Former For-Profit School Admits to Deceiving Students and Falsifying Documents in Precedent-Setting Final Judgment
AG Will Pursue Federal Student Loan Discharges from the U.S. Department of Education Following Admissions from American Career Institute; Students to also Receive $2 Million in Private Student Debt Discharges
BOSTON – A for-profit school that abruptly closed in 2013 has admitted to lying to its students, fabricating its records, and employing grossly unqualified teachers, amongst a variety of other fraudulent practices. Thousands of defrauded students are now left with millions of dollars of debt and no means to repay their loans, Attorney General Maura Healey announced today.
The AG’s Office will use these admitted violations of Massachusetts law to urge the U.S. Department of Education to cancel federal loans that students at American Career Institute (ACI) took out to attend the school’s low-quality career training programs.
“Our office has achieved an unprecedented result against a predatory for-profit school that we hope will yield long-overdue relief for thousands of ACI students in Massachusetts,” AG Healey said. “We look forward to working with the U.S. Department of Education to secure immediate loan forgiveness for those affected and will continue to pursue institutions who engage in this illegal and unfair conduct.”
The AG’s Office sued ACI in 2013 for engaging in a range of deceptive schemes. The consent judgment, entered Thursday in Suffolk Superior Court against ACI, is believed to be the first time a predatory, for-profit school has admitted its wrongdoing in violation of state law. ACI has acknowledged widespread illegal conduct, including knowingly overstating the employment prospects for its graduates; falsifying student signatures, enrollment records, attendance, and grades; and using unlicensed instructors, inadequate books and instructional materials, valueless externships, and providing no meaningful career placement services.
Between 2010 and early 2013, ACI operated career training schools at five locations in Massachusetts – Braintree, Cambridge, Framingham, Springfield, and Woburn – offering various certificate programs, such as information technology and medical assisting programs, with tuition and fees that cost up to $23,000. ACI also had campuses in Baltimore, Columbia, and Wheaton, Maryland.
ACI’s profits depended upon the school’s access to federal grants and loans, and according to the amended complaint, in fiscal year 2012, ACI collected more than $30 million in federal student loan money, an amount equal to 89 percent of the school’s total revenue. To maintain accreditation and collect tuition payments, ACI:
- Falsified records in order to meet the student grade and attendance requirements;
- Signed student signatures on various records without the students’ knowledge or permission, including enrollment agreements;
- Misrepresented graduation and job placement rates and pressured students to enroll with false promises and by creating a false sense of urgency;
- Told some prospective students that employment was “guaranteed”;
- Unlawfully enrolled and collected tuition from students who did not meet minimum education requirements and did not qualify for federal student loans;
- Falsified documents used to track job placements, representing that students worked at companies that did not exist or that never hired an ACI graduate.
Using the school’s admissions of wrongdoing and numerous violations of the Massachusetts Consumer Protection Act, the AG’s Office will request that the Department cancel all federal loans taken out by students who attended ACI from at least January 2010 through the school’s closure in January 2013. The AG’s Office will make available to the Department its investigative findings and the supporting documentary evidence. It is estimated that more than 4,400 former ACI students may be eligible for loan relief, including over 1,400 students who are entitled to loan discharges because they were enrolled at ACI at the time the school closed. The Department has already used its existing authority to grant discharges to defrauded Corinthian students in Massachusetts and other states on the basis of its illegal conduct.
The judgment against ACI calls for more than $25 million in civil penalties, fees, restitution and injunctive relief, with the amounts largely uncollectible and suspended as a result of the school’s insolvency. The school’s officers and directors are also permanently prohibited from operating or managing any career or vocational training school in Massachusetts.
The AG’s Office, working with the Massachusetts Division of Professional Licensure (DPL), also obtained more than $2 million in discharges of private student debts owed to ACI and serviced by Tuition Options in a parallel action filed in federal court. This relief will immediately benefit more than 700 former ACI students.
Students receiving private student debt discharges will be notified by the AG’s Office.
All former ACI students are encouraged to call the Student Loan Assistance Unit Hotline at 1-888-830-6277 or by completing the ACI Student Contact Information Update Form so the AG’s Office can assist those students who may be eligible for various relief.
AG Healey has been a national leader against predatory for-profit schools and securing relief for students. In November 2015, AG Healey submitted an application to the Department of Education requesting the cancellation of federal loans taken out by students of Corinthian Colleges in Massachusetts, and announced action against student debt relief companies and the launch of a Student Loan Assistance Unit to assist borrowers having trouble paying their loans. The AG’s Office is in ongoing litigation with Corinthian and recently sued ITT Tech and an unlicensed for-profit nursing school for alleged unfair and deceptive practices. The AG’s Office has also reached settlements worth more than $6 million with Kaplan Career Institute, Lincoln Tech, Sullivan & Cogliano, and Salter College.
The case against ACI was handled by Assistant Attorneys General Colleen M. Nevin and Justin J. Lowe, with assistance from Dan Krockmalnic, Andrea Park, Jared Rinehimer, Mychii Snape, and Jeffrey Walker and Paralegals Virginia Aprahamian Weeks and Lois Martin, all of AG Healey’s Consumer Protection Division, Assistant Attorney General Alex Klibaner of AG Healey’s Insurance and Financial Services Division, and Investigators David Bolcome and Kristen Salera from AG Healey’s Civil Investigations Division.