Who’s to Blame for Job Placement Rate Abuses at For-Profit Colleges?

[Over the last several months, Higher Ed Watch has examined how many for-profit colleges cook the books on the job placement rates they disclose to prospective students and regulators. In prior posts, we have looked at how the manipulation of these rates is a widespread problem throughout the industry; revealed some of the most common tricks of the trade for-profit schools have used to inflate these numbers; showed how accreditors and regulators have been asleep at the switch as these abuses have been occurring; and reported on the Obama administration’s unsuccessful effort to curb these practices. Today, in the first of two posts, we will examine one of the most common excuses for-profit schools make when they are caught inflating these rates.]

When Career Education Corporation executives first revealed in August that they had found that “certain” of the company’s health professional schools had engaged in “improper practices” in calculating their job placement rates, they did what for-profit college leaders almost always do when improprieties are discovered on their campuses: they blamed “rogue” employees.

“The actions of a few people have let down others who work hard and responsibly every day on behalf of our students,” Gary McCullough, Career Education’s chief executive officer, said at the time.

But an internal probe of the company performed by an outside law firm has put the lie to these claims. As Career Education officials revealed last week, the lawyers found that the vast majority of the company’s Health Education and Art & Design schools significantly inflated the 2010-11 job placement rates they have been disclosing to prospective students and were about to report to the Accrediting Council for Independent Colleges and Schools (ACICS). “We uncovered that what were going to be reported as placements in a number of cases and a number of places were not genuine placements,” Steve Lesnik, the company’s chairman said during a conference call with financial analysts. Lesnik took over as the company’s CEO last week after McCullough abruptly resigned from his post.

And these findings may just be the tip of the iceberg, as the law firm is now examining whether similar abuses occurred at Career Education’s other three units: American Intercontinental University, Colorado Technical University, and its Culinary schools. This does not bode well for the company, considering that it recently agreed to pay $40 million to settle a class action lawsuit accusing its California Culinary Academy in San Francisco of engaging in a systematic effort to mislead students about the school’s record in placing students into jobs, by, among other things, fabricating placements. Career Education did not admit to any wrongdoing.

The problems that the law firm unearthed at Career Education are clearly not the result of a few bad apples. They appear to be widespread throughout the company, and in fact throughout the for-profit higher education industry.

Here, for example, are some other for-profit college companies that have come into the crosshairs of federal and state regulators in recent months over allegations that they have manipulated their job placement rates:

• ATI Enterprises: In late July, the Texas Workforce Commission (TWC) threatened to shut down ATI’s Texas campuses after an independent accounting firm found that 90 percent of the company’s programs in the state had “significantly overreported” their job placement rates for the 2010 fiscal year, and that the majority of these programs had actual rates below the 60 percent threshold that TWC requires schools to meet. The firm also discovered that some of the schools’ programs had contacted fewer than 11 percent of their former students to confirm whether or not these individuals were working in a job related to their training. Ultimately, the commission granted ATI a stay of execution. While the commission withdrew its approval for 22 programs ATI offers in Texas that substantially misrepresented their job placement numbers, it allowed the company’s schools to continue operating in the state on a conditional basis.

• National College: In September, Kentucky Attorney General Jack Conway filed a consumer protection lawsuit against National College, accusing the small for-profit school chain of deceiving prospective students by disclosing job placement rates for its Kentucky campuses that were significantly higher than those it reported to its accreditor. The company recently added a disclaimer to its website noting that “the successful employment” rates that it advertises represent graduates “who are employed in any field,” presumably including ones who are flipping burgers at McDonald’s or serving coffee at Starbucks because their training didn’t pay off.

• American Commercial College (ACC): Last week, agents with the U.S. Department of Education raided two of American Commercial College’s five Texas schools and seized documents, including allegedly employment records of the schools’ former students. The raid came shortly after the Texas Workforce Commission threatened to shut down the company’s Lubbock and Abilene campuses over its findings that they had fabricated many of placements they had reported. In a letter announcing its intention to revoke the licenses of the schools, the commission wrote that employees at the two schools “admitted to TWC investigators that they falsified employment information on student employment reports submitted to TWC, and that they were directed to do so by ACC management.”

Meanwhile, as we at Higher Ed Watch have previously reported, some other giant publicly traded for-profit higher education companies that compete with Career Education have also been accused of cooking the books on their job placement rates. These include Corinthian Colleges, Education Management Corporation, and Kaplan Higher Education. The job placement issue has been a particularly sensitive one for Corinthian. In 2007, a California Attorney General investigation found that the company had deliberately and persistently misled prospective students about their rates.The case was ultimately settled, and Corinthian did not admit to any wrongdoing.

Similarly, the privately-held for-profit college chain Alta Colleges agreed  to pay the U.S. Department of Justice $7 million in 2009 to settle allegations raised in a False Claims lawsuit that its Texas campuses had engaged in practices “designed to mislead prospective students and to misrepresent material facts to them.” Among other things, the government found that the school recruiters had lied to prospective students about their job placement rates, saying that they were more than 90 percent when they actually were just over 50 percent. Like Corinthian, Alta, which is the parent company of Westwood College, did not admit to any wrongdoing.

But why are these types of abuses so prevalent at for-profit colleges? We will try to answer that question in our next post.