For-Profit Education

Who's Regulating Troubled For-Profit Institutions? Executives at Other Troubled For-Profit Institutions

February 26, 2016

Plenty of accreditors have come under scrutiny for failing to hold colleges — especially for-profit institutions — accountable for low rates of graduation and high rates of student-loan default. But none has felt more heat than the Accrediting Council for Independent Colleges and Schools, or Acics.

Acics allowed Corinthian Colleges Inc. to keep on operating right up until the for-profit college chain collapsed after evidence emerged that its campuses had lured thousands of needy students into predatory loans. The accreditor placed a Corinthian campus on its "honor roll" just months before the U.S. Education Department forced the college to shut down.

Acics, which oversees hundreds of for-profit institutions, is now the target of two government investigations. A ProPublica analysis also found that colleges overseen by Acics had the lowest graduation rates among those of any accreditor.

So who are the people behind the beleaguered accreditor? They include executives at some of the most scandal-plagued colleges in the country.

We looked at all Acics commissioners since 2010 and found that two-thirds of them have worked as executives at for-profit colleges while sitting on the council. A third of the commissioners came from institutions facing consumer-protection lawsuits, investigations by state attorneys general, or federal financial monitoring.

Consider Beth Wilson. Ms. Wilson, executive vice president of Corinthian Colleges, joined Acics in 2014, less than three months after Kamala D. Harris, the California attorney general, filed a lawsuit against Corinthian for deceptive advertising and falsifying job-placement numbers. Ms. Wilson was no stranger to accreditation, having previously been the chair of another accreditor of primarily for-profit colleges. And she was no stranger to Corinthian’s problems. According to the attorney general’s continuing suit, Ms. Wilson ordered employees to alter Corinthian’s job-placement statistics.

Ms. Wilson did not respond to requests for comment.

Having a majority of commissioners be industry executives violates no federal rules. The Department of Education requires only a small fraction of commissioners to be from outside the industry, and accrediting agencies for both nonprofit and for-profit colleges are largely composed of industry players.

However, some education experts argue that potential conflicts of interest in for-profit accreditation are especially troubling because of the heightened scrutiny of the industry.

Robert M. Shireman, a former deputy under secretary in the Department of Education and currently a senior fellow at the Century Foundation, calls the accreditation process "a giant cesspool of corruption." Mr. Shireman, who has long worked to bolster regulation of for-profit colleges, says the accreditation process "needs to be independent" and not overseen by the industry itself.

"It would be like getting the CEOs of the airlines together," he says, "to review whether the airplanes are safe."

"The scandals surrounding the for-profit-college industry have thrown a spotlight on flaws in the accreditation system," says Stephen Burd, a senior policy analyst at New America, a Washington think tank, and a former reporter for The Chronicle. "These agencies turn a blind eye to abuses, and lobby on behalf of the industry."

The 15 commissioners of Acics, who are unpaid, are the decision makers on whether a college receives accreditation — a necessary seal of approval to receive federal student-aid funds. Acics, like other accrediting agencies, is funded through membership fees from the colleges it oversees, and its commissioners are mainly peer reviewers at member institutions.

“The scandals surrounding the for-profit-college industry have thrown a spotlight on flaws in the accreditation system.”
Albert C. Gray, executive director of Acics, says the agency has a strict conflict-of-interest policy and recusal practices that do not allow commissioners to sit in on hearings that involve their own colleges.

"It might appear that it’s compromised by the fact that the peer reviewers are affiliated with the institutions," he says. "But while that may be an appearance, proper protections are put in place in the system to ensure that doesn’t occur."

Here is a rundown of a handful of commissioners, their day jobs, and what their companies have been accused of:

Commissioners David Luce and Beth Wilson

When they served: Mr. Luce served from 2008 to 2013 (his second term with the agency); Ms. Wilson served in 2014.

Where they also worked: Corinthian Colleges Inc. Mr. Luce was assistant vice president for accreditation and licensing; Ms. Wilson was executive vice president.

What their institution was getting heat for: A whole lot, including deceptive marketing techniques and predatory loan practices. The list includes investigations by the Government Accountability Office, more than 20 state attorneys general, the Department of Education’s inspector general, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission. The Government Accountability Office investigation resulted in a congressional hearing, and the Consumer Financial Protection Bureau secured a default judgment finding Corinthian liable for more than half a billion dollars. Many of the other investigations are continuing.

What happened to their institution’s accreditation: Not much. In the years leading to Corinthian’s collapse, the number of institutions that Acics accredited increased from 35 in 2005 to 57 in 2013. By the time the Education Department reached a deal with Corinthian to close and sell its campuses, Acics was the chain’s leading accreditor. In 2014, just months before the department took action, Acics put a Corinthian institution on its honor roll. Acics did not revoke the accreditation of any of Corinthian’s campuses before the department stepped in.

How much federal aid their institution received: Around $1.4 billion annually.

What they say: Neither David Luce nor Beth Wilson responded to requests for comment. Mr. Luce left Acics’ council at the end of his term, and Ms. Wilson resigned midway through 2014, according to Acics officials.

Commissioners John Euliano and Richard Bennett

When they served: Mr. Euliano has served since 2011; Mr. Bennett has served since January.

Where they also worked: Southern Technical College. Mr. Euliano is the founder; Mr. Bennett is senior vice president for financial aid.

What their institution was getting heat for: Accepting invalid high-school diplomas and financial compliance. The Miami Herald reported last year that Southern Technical College and others had enrolled students without proof that they finished high school. Two Southern Technical College campuses have also been flagged by the Department of Education for problems of financial responsibility as of December 2015. One campus received the government’s lowest possible financial rating for the 2012 academic year (the most recent data), a score shared by only 40 of 3,400 institutions across the country. From 2011 to 2012, the college was subject to a Department of Education review to confirm that it met federal student-aid requirements. In a review of two years of data, the department found more than $200,000 in liabilities because of compliance problems, including incorrect financial-aid calculations and invalid high-school diplomas.

What happened to their institution’s accreditation: Again, not much. None of Southern Technical College’s campuses have had their accreditation suspended or revoked. And in 2012 three of the campuses were put on the accrediting agency’s honor roll.

How much federal aid their institution received: $36 million during the 2013 academic year.

What they say: Mr. Euliano told ProPublica in an email that there is no conflict of interest within Acics’ council. "Any insinuation that there is any ‘home cooking’ or that our peer-review process is somehow ‘the fox running the hen house’ (it seems like that is where you are going) is absolutely 100% false," he said. (Read his email.) Mr. Euliano also described the Education Department review as "not out of the ordinary" and the liabilities that were found "small compared to the amount of aid processed." He sold the college in 2012, staying on for a year to help with the transition.

Mr. Bennett said in an email that the low financial score was a result of the sale, and that it wasn’t a good indicator of the company’s fiscal viability. He also said that landing on the Department of Education’s list of colleges with financial-compliance problems is "not always representative of any wrongdoing/findings from the department." The department has described the list as a "caution light."

Commissioner Francis Giglio

When he served: 2009 to 2012.

Where he also worked: Lincoln Educational Services. Mr. Giglio is vice president for compliance and regulatory services.

What his institution was getting heat for: Eric T. Schneiderman, New York’s attorney general, opened an investigation into Lincoln Educational Services in 2011 to see whether the company had misrepresented  its education quality, tuition costs, program accreditation, or ability to find jobs for students.

What happened to his institution’s accreditation: Yet again, nothing, really. None of the college chain’s campuses have had their accreditation suspended or revoked.

How much federal aid his institution received: $200 million during the 2013 academic year.

What he says: "If, in fact, in that institution there was some type of conviction or determination that there was fraud, waste, or abuse, then that person would no longer be on the commission," Mr. Giglio told ProPublica. "But in the meantime, there’s always the opportunity for that person to say, This is fiction, these students have said these things, but this isn’t truly what’s happening." Mr. Giglio said his company had not heard from the attorney general since it sent the requested documents. Mr. Schneiderman’s office declined to comment.

Commissioner Jeanne Herrmann

When she served: 2009 to 2015.

Where she also worked: Globe University/Minnesota School of Business. Ms. Herrmann is chief operating officer.

What her institution was getting heat for: Job-placement numbers and marketing tactics. In 2013 a former dean at Globe University won a whistle-blower lawsuit against the institution. The dean said she had been fired after complaining about fraudulent job-placement numbers and misleading recruiting practices. Lori Swanson, Minnesota’s attorney general, filed a lawsuit against Globe in 2014, accusing it of misrepresenting job opportunities to students. That suit is continuing.

What happened to her institution’s accreditation: Again, not much. None of the college’s campuses have had their accreditation suspended or revoked.

How much federal aid her institution received: $74 million during the 2013 academic year.

What she says: Ms. Herrmann did not respond to a request for comment.

Commissioners Gary Carlson and Edwin Colon

When they served: Mr. Carlson served from 2006 to 2011; Mr. Colon served from 2009 to 2014.

Where they also worked: ITT Technical Institute. Mr. Carlson was vice president for academic affairs at ITT until his retirement, in late 2010. Mr. Colon was director of an ITT Technical Institute campus until May 2014, according to his online résumé.

What their institution was getting heat for: Job placements and recruiting practices. A continuing whistle-blower lawsuit, brought in 2007, alleges that the institute submitted false claims to the government to receive more financial aid. In 2010 a U.S. Senate committee began an investigation into ITT, eventually finding that the company had used aggressive recruiting tactics and that many of its students had left without finishing their degrees. The Consumer Financial Protection Bureau opened an investigation in 2013 and filed suit a few months later, accusing the company of predatory lending. In 2014, ITT was hit with a dozen investigations by state attorneys general. The suits from the Consumer Financial Protection Bureau and the attorneys general are continuing, according to the company’s most recent SEC filings.

What happened to their institution’s accreditation: And again … not much. Acics has not revoked or suspended any of the college’s campuses.

How much federal aid their institution received: $796 million during the 2013 academic year.

What they say: "I don’t think that everybody that’s under investigation is always immediately guilty," said Mr. Carlson. "When we paint-brush one whole industry as being bad because of some not following the rules, it’s probably a mistake." Mr. Colon did not respond to a request for comment.

In response to the list of commissioners from scrutinized institutions, Anthony Bieda, vice president for external affairs at Acics, describes members of the council as "highly ethical" and "committed public servants who receive no pay for their service." He says the commissioners were nominated or appointed before the scrutiny of their companies occurred.

"If issues related to the commissioners’ institution were raised in a council meeting, the commissioners always and diligently recuse themselves from the discussion and any subsequent decision," says Mr. Bieda. He adds that "the commissioners themselves were not under scrutiny or accused of wrongdoing."

Ultimately, the makeup of the accreditation boards reflects the industry itself, warts and all.

"The way the agency commissioners are selected, it stands to reason that an agency that covers what we’ll call at-risk schools will have commissioners from at-risk places," says Susan Phillips, the chair of a Department of Education committee that reviews accreditors.

This article was co-published with ProPublica.