07.27.19

By: Daniel Moore
Source: Pittsburgh Post-Gazette

Congress investigates Education Department in wake of abrupt Art Institute closures

The Art Institute of Pittsburgh shuttered abruptly in March, locking out students and breaking rules set by accreditation agencies on how to properly close schools. The building was quickly looted of art and textbooks and now sits quietly in the Strip District.

But the saga over the messy collapse of Dream Center Education Holdings — the California nonprofit that took control of the Art Institute college chain from Pittsburgh-based Education Management Corp. in 2017— is just heating up in Washington.

House Democrats last week accused Trump administration officials of working behind the scenes to help Dream Center evade responsibility for missteps following the EDMC acquisition. 

Rep. Bobby Scott, D-Va., chair of the House Education and Labor Committee, released a trove of emails and documents that he said show Dream Center executives knowingly deceived students about the loss of accreditation at four Art Institute campuses last year — and that the U.S. Department of Education knew about it and passed a rule to help Dream Center restore that accreditation.

The documents “raise questions about whether the department took steps to allow Dream Center to mislead students and how the department should have better protected students,” Mr. Scott wrote in his letter addressed to Education Secretary Betsy DeVos. 

The Education Department strongly denied the allegations and responded by hand-delivering files presenting its version of events to the committee’s offices on Capitol Hill. 

According to the department’s timeline, discussions to allow colleges to retroactively accredit programs date back to 2008. Those discussions were separate, it showed, from Dream Center’s desire to reinstate accreditation at four Art Institute campuses in Illinois, Michigan and Colorado for a five-month period in early 2018 that it led students to believe their programs were accredited.

“A serious look at all of the facts shows Dream Center did not receive any unique benefits from policy decisions made by the department,” said Liz Hill, the agency’s press secretary. “The department was dealing with the issue of retroactive accreditation long before Dream Center came into the picture.”

Documents released by the committee, totaling 74 pages, provide a deeper look at the chaos that unfolded shortly after Dream Center bought dozens of EDMC schools. While Dream Center officials have blamed EDMC for misrepresenting the financial losses, the emails show Dream Center’s mismanagement and confusion about the accreditation process contributed to the failure of the schools.

At one point, an unnamed Dream Center admissions official resigned after being instructed to mislead students about the status of accreditation at the four Art Institute campuses.

“The events of the past six months have made it impossible to for me to continue my employment,” the official wrote in an email on June 6, 2018. “Our team was told to ‘punt’ on any questions we received about that status and to change the conversation to a more favorable topic ... My heart breaks for the students who have trusted us so completely.”

Dream Center, a philanthropic organization affiliated with a Pentecostal church that funds programs across the country for underprivileged people, had no experience in higher education when it signed the deal with EDMC.

The $60 million acquisition transferred dozens of for-profit colleges with about 60,000 students and 15,000 faculty and staff, in an effort to use a nonprofit status to breathe new life into beleaguered schools. In 2015, EDMC reached a $100 million settlement with federal and state officials who alleged admissions staff illegally recruited students. EDMC admitted no wrongdoing.

But the complicated nature of the deal and Dream Center’s ties to for-profit schools roiled usually subdued officials at the country’s six regional accreditation agencies. Accreditation — higher education's way of enforcing quality control measures — reviews finances, academics, policies and other measures to ensure schools are meeting minimum standards.

In June 2018, the Pittsburgh Post-Gazette reported that Art Institute campuses in Michigan, Illinois and Colorado had lost accreditation five months earlier, yet Dream Center had continued to market the schools as accredited. Sen. Dick Durbin, D-Ill., citing the Post-Gazette’s report, called for a Congressional inquiry.

Emails released last week show a lengthy discussion among Dream Center executives and lawyers about whether to appeal or sue the Higher Learning Commission, the Chicago-based accreditation agency that revoked approvals on Jan. 20, 2018.

Dream Center ultimately decided to close the schools and chose not to notify students about the accreditation status until June 20, 2018 — all while students at those schools were kept in the dark and completed two terms of courses that were unaccredited.  

“Why appeal if we are going to close these schools?” wrote Randall Barton, chair of Dream Center Education Holdings, in an email to lawyers on May 31, 2018.

Mr. Barton added that Dream Center would have never bought those schools had he known they needed to be accredited at the closing of the deal.

He also discussed pressuring the Higher Learning Commission, or HLC. “It seems to me we need to go to Chicago and sit down and state to HLC that you deceived us,” Mr. Barton wrote. “If HLC cooperates and gives maximum flexibility we will agree not to sue them for what will be a multi-million dollar suit.”

Even as Dream Center shuttered 18 Art Institutes in July 2018, accreditation setbacks hampered Dream Center’s takeover of the Art Institute of Pittsburgh and other campuses. The Art Institute of Pittsburgh’s accreditation agency, the Middle States Commission on Higher Education, refused to approve the sale and gradually placed the school on stricter watch.

In January, Dream Center asked a judge to place the Art Institute of Pittsburgh and other former EDMC schools in federal receivership, which is akin to bankruptcy. In court filings, Dream Center estimated the former EDMC schools would lose a total of $64 million in 2019.

After trying to sell the Art Institute of Pittsburgh, the federal receiver told students the 98-year-old school was closed at 5:30 p.m. on March 8. 

Leaks started investigation

The inquiry from the House Labor and Education Committee began in February, committee staffers said, around the time it obtained emails leaked from a source. The staffers said the emails contradicted the department’s previous statements to Congress and questioned deep ties between some department officials and the for-profit education industry.

In July 2018, the department reversed a policy that had long prohibited schools from retroactively accrediting programs. Just weeks before, a Dream Center executive was caught on audio promising faculty that accreditation would be restored because the Education Department “went so far as to change a regulation at DOE to make it easy for HLC to help us.”

Ms. Hill, the department’s spokeswoman, said those comments had been “cherry-picked” and sought to distance the department from Dream Center. 

“The fact that Dream Center executives characterized a policy decision on a pending appeal was somehow about them is disingenuous but not surprising,” Ms. Hill said. “They were trying to make it appear they had control of the mess they had made.” 

Mr. Scott’s letter, dated July 16 and made public last week, requested interviews with four Education Department officials, as well as copies of emails and text messages among top officials related to Dream Center.

In a letter responding to Mr. Scott last week, Reed D. Rubinstein, the Education Department’s acting general counsel, defended the agency’s handling of Dream Center’s problems, suggesting previous approaches to ailing schools were ineffective. 

“The department worked tirelessly with the accreditation agencies to ensure that students could complete their educational programs, preventing a repeat of the catastrophic Obama administration Corinthian College collapse,” Mr. Rubinstein wrote, referring to the for-profit school that shuttered in 2015, leaving 80,000 students eligible for loan forgiveness.

Mr. Rubinstein said the department will provide the emails and text messages requested by the committee. He suggested department officials would provide officials to sit for interviews “as may be necessary and appropriate.”