Concerned about fraud, New York freezes openings of for-profit schools
By Nahal Toosi
ASSOCIATED PRESS, February 11, 2006

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NEW YORK  As for-profit schools across the country face allegations from financial aid fraud to flimsy academics, New York has decided to put the brakes on the rapidly growing sector of higher education.
The state Board of Regents recently said it will not consider applications from new degree-granting for-profit schools until it reviews its approval process and has a better sense of the problems the schools face.

The decision comes in the wake of a flurry of reports about problems.

In New York, one school was accused of cheating to get more student aid money, and another was ordered shut down because of poor academics. In Kentucky, Decker College, a for-profit school previously headed by New York gubernatorial candidate William Weld, is being investigated for alleged misuse of the federal student loan program. Reports of problems at commercial schools in California and Florida also have crept up.

We believe there are many high-quality proprietary colleges in New York state, said Johanna Duncan-Poitier, deputy commissioner for higher education and the professions. But there were many red flags  spiraling enrollments, student complaints, financial aid disallowances, unacceptable graduation rates and so forth.

The New York freeze has grabbed the attention of supporters and skeptics of for-profit schools because the state already has some of the country's strictest regulations governing such institutions. A move to enact changes might prompt other states to follow, observers said.

If problems are happening in New York, where this industry has been supposedly well-regulated, then the problems in other states are almost certain to be worse, said David Hawkins, director of public policy for the National Association for College Admission Counseling.

Gov. George Pataki also has suggested reforms, including requiring students to take a minimum 15 credit hours instead of 12 to qualify for state financial aid, something critics say will hurt low-income students.

For-profits include everything from beauty schools to colleges that grant degrees, including advanced ones such as a master's in business administration. Many are small, privately owned operations, but in more recent years some have emerged as publicly traded corporations.

At Interboro Institute in New York, the state says an undercover investigation found instances where school officials cheated to help enroll more students and make sure they were eligible for financial aid. Interboro, which operates throughout the New York City area, has been told to take several measures, including restricting enrollment.

Officials with EVCI Career Colleges Holding Corp., Interboro's parent company, say an outside firm found no basis that top management had a role in any improprieties, and that any violations were isolated cases.

Interboro, a business-centered school, had about 800 students at one campus in spring 2000; that grew to 4,500 at four campuses by fall 2004. The fact that we grew so fast is testament to the fact that there's such a great need in New York to provide a quality education, said EVCI chief executive John McGrath.

The school's Washington Heights campus consists of maroon brick office space at the bottom of an apartment tower, along with space in nearby buildings, including a Pentecostal church. Outside, a group of students offered mostly praise for the school.

A lot of people who come to this school are dropouts, a lot of single mothers, said Mario Collado, 23, who is earning his GED while studying for an associate's degree in business management. They're trying to better themselves.

Leaders of for-profit colleges say problems can be found in every sector of higher education, not just theirs.

Those of us who do things properly are as upset about what is being reported as anyone, said Ellen Hollander, president of the Association of Proprietary Colleges, which represents degree-granting commercial schools in New York. We strongly encourage the regents to take action to prevent abuses.

State officials say they are sensitive to the fact that for-profits often serve an economically disadvantaged student population, but they also worry that those students may be the most vulnerable victims of corrupt schools.

Asked if the state has failed in its monitoring of for-profits, Regent Merryl Tisch said: A rotten apple doesn't spoil the barrel. By and large many of these institutions are really doing very credible work.

FOX i-Team investigation of Decker College

Attorney General Stumbo Investigates Decker College

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FRANKFORT, KY (October 5, 2005)  Attorney General Greg Stumbo today announced that his Office is investigating Decker College and whether it has engaged in practices that are in violation of the Consumer Protection Act.

At the request of the Kentucky State Board for Proprietary Education, the Office of the Attorney General began investigating whether Decker College in Louisville misrepresented to students that is was approved by the Veterans Administration to provide GI benefits. During that investigation, additional information was uncovered which suggests Decker College may have engaged in other false, misleading or deceptive practices.

I am determined to ensure that Kentuckians who want to improve their job skills are treated fairly, Stumbo said. People who invest money in their futures deserve to have those futures protected.

A letter to Decker College from the US Department of Education, dated September 30, 2005, states the following: The Department must deny Deckers recertification application in order to protect Title IV, HEA program funds.

This will affect students with the following financial aid: Federal Pell Grant, Federal Supplemental Education Opportunity Grant, Federal Work Study, Federal Perkins Loan, Federal Direct Student Loan, and the Federal Family Education Loan programs. The Direct Loan Program includes the Federal Direct Stafford Loan Program, the Federal Direct Student Unsubsidized Stafford Loan Program, and the Federal Direct PLUS Program. The FEEL Program includes the Federal Stafford Loan Program, the Federal PLUS Loan Program, and the Federal Consolidation Loan Program.

The Office of the Attorney General has set up an email address where all students, employees and faculty can submit information. All email contacts will be reviewed by the Kentucky Bureau of Investigation. That address is decker@ag.ky.gov. Individuals can also call 1-866-KBI-FORCE (1-866-524-3672).

The Office of the Attorney General will also continue to work with the Board for Proprietary Education on complaints which are under the Boards jurisdiction.

For more information, please contact us at:

Office of the Attorney General
State Capitol, Suite 118
Frankfort, Kentucky 40601
(502) 696-5300

Major Troubles for Decker College
The walls are closing in on Decker College, a for-profit institution based in Kentucky and partially owned by William Weld, a gubernatorial candidate in New York.

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On Wednesday, Kentuckys attorney general, Greg Stumbo, announced that his office would investigate whether Decker  which has operated a business program at its main campus in Louisville and construction schools in Louisville, Atlanta, Indianapolis, and Jacksonville, Fla.  engaged in false, misleading or deceptive practices under the states Consumer Protection Act.

Stumbo said he had been asked to investigate by the states Board for Proprietary Education, following lawsuits by students accusing the college of misrepresenting itself. I am determined to ensure that Kentuckians who want to improve their job skills are treated fairly, Stumbo said. People who invest money in their futures deserve to have those futures protected.

The attorney generals action follows by several days a decision by the U.S. Education Department to end Deckers participation in federal student aid programs. In a September 30 letter to Weld, Robin S. Minor, director of the School Participation Management Division of the departments Federal Student Aid office, said the institution had failed to comply with federal financial aid rules and breached its fiduciary duty to the federal government in very severe ways.

According to the departments letter, Decker:

Offered its associate applied science degree in construction crafts  in which a majority of its students are enrolled  primarily in an online format even though it was not accredited by the Council on Occupational Education to do so.

Failed to return $7 million in federal Pell Grant and loan funds that it owed to the department because students had dropped out partway through a term.

Received federally guaranteed loan funds on behalf of its students without prior approval from the Education Department, despite having been prohibited from doing that because of previous restrictions on its eligibility.

Because of those breaches, the department said, Decker is ineligible to participate in the federal student aid programs, including the Pell Grant and guaranteed loan programs, as of September 30.

The inability to award federal student aid is often the death knell for colleges. Decker has already wilted under the recent scrutiny, closing most of its branch campuses and ceasing to pay many of their employees last month.

Welds investment firm, Leeds Weld, which he founded after leaving the governors office in Massachusetts and invests heavily in for-profit higher education, is a minority investor in Decker. Welds involvement with the college has become a minor issue in the New York gubernatorial campaign.

A spokeswoman at Leeds Weld referred calls to Mark Stein, the chief financial officer at Decker. Stein did not return telephone calls seeking comment.

Gov. William Weld
by Billybare
Tue Oct 25, 2005 at 11:02:15 AM PDT
DECKER COLLEGE IN LOUISVILLE, Ky CLOSES ITS DOORS.The private, for-profit trade school has closed its doors and removed its online construction courses. Decker, a vocational trade school is partially owned by Leeds Weld & Co., an investment firm run
by former Massachusetts Gov. William Weld.

Decker offered programs in electrical, carpentry, and heating, ventilation and air conditioning and barbering. The US Department of Education stopped Decker's access to federal financial aid and said it owed taxpayers and lenders $7.2 million, mostly in aid that wasn't repaid after students dropped out.

Decker is being investigated by Federal and state

investigative agencies for violation of consumer protection laws and misuse of veteran benefits.

School officials declined to comment or did not return

Bill Weld's School Daze
The GOP candidate's troubled term at a construction training college
by Tom Robbins
December 20th, 2005 11:56 AM

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The saga of William Weld's sojourn to Kentucky to run a for-profit vocational college where students were taught mainly through online computer classes makes an even more intriguing résumé listing for the would-be leader of the Empire State than has already been reported.
The former Massachusetts governor has pressed on with his campaign to win the Republican nomination to succeed New York's George Pataki despite widespread reports (most recently and thoroughly in the Sunday New York Times, by Sam Dillon and Patrick Healy) about his ill-fated mission to Louisville, where, in January of this year, he agreed to become the $700,000-a-year chief executive officer of Decker College.

Weld has acknowledged that things didn't work out well there, but has insisted he wasn't part of the problem. "I was proud of the programs Decker offered," he told NY1's Davidson Goldin last week.

But starting in 2004, students, instructors, and recruiters began stepping forward to complain that the college, which had locations in four states, operated as little more than a cyber-age "loan mill," duping desperate, low-income job seekers into believing the online courses would make them skilled and employment-ready construction trades workers in a few months in exchange for shouldering federal student loans of more than $20,000.

The AFL-CIO's Building and Construction Trades Department added another allegation: that Decker was a key player in a national effort by non-union construction contractors to train employees on the quick and the cheap, while making money doing so, and avoiding lengthy and more costly hands-on apprenticeships.

In late September, the school had its access to federal student loans shut down after regulators cited it for abuses, including failing to remit $7 million in loans it took in from students who later dropped out. On October 5, the Kentucky Attorney General's office announced it was investigating the school for possible consumer fraud. The next day, Weld, who had already relocated to New York to begin campaigning, resigned his position as Decker's CEO. It was none too soon. On October 18, 40 agents from the FBI and other agencies descended on Decker's Louisville campus and hauled away more than 1,000 cartons of records. The school closed its doors three days later.

None of that slowed down the former federal prosecutor, the tall rusty-haired man Boston wags dubbed "Big Red" during his years as governor from 1991 to 1997. Last week, Weld launched a website (weldfornewyork.org) saying he could do for New York what he did for Massachusetts by lowering taxes and getting tough on crime. But he's facing more questions about his strange tenure at the junior college in Louisville than anything he did as the Bay State executive.

Weld's involvement with Decker began when his financial firm, Leeds Weld Equity, which sought out for-profit educational investment opportunities, decided in 2002 to buy a $30 million minority share in a company called Franklin Career Services, a nationwide chain of truck driving schools owned by a pair of brothers, Gerald and Jeffrey Woodcox, of Louisville. At the time, business at Franklin was booming. Annual profits in 2001 reached $79 million. But there too, serious questions about management practices were already being raised.

The toughest queries came from an insurance firm, Royal Indemnity, based in North Carolina, which had agreed to provide credit-risk insurance for pools of student loans made to Franklin's pupils. At its zenith, when Weld's firm bought into the company, Franklin had 33 separate schools, including sites in Mississippi, Missouri, Kansas, Louisiana, Ohio, West Virginia, and Albany, New York. Students were promised an intensive 16-day driving course at the end of which they would qualify for a Class A commercial driver's license. The cost was steep, ranging from $8,000 to $12,000. To finance the program, Franklin assisted students in obtaining loans from an outside lender. In turn, the lender purchased insurance coverage from Royal Indemnity to protect it from defaults.

In early 2002, however, Royal Indemnity abruptly ceased providing insurance. The reason, as the insurance firm later claimed in a 2004 civil racketeering lawsuit, was that student default rates were soaring above 70 percent. Franklin and its loan company, the lawsuit claimed, were running "a massive fraudulent tuition loan scheme."

The insurance company's formal complaint depicts Franklin and its owners as routinely hoodwinking vulnerable job seekers into signing up for the loans, regardless of their ability to repay them. Among those sought out to sign up and take on the loans were "criminals, drug addicts, alcoholics, and the homeless." To do so, the trucking school's recruiters allegedly "routinely submitted falsified loan applications," the insurance firm chargedeven using pre-printed answers regarding past employment and salary history on application forms.

Nor did students get much of an education, the company alleged. Royal accused Franklin of using unlicensed instructors and defective trucks. When it came time to pass the qualifying licensing test, Royal claimed that Franklin's instructors provided students with the answers to the written test.

Franklin denied any wrongdoing and the suit is still pending. But whatever its actual practices, the insurance company wasn't the only one with suspicions. In 2001, the Kansas Board of Regents ordered Franklin's local branch to cease enrollment over concerns about its curriculum. In July 2002, Ohio state officials ordered 400 graduates of a Franklin school to retake their driving test, or face cancellation of their licenses. Some grads couldn't afford to take the test again; others flunked, and were later unable to get work or repay their loans, the insurance company asserted.

The earliest coverage of the Decker scandal appeared in the Louisville Courier- Journal, where reporter Mark Pitsch recounted how, after Franklin's driving schools ran into trouble in 2002, its owners decided to buy Decker, an existing business college in Louisville eligible to receive federal Title IV loans. Remarkably, despite the problems at the truck driving schools, Weld and his investment firm jumped in again, buying a 19 percent share in the new venture.

The school's pitch was to add construction skills to its curriculumand do all but nine weeks of the training via online courses. As Decker's first CEO, the owners hired Daniel Bennet, a leader in developing non-union construction training programs, an industry that the AFL-CIO has long accused of pushing profits over safety needs. Indeed, when Decker filed its application to open a branch in Georgia, it submitted a business plan to state officials that claimed that a local contractors' association could open a Decker branch and, with as few as 240 graduates a year, earn a $300,000 annual profit.

But according to a lawsuit filed in February by two graduates of the Georgia center, there wasn't much learning going on. Edward Meadows and Andre Copeland said that they quit their regular jobs to be trained as heating and ventilation installers. But the men said that the curriculum changed repeatedly with seven different unqualified instructors in their one-year course. They said they only graduated because they were fed answers to tests. Neither man was later able to find a job. (Decker responded that the men knew what they were getting when they signed up.)

Somehow, none of these problems registered with Weld. In a June 2005 newsletter to Decker students, the CEO said the school beat any of his past gigs, including governor, prosecutor, or novelist (he's written three): "I don't know that I've ever had a position where I had so clearly the feeling that my day-to-day actions are likely to create history for a whole group of people, and a favorable history at that. Decker College is an amazing company . . . I can assure you that we will be making not only business history, but academic history as well."

Giuliani Pal
Weld's brain trust
by Tom Robbins, Village Voice, December 20th, 2005 11:58 AM

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A few months after Rudy Giuliani established himself as a private business consultant, he announced that he'd signed on as chairman of the advisory board for an investment firm run by former Massachusetts governor William Weld, his old pal from their days in the Reagan Justice Department. The May 6, 2002, press release described Leeds Weld Equity Partners (Weld's name has since been dropped) as the nation's largest private equity fund in the education and training industry and quoted Giuliani as saying that the fund would be part of the private sector's "increasing role" in "addressing national and global education and training needs." Other stars on the panel include two former U.S. secretaries of education and exClinton adviser Thomas "Mack" McLarty.

So did Giuliani approve of the fund's multimillion-dollar investment in troubled Decker College, now the target of federal and state fraud investigations? Giuliani Partners spokesperson Sunny Mindel said Giuliani "had nothing to do" with the investment.

Whatever his role, it's not Giuliani's first acquaintance with trade schools like Decker accused of abusing federal student loans. Back in 1980, when he was a private attorney, Giuliani helped a trade school proprietor named Albert Terranova work out a misdemeanor plea to stealing from a federal job-training program. Giuliani then helped Terranova get a new license from New York State education officials, telling them that Terranova was "a dedicated and responsible" person. But in 1989, Terranova was indicted again, this time in a massive 235-count state fraud case for stealing from the schools Giuliani helped him establish. Terranova later pleaded guilty and paid hefty fines. Were they still in touch? Giuliani spokesperson Mindel demurred.