As Feds Crack Down On For-Profit College, A Founder Heads To Prison For Fraud
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A federal judge's ruling in Florida has brought a new development in the various government investigations of the for-profit college industry: prison time for the school's founder.
Alejandro Amor, the founder of a college called FastTrain in South Florida, was sentenced last week to eight years in federal prison for fraud.
Court papers say FastTrain, which closed down in 2012, engaged in deceptive advertising and pressure tactics, such as hiring former strippers to recruit for the school. Investigators found that the company forged signatures, enrolling people who were not qualified for college and more than 1,000 students who hadn't even finished high school. The school had collected some $35 million in student loans and federal financial aid. The judge's ruling concluded that millions of dollars of that money had effectively been stolen.
Amor's lawyer had argued that rogue employees were responsible for the fraud. Three former employees had earlier been convicted.
The FastTrain case is extreme, and the tactic of criminal charges is so far unusual. (There is a second case, also in Miami, where the founder of now-shuttered Dade Medical College was sentenced to house arrest for illegal bundling of campaign contributions.)
But allegations of misleading claims and deceptive advertising are not unusual at all.
They are part of a multiagency assault mounted by the Obama administration's Department of Education, the Federal Trade Commission, many states and the federal Consumer Financial Protection Bureau, which was formed after the financial crisis in 2008. An interagency task force was announced in 2014, and the Education Department announced a new "enforcement unit" in February of this year, with a director from the FTC.
As of last June, 28 for-profit colleges were under investigation, according to a report from the Brookings Institition.
This list includes some of the very biggest names in the business: Apollo Group (operators of the University of Phoenix), DeVry and ITT. All three companies have denied the allegations and say they are cooperating fully with investigators.
At their peak in 2010, for-profit colleges enrolled 2 million students, or about 1 in 10 American college students. The industry was a pioneer in online education, offering opportunities to people who had been overlooked by traditional colleges: working adults, parents, first-generation students, veterans.
An otherwise scathing Senate report in 2012 acknowledged that these institutions meet an important need, especially in the area of short-term, technical certificate programs.
The industry is currently engaged in efforts to overhaul its recruitment and admissions practices. In November, Education Management Corp. brought an end to investigations from 39 states, the District of Columbia and the U.S. Justice Department, by promising new transparency, better disclosures and new rules for recruiters. The company also promised to forgive loans of students who left within six weeks of enrolling.
But statistics show the vast majority of people who enroll in a for-profit college will leave without a degree, and they are far more likely to default on their loans than students at other types of colleges.
Until now, few of those students have seen their loans forgiven by the federal government or anyone else. For example, the Education Department has announced loan cancellations for about 9,000 former Corinthian Colleges students out of a total enrollment of 75,000 at the college, which was shut down in 2014.