Classes Decry ‘Systemic Fraud’|at Profit-Seeking U.S. Colleges

DENVER (CN) – More than 700 students and 50 employees complained about “systemic fraud” at for-profit Westwood College, according to a federal class action. Students say the college lied about its accreditation, tuition, fees, job placement services and curriculum, so as to enroll as many student-victims as possible and “maximize its obtainment of federal and private loan money.” The complaint is one of at least four class actions filed around the country late last week alleging fraud at for-profit colleges.




     The U.S. Senate has joined the Government Accountability Office in investigating such colleges, which receive 25 percent of the federal Title IV loans and grants, though they enroll just 10 percent of U.S. college students, according to the class action complaint.
     The 32-page complaint cites findings from the GAO and testimony of for-profit college administrators and members of accreditation boards who testified to the Senate Committee on Health, Education, Labor and Pensions (the HELP Committee).
     The HELP Committee held its first hearing on the alleged “systemic fraud” in for-profit colleges on June 24. According to the Westwood class action: “The report from the first hearing found that for-profit colleges spend huge sums of Federal Title IV dollars – taxpayer dollars – on TV advertisements. billboards, phone solicitation, web marketing and aggressive sales staff. It noted that the for-profit industry obtains an alarming 25 percent of the $89 billion in Federal Title IV loans and grants, despite enrolling only 10 percent of post-secondary education students. By spending an average of 31 percent of their revenue on advertising as compared to the 2 percent that is usually spent by community colleges, defendants and others in the industry turn profit margins that are among the highest in corporate America. While the HELP Committee’s first report was instructive, it barely brushed the surface of defendants’ deceptive trade practices. (Citations omitted.)
     Westwood operated under a slew of corporate umbrellas, including Alta Colleges, Grant Corp., Trav Corp., Wesgray Corp., Paris Management Co., Elbert Inc., Bounty Island Corp., and also did business as Westwood College Online and Redstone College, according to the complaint.
     Two individuals also are named as defendants: George Burnett, acting CEO and director of Alta Colleges, and William Ojile, chief legal and compliance officer for Alta Colleges and its subsidiaries.
     Westwood, on the other hand, claims that the attorneys bringing about such class actions suits against the school do not actually represent a class of former students and have “engaged in the ‘in terrorem’ tactic of filing serial ‘strike suits’ in several states – all with the hopes of extracting an attorney’s fee-rich settlement,” it stated in a letter to CNS.
     It says that such accusations “are opportunistic, not representative of the experiences of the overwhelming majority of Westwood students and graduates, and therefore cannot proceed on a class basis,” to which the American Association of Arbitration has agreed, the school claims.
      In their complaint, the lawyers for the plaintiffs say, “Burnett did not hold an academic position before being tapped as CEO and director of Alta Colleges. Rather, he had a history of marketing, online, and technological business experience from his previous position as the chief marketing officer for Qwest Communications International, a large telecommunications company. Qwest was investigated by the SEC for securities fraud and eventually fined about $250 million for fraudulently reporting $4 billion in revenue and expenses. As CEO of Alta Colleges, Burnett ushered in an era of aggressive sales and marketing tactics that he honed at Qwest geared to raise revenues and maximize profit. To this end, Burnett devised, implemented, authorized, or sanctioned the internal policies and the comprehensive training programs that teach Westwood’s admissions representatives to engage in the deceptive trade practices described herein.” The complaint adds: “Previous to his current position, Ojile worked alongside Burnett at Qwest.”
     According to the Westwood students deceptive trade complaint: “As detailed in the accounts of more than 700 students, more than 50 former employees, and the United States Senate, defendants engage in deceptive trade practices at every step of the process from recruitment to post-graduate job placement. Defendants train their admissions representatives to provide uniform misrepresentations and make material omissions as to the costs and fees related to Westwood programs; job placement opportunities and salary expectations; accreditation status and the transferability of credits; and the academic qualifications and roles of the admissions representatives themselves. As revealed at the second HELP Committee Hearing, when defendants’ conduct in these areas became so outrageous that the Accrediting Commission of Career Schools and Colleges (‘ACCSC’) issued a show cause order asking why Westwood should be entitled to keep its accreditation, Westwood responded by telling ACCSC “that they had chosen to make application at another agency … because they were unable to meet our standards with regards to student achievement. … Notably, ACCSC is the same accrediting agency that had standards lax enough to enable several of the other 15 for-profit colleges exposed in the GAO report to engage in blatantly deceptive trade practices.”
     The class claims that Westwood and its co-defendants “for years have been deceiving tens of thousands of students into pursuing an ‘education’ that has little-to-no value. Defendants follow a simple formula: recruit those with the greatest financial need and enroll them in high-cost institutions to maximize the amount of federal funding defendants receive. In 2008, Alta Colleges received $181 million in federal funds ($27.5 million in Pell Grants and $154.4 million in federal loans).”
     Westwood charges from $68,174 to $81,905, or more, for a bachelor’s degree, according to the complaint.
     “Prior to the congressional scrutiny, defendants flourished in the unscrupulous culture of the for-profit college industry, making it clear why the words ‘for profit’ come before ‘college,'” the complaint states. “Through their institutions known as Westwood College. Westwood College Online and Redstone College (collectively ‘Westwood’), defendants have perfected the art of preying on the hopes and dreams of vulnerable students who are desperately seeking better lives. Defendants spend more on recruiting than any other portion of their operations, including education instruction. The extreme amount of money spent on advertising has produced flashy Westwood commercials, which offer the enticing promise that ‘Your future is in your hands,’ followed by the invitation to find out ‘What will it hold?’ Students understandably answer with dreams of graduate degrees; high-paying, gratifying careers; and, more than anything else, brighter futures. The reality is that Westwood knows exactly what the answer is for many of these students: lives impaired by insurmountable debt obtained in the pursuit of useless degrees.”
     Among other things, the class claims that Westwood admissions representatives hide the true cost of admissions and reveal tuition rates only “on a ‘per term’ basis because most traditional schools have only two to three terms per year while Westwood has five.”
     Westwood inflates its job placement statistics to lure students, the class claims.
     “For example, admissions representatives would routinely promise a game-design student a high-paying job at a major development company when, in reality, the highest possible position they could obtain is a game-tester at approximately $10 an hour. Further, game-tester is a job that can be obtained without a college degree and certainly without $80,000 in debt,” the complaint states.
     The class adds that “Westwood may consider a copy assistant at Kinko’s to be a job in the graphic design field or a shift manager at Quizno’s as a business management job.”
     Though Westwood is nationally accredited, it failed to disclose that it was denied regional accreditation by the Higher Learning Commission, the complaint states. The school claimed that that accreditation was “just around the corner,” would be “retroactive,” which is untrue, the class says. It adds that admissions counselors misrepresented Westwood’s accreditation status, leading “students into believing that national accreditation is of equal or even greater value than regional accreditation,” failing to state that Westwood credits may not transfer to other schools.
     Admissions reps at Westwood are under constant pressure to “meet a minimum enrollment quota to maintain employment and receive promotions,” according to the complaint.
     Students say the admissions officers are given incentives “to sign up as many students as possible over that quota by participating in competitive ‘games’ based on applications, actual enrollments, and sales tactics.”
     Westwood divides its representatives into teams and encourages them to announce their new sales “in a demeaning and degrading manner,” the class claims.
     The complaint continues: “By way of illustration, an admissions representative sent an email from ‘The Drivers’ team stating ‘Everyone Hit the DECK!!!!!!!!!!!!!! A Drive BY JUST Occurred!’ with a violent depiction of a drive-by shooting.”
     That “drive-by” message announced that a sales rep had just procured “his second application of the day,” the class says.
     The two named plaintiffs are Krystel Bernal and Amanda Krol.
     Bernal claims that Westwood charged her “more than $75,000 in tuition, books and fees” for a three-year degree in fashion merchandising – “more than $20,000 more than the figure provided by the admissions representative.” She says she applied for that amount in federal and private student loans. She adds that “during her final quarter at Westwood,” she was told “that if she did not pay her account balance in full by graduation, she would automatically receive an Apex loan in the amount of her account balance with an interest rate of 18 percent, and she would not receive her diploma.”
     As a final insult, she says, “When Bernal informed the team that she intended to seek a job in fashion merchandising – the career towards which she had now paid $75,000 – Westwood’s representatives told Bernal to not ‘aim so high.’ Instead, she was advised to look for an ‘entry level’ position in retail sales at local department stores – the very position that Bernal had prior to attending Westwood, and for which she knew she did not need a college degree.”
     Krol, a single mom, says she was charged more than $85,000 for a four-year degree in criminal justice, and that Westwood’s admission rep told her “that Westwood would help her find a Job after graduation and that she could expect to make over $100,000 a year while working for organizations like Disney or the FBI.”
     But once she enrolled, Krol says, Westwood not only charged her “much more money for tuition and costs,” but “All the while, the admissions representatives, who had been so eager to help Krol during enrollment, were no longer communicating with her.”
     She says that when she found that she could not transfer her credits, as she had been promised, she “felt that she had no choice but to complete her Westwood education” because she and her mother were already tens of thousands of dollars in debt.”
     The class demands damages for deceptive trade. Its lead counsel is Timothy Kratz with Pendleton, Friedberg, Wilson and Hennessey.

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