This memo analyzes and provides representative examples of over 500 complaints from military-connected students who attended schools owned by the Perdoceo Education Corporation, formerly known as the Career Education Corporation and referred to herein as CEC. These complaints by GI Bill beneficiaries—both veterans and eligible family members—and active- duty servicemembers using Defense Department (DOD) Tuition Assistance (TA) benefits were received by Veterans Education Success over approximately the past 7 years. We also summarize information provided by three whistleblowers whose comments echo issues raised by these complainants. This memo begins with a catalogue of the numerous settlements and investigations of this publicly traded chain by both federal and state entities.
II. Enforcement Actions and Investigations by Federal and State Authorities
The enforcement actions and investigations against CEC schools largely involved allegations of misleading advertising and recruiting, the leading complaint topic cited by military-connected students. • In 2020, the U.S. Department of Veterans Affairs (VA) warned CEC that unless corrective action was taken, it might suspend new GI Bill enrollments at the company’s schools due to allegations of deceptive advertising, sales, and enrollment practices outlined in its 2019 settlement with 48 states and the District of Columbia. Under Title 38 U.S.C. § 3696, VA is prohibited from approving the enrollment of GI Bill beneficiaries in any institution that utilizes advertising, sales, or enrollment practices of any type that are erroneous, deceptive, or misleading either by actual statement, omission, or intimation. On July 2, 2020, VA announced that evidence provided by CEC indicated that sufficient corrective actions had been taken to avoid suspension.
- In 2019, CEC reached a settlement with 48 states and the District of Columbia for $493.7 million in debt forgiveness to nearly 180,000 former students, plus $5 million to states. Their investigation revealed that CEC:
- Used emotionally-charged language emphasizing the pain in prospective students’ lives to pressure them into enrolling in CEC’s schools;
- Deceived students about the total costs of enrollment by instructing its admissions representatives to only inform prospective students about the cost per credit hour without disclosing the total number of required credit hours;
- Misled students about the transferability of credits into CEC from other institutions and out of CEC to other institutions by promising on some occasions that credits would transfer;
- Misrepresented the potential for students to obtain employment in the field by failing to adequately disclose the fact that certain programs lacked the necessary programmatic accreditation, which it knew would negatively affect a student’s ability to obtain a license or employment in the student’s field of study; and
- Deceived prospective students about the rate that graduates of CEC programs obtained a job in their field of study, thereby giving prospective students a distorted and inaccurate impression of CEC graduates’ employment outcomes.
- In 2019, the U.S. Federal Trade Commission (FTC) ordered CEC to pay $30 million to settle charges that the company had used sales leads from deceptive websites (“lead generators”) that falsified their affiliation with the military and used other unlawful tactics.
- In 2019, the U.S. Department of Education (ED) renewed American InterContinental University’s (AIU) Title IV Program Participation Agreement, but the school remained on provisional certification due to an ongoing regulatory review. AIU had delayed disbursement of about $40 million in Title IV funds to students in order to manage its compliance with the requirement that a for-profit school can receive no more than 90 percent of its revenue from federal student aid.
- In 2017, a False Claims Act lawsuit brought against AIU led to a settlement that required CEC to pay the United States $10 million. According to an article on the lawsuit, the whistleblowers alleged that the school “enrolled students who were illiterate and students who did not have a high school diploma. AIU also reportedly rewarded their recruiters with bonuses, which directly correlated with the number of students they enrolled. The Southern Association of Colleges and Schools, which accredited AIU, put the university on probation in 2006 and 2007, for awarding recruiters and enrolling students without a high school diploma or an equivalent.”
- In 2016, the U.S. Securities and Exchange Commission (SEC) launched an investigation of the company’s classification of Le Cordon Bleu Culinary Arts campuses as “held for sale within discontinued operations, subsequent sales process and CEC’s related public disclosures.” Le Cordon Bleu students settled several lawsuits, and CEC closed all of its campuses.
- By 2016, numerous states had launched investigations of CEC.
Connecticut served as the point of contact for inquiries received from the attorneys general of
The Attorney General of the following states: Arizona, Arkansas, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, and Washington (January 24, 2014); Illinois (December 9, 2011); Tennessee (February 7, 2014); Hawaii (May 28, 2014 ); New Mexico (May 2014); and Maryland (March 16, 2015). In addition, CEC had received inquiries from the attorneys general of Florida (November 5, 2010), Massachusetts (September 27, 2012), Colorado (August 27, 2013), and Minnesota (September 18, 2014). The inquiries are civil investigative demands or subpoenas that “relate to the investigation by the attorneys general of whether the Company and its schools have complied with certain state consumer protection laws, and generally focus on the Company’s practices relating to the recruitment of students, graduate placement statistics, graduate certification and licensing results and student lending activities, among other matters.”
- In 2015, the FTC investigated allegations of deceptive or unfair acts or practices in advertising and recruiting by CEC.
- In 2013, the company settled a class action lawsuit for $27.5 million for allegedly defrauding investors by reporting inflated and false placement rates to its accreditors and misleading investors about the health and condition of the company.
- In 2013, New York settled with CEC for allegedly deceiving students about their eligibility for jobs and job placement rates. CEC agreed to pay $9.25 million to students, pay a $1 million penalty, and change how the school calculates and verifies job placement rates.
- In 2012, the SEC began an investigation of CEC’s own previously announced internal investigation of student placement practices and related matters.
- In 2011, ED placed CEC schools on Heightened Cash Monitoring.
- In 2011, ED began an investigation of alleged CEC misrepresentations about job placement rates
- In 2011, CEC settled a class action lawsuit for $40 million following allegations that the California Culinary Academy had misled students by including graduates whose jobs did not require a degree in its job placement rates.
California Culinary Academy had misled students by including graduates whose jobs did not require a degree in its job placement rates.
- In 2010, the ED Office of Inspector General opened an audit to determine whether Colorado Technical University had policies and procedures for administering Title IV funds in accordance with applicable federal law and regulation.
- In 2010, the company reached a $20 million settlement in a class action lawsuit alleging aggressive marketing using text messaging in violation of federal law.
- In 2008, CEC settled a class action lawsuit for $4.9 million. CEC allegedly provided false information to investors regarding the number of qualified students attending its schools.