumer complaints and evidence brought to light in August by an undercover Government Accountability Office probe of 15 for-profit colleges that found all 15 schools guilty of various deceptive and fraudulent practices.
After sending in undercover government agents posing as students, the GAO issued a report revealing that some recruiters at the for-profit schools were recorded encouraging the agents to falsify financial information on the Free Application for Federal Student Aid (FAFSA) in order to qualify for more money in government-issued Pell Grants and student loans, while other recruiters wildly exaggerated the possible earning potential of degrees awarded by the schools.
Many for-profit colleges derive the bulk of their income from federal financial aid funds awarded to students in the form of federal grants and college loans — taxpayer-subsidized money that can account for as much as 90 percent of a school’s total revenue. Apollo Group, in fact, is the single largest recipient of federal student loan funds in the United States.
None of the recruiters targeted in the GAO probe provided clear information about costs and lengths of degree programs or about the schools’ graduation rates, as required by federal regulations.
“We have received a number of complaints. The combination of the complaints and the [GAO] report that came out” prompted the attorney general’s office to begin an investigation, said Ryan Wiggins, deputy communications director for McCollum (“Washington Post’s Kaplan, For-Profit Schools Are Focus of Florida Probe,” Bloomberg, Oct. 19, 2010).
Although Wiggins declined to specify the source of the complaints or answer questions about other details, the attorney general’s website listed the issues being investigated as “alleged misrepresentations regarding financial aid” and “alleged unfair/deceptive practices regarding recruitment, enrollment, accreditation, placement, graduation rates, etc.”
Representatives from Kaplan, Apollo, and Corinthian told The Wall Street Journal that they had not yet been notified of the attorney general’s investigation, while representatives from Education Management and MedVance were reported as being unavailable for comment.
In response to news reports and inquiries, the Apollo Group issued a statement saying that the company supports “efforts to enhance accountability within higher education” and strives “to play a leadership role in continuously improving and transparently reporting the outcomes and achievements of students served by our schools.”
The news of McCollum’s investigation into the for-profit schools comes on the heels of the announcement from Oregon state officials that Oregon has joined a class-action lawsuit against the University of Phoenix, seeking $10 million for investment losses resulting from the school’s alleged securities fraud, deceptive marketing to students, and fraudulent reporting of income from government-backed student loans.
Further Reading
U.S. Government Accountability Office. “For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices.” Testimony submitted to the U.S. Senate Committee on Health, Education, Labor, and Pensions. August 4, 2010.
Florida Office of the Attorney General. Civil investigation into Kaplan, Inc. a/k/a Kaplan Educational Centers, Inc., a/k/a Kaplan University, f/k/a Kaplan College. Case number L10-3-1192.
Florida Office of the Attorney General. Civil investigation into University of Phoenix, Inc. Case number L10-3-1193.
Florida Office of the Attorney General. Civil investigation into MedVance Institute, Inc. a/k/a KIMC Investments, LP, Kann Institute for Medical Careers, Inc. Case number L10-3-1194.
Florida Office of the Attorney General. Civil investigation into Everest College a/k/a Florida Metropolitan University a/k/a Everest University and Everest Institute; National School of Technology, Inc.; Florida Metropolitan University. Case number L10-3-1195.
Florida Office of the Attorney General. Civil investigation into Argosy University of Florida, Inc.; Argosy Education Group, Inc. d/b/a Argosy University; Education Management Corp. Case number L10-3-1196.
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