On March 1, 2005, the House Committee on Education and The Workforce held a hearing on the Enforcement Of Federal Anti-fraud Laws In For-profit Education, regarding CEC in light of the 60 Minutes segment. Chairman John A. Boehner, Representative Maxine Waters, and other bipartisan U.S. Representatives were presented with witness statements’ regarding the fraudulent and misleading practices that CEC frequently engaged in, to profit from their students by abusing Title IV Funds.

“As Congress reauthorizes the Higher Education Act, our first priority has to be providing access and fairness for low and middle-income students and families struggling with the high price of college. This means holding “nonprofit” schools accountable for the role they’re playing in the hyperinflation of college costs. It means providing fairness for students at proprietary schools. And it means ensuring that federal anti-fraud laws to protect students are both adequate and fully enforced.”

“Career Education Corporation misrepresented graduation rates, promised inflated salaries to prospective enrollees, enrolled students who did not have the ability to complete casework, and focused heavily on boosting enrollment numbers and Federal student aid payments. These actions represent a disservice to students, taxpayers, and those colleges that play by the rules and provide a quality education on a fair basis.” John Boehner said March 2005 to a US House of Representatives hearing on abuse in the student aid program and the proposed changes to the College Access and Opportunity Act, H.R. 609

In a statement made to Congress by Maxine Waters, CA U.S. House of Representatives, during a testimony on the 90/10 Title IV funding congressional hearing, includes excerpts from a letter written by a CEC owned American Intercontinental University employee, “We have been raising issue with these questionable practices ever since CEC bought AIU three years ago. We saw the demographics shift to primarily low income, D average (and below) students who were ill prepared to commit to the structure, rigors and requirements of a design college. They were taking out huge federal loans to pay for their tuition, and then because they had no funds for supplies, transportation, or even food, would fail. I have a DEEP SEATED moral problem with targeting these students, getting hold of their financial aid monies, and lying to them in a variety of ways (i.e. they will be able to get a B.A. degree in two years, they will be able to get a job with JayLo designing, they will be able to get a job with Spielberg and the list goes on and on). As stated above, the majority of these students recruited are not ready for a college, especially one that will land them $60,000 to $80,000 in debt IF they finish, which the majority does not. They have no discipline to come to class, to do the work required for completion of the course and we flunk a large number of these applicants. But that’s ok to the Administration. They allow them to withdraw or take a leave, they collect their financial aid and let them back in after a quarter off. A student who had flunked EIGHT QUARTERS (that is 3 classes each quarter at a minimum of $1800 per class for a total of $43,200.). He was re-admitted last year only to continue his poor academic standards, flunking or withdrawing from his classes!!!!!! This is not unusual.’ The faculty hold these students to standards that are in keeping with college level classes, even though we are repeatedly pressured by the administration to “work with them” meaning, “pass” them through so they do not drop out and we can no longer get their federal money!” CONTINUED RESEARCH: Find employees name

Ms. Waters also testified, “A case in point is the Long Beach campus of Brooks College, owned by CEC. The college ‘claims’ a high placement rate for its graduates, with the school’s assistance, if we are to believe the school’s self-reporting. But the school’s accreditor, the Western Association of Colleges and Universities provides in the summary of its evaluation report as follows: `The claims must be viewed in light of the fact that only about 35% of Brooks students ever finish the program and that another 10% of those who do complete or graduate are waived from placement…The quality of job placements is another important indicator of college program integrity. The college claims in its catalogue, for example, that graduation from the Interior Design program `automatically puts you in the elite group of well educated interior design professionals’’ and that `as a Fashion Merchandiser [graduate] from Brooks College, you’ll be prepared to handle some of the most competitive and serious business management and executive training positions in fashion capitals around the country.’’ Within such statements, there is an implied representation of program quality, market competitiveness of graduates, and availability of career opportunities. However, college data show that the average starting salary wages for Interior Design graduates is $11.67 per hour and for fashion merchandising graduates is barely above minimum wage. The most common job title for fashion merchandising graduates is sales associate. The average starting wage for graduates and completers in all programs majors is less than $11.00 per hour.”

As Tami Hanson, former placement director at CEC tesified, “(A) placement did not necessarily mean getting students the jobs they trained for.” As she says, “A job placement could mean just about almost anything.” Should the school be allowed to count a job which requires no experience or training as a placement? This happens all the time. Even if we assumed placement was accurately reported, which is a big assumption, the accreditors’ definition of a placement can be so expansive that a job of a few hours, or a day, or an unrelated job counts as a placement.”

As her testimony continued, Ms. Waters goes into detail on the lack of oversight the accreditation agencies play in turning a blind eye to the fraud and misrepresentation. For example: “A former employee of Brooks Institute of Photography contacted the state enforcement agency (BPPVE) and the Accrediting Council for Independent Colleges and Schools (ACICS), about violating the law. ACICS conducted an investigation and found nothing wrong. The Bureau of Private Postsecondary and Vocational Education also investigated BIP in connection with an application for re-approval of the school, but unlike the accreditor, the state enforcement agency found multiple violations. Because accrediting agencies are dependent on school fees, I strongly believe there is a legitimate need for increasing the 90/10 to require a higher percentage of non-Title IV money. ”

“The level of damage to these students is far more severe, because of the enormity of the loans they owe, and the fact that their loans cannot be discharged in bankruptcy when the students are unable to pay. It sends a bad message when violations of financial aid law have so few consequences for a school which is caught, but the consequences experienced by defaulting students are many, and severe. Pure and simple, these schools ruin young adult’s lives, and steal their dreams. Yet for the most part, the Department refuses to follow up on leads that fraud and violation of the law exist.” – Maxine Waters – 2005

In the conclusion to her testimony, Maxine Waters states, “The Federal regulations specifically prohibit these practices listed above. But these prohibitions may as well not exist for all the (non-existent) enforcement that is done by the Department. We should not have to count on whistleblowers or private attorneys to do the Department’s job. There should be specific laws and regulations which only apply to trade schools (those with no significant general education requirements).

Such schools should be required to report all lawsuits filed by students and stockholders against the school and all lawsuits filed by former employees or stockholders that alleged violations of financial aid or education laws and/or regulations. The Department should be required to investigate all such allegations. The Department should be given no discretion in this regard.

All trade schools should also be required to give a copy of any confidential settlement of such a lawsuit to the Department, the OIG and the state enforcement agency. The Department should not simply ignore such suits which are a source of evidence, as is the case now.

Furthermore, this committee should investigate why the Department does not sufficiently investigate schools that violate the law and hand out appropriate penalties when they show no mercy to defaulting students who have been defrauded and are having 15% of their paychecks or disability checks taken so they are not left with sufficient funds to support their families.

The low income former students’ earned income tax credits, which are to benefit low income children and tax refunds, are taken year after year from defrauded students who defaulted and did not get a job.

The amount owed by the student never goes down because of added interest and huge collection fees which can add an additional 40% to the amount owing. These trade school students get zero priority from the department. This has simply got to change.”

In closing statements before the Committee on Education and the Workforce, in the US House of Representatives, on Enforcement of Federal Anti-Fraud in For-Profit Education, Committee Chairman, John Boehner stated, “I just have to tell you that I have talked to enough people in this field and, again, in all different types of career offerings and educational offerings, that leads me to suggest that this is not at all foreign, this is not a surprise; nobody in the industry was surprised by 60 Minutes. Nobody in the industry likes 60 Minutes. Nobody in politics likes 60 Minutes when they turn their guys on the Congress. None of us, you know, have said, “Well, that was a good story.” but not a lot of Members are surprised sometimes when we see stories about the Congress or one of our programs or whatever else; we are not surprised. Most of us were damn glad it did not happen to us, and that is what I sense is going on here.”

Read the whole transcript from the ‘Enforcement Of Federal Anti-fraud Laws In For-profit Education’