Students Say Profit-Seeking College Bled Them Dry

SANTA FE, N.M. (CN) — Students claim in court that profit-seeking Laureate Education deliberately allowed the Santa Fe University of Art and Design to fail, stranding them in the middle of the academic year.

Laureate Education operates more than 70 profit-seeking colleges in 25 countries, according to the complaint. It was bought for $3.8 billion in 2007 and became a private company. It reported more than $4 billion in 2015 and went public in 2016, with an initial public offering that raised $490 million, according to the April 27 complaint in Santa Fe County Court.

“Laureate is under investigation in several countries,” the complaint states. “These include regulatory investigations in Chile on charges of deceptive trade practices and false claims; IRS and SEC investigations in the United States over an alleged pay-to-play scheme in the united States and possible bribes in Turkey in violation of the U.S. Foreign Corrupt Practices Act; and assessments in Spain for millions of dollars in taxes.”

Lead plaintiff Lucian Orsinger cites Laureate-owned Walden University as “Laureate’s ideal” college, growing from 2,082 students in the fall of 2001 to 46,456 in the fall of 2010. “Walden also burdens its students with the second-highest debt load of any United States college,” according to the complaint.

Laureate Education bought the College of Santa Fe in 2009, but Orsinger says it drove down the purchase price by entering into negotiations a year earlier and then backing out of the deal, forcing the school to close so Laureate could buy it from the City of Santa Fe at a much lower price.

When the school didn’t generate enough profit, Orsinger and two co-plaintiff students say, Laureate stripped the university of what it needed to succeed, removing the president and replacing him with a Laureate executive who announced another designed-to-fail negotiation to sell the university to Raffles Education Corp., a Singapore-based profit-seeking company.

After the sale to Raffles fell through in April this year, the school announced it would close after the 2017-2018 academic year, stranding its students and faculty. In the April 27 lawsuit in Santa Fe County Court, the students say most colleges close enrollment in January and the hiring window for college faculty has passed.

They claim that Laureate knew well before this academic year began that it would close the school, and took the opportunity to maximize profits before the closure: for example, collecting a $1,000 program fee from each student before the fall 2016 semester.

“Laureate stated [the fee] would be used to purchase equipment and materials for the benefit of students: the Contemporary Music department could spend the money on instruments; Digital Arts on computers; Photography on cameras. Department chairs were asked for input regarding where the program fees should be applied. But the promised books, instruments, tools, and equipment never materialized. Department chairs were instructed not to spend the money. The program fees were never used for the students’ benefit, and were not returned to students,” according to the complaint.

In its April 12 announcement to students, the school promised “a thoughtful, phased teach-out and transfer process leading up to the graduation of students who are eligible to complete their degrees by May 2018.” The announcement offered, among other things, a transfer grant of $2,500 to students who transfer out of the school by the spring of 2018.

But the students call the grant “little more than an illusory buyout. The transfer grant will not be paid directly to students but may be applied only to balances owed to SFUAD or tuition at certain other schools, subject to a number of conditions.”

As for the promise of an enhanced summer semester, the students say: “Laureate has forbidden department chairs to add classes to the summer semester to enable students to complete their degree programs.”

Seniors who stay for the 2017-2018 year face a bleak prospect, the students say. “With only a fraction of a senior class in the teach-out the collaborative benefits of collegial education would be eviscerated. Students who have no option other than to return will suffer because of the greatly diminished faculty, skeleton staff, limited classes, no interaction with juniors, sophomores, and freshmen, limited facilities, and a fractured social life. For this shadow of an educational experience, Laureate intends to charge students full tuition.”

The students seek compensatory and punitive damages for breach of contract, unfair trade, bad faith, negligent misrepresentation, fraud and unjust enrichment.

The students are represented by Benjamin Allison with Bardacke Allison, and Stephen Tinkler, both of Santa Fe.

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