As Feds Crack Down On For-Profit College, A Founder Heads To Prison For Fraud

May 12, 2016
Originally published on June 2, 2016 3:48 pm

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.

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DAVID GREENE, HOST:

The for-profit college, the University of Phoenix, has been raising a lot of eyebrows with an ad that is meant to inspire. But so far, it's inspired mostly anger on social media. This ad depicts working-class Americans heroically juggling job and family while also getting an education. And it's set to this tune.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR: (Singing, to the tune of "If I Only Had A Brain") So my kids don't have to forage, got two jobs to pay a mortgage. And I've also got a brain.

GREENE: OK. That's an ad for the University of Phoenix that has been angering a lot of people on social media. And I'm with Anya Kamenetz from the NPR Ed team, who's been covering the for-profit college system for some time now. Hi, Anya.

ANYA KAMENETZ, BYLINE: Hi, David.

GREENE: That ad, you hear it, I mean it comes to the end. You see on the screen it says we rise. Why are people so angry when they find out that it was - it's for the University of Phoenix?

KAMENETZ: You know, I think it really points up to the moment of time that we're in. The for-profit industry expanded really strongly throughout the first decade, the 2000s. And now there is a real contraction going on. The Obama administration has been engaging in an escalating series of actions, to - at the state level and the federal levels - to try to rein in those particular colleges that are making misleading promises and doing a lousy job graduating students.

Let's stipulate that not every for-profit college or degree program is a bad deal for students. But in an ad like this, there's an implicit promise that for hard-working people, that they're going to get a better future. And a lot of these institutions are being investigated and in some cases, being prosecuted for making fraudulent claims - for deceptive advertising, for misleading people about what they're standing to gain from a for-profit college degree.

GREENE: As I understand it, I mean, people actually going to jail now from some of these schools.

KAMENETZ: Yeah, this really is a new one. So right now, the biggest case in terms of the severity of the charges is that of Alejandro Amor, who's the founder of a college called FastTrain, which had several campuses in South Florida. And he was just sentenced to eight years in federal prison for fraud.

GREENE: Eight years? I mean, that's quite a sentence.

KAMENETZ: Yeah. So court papers say that FastTrain, which closed down in 2012, engaged in a lot of deceptive advertising, really intense pressure tactics. There are allegations that they hired former strippers to recruit for the school. And to top it all off, they enrolled people who weren't qualified to go to college. In fact, they enrolled over 1,000 students without high school diplomas.

GREENE: You know, you raised an important point at the beginning of this conversation, which is that not all schools are doing something wrong necessarily. I mean, probably these schools have given a lot of opportunities for people who have other jobs, that don't have time to get an education. If the Obama administration's really going after these schools, what impact will this have on students?

KAMENETZ: Well, that's a really important question, David. And, you know, it's tricky. For the people who actually enrolled and paid for classes at some of the institutions that have been shut down, they're out a lot of time. They're out a lot of money. And they haven't advanced at all in their education. And very few of these students have seen their loans forgiven by the Department of Education or anyone else.

GREENE: So we're talking about students who are going to school. The school is shut down because of these charges and, I mean, they're out money. They don't get the loans forgiven at all.

KAMENETZ: They're still on the hook for those loans. And by the way, they owe the loans to the federal government. So the same agency that is investigating, in some cases prosecuting, these colleges is not offering relief to the students. In fact, they're saying, we know we're still going to collect these loans. You might be able to go through an onerous process with a lot of red tape to get the loans forgiven.

GREENE: Anya, thanks a lot.

KAMENETZ: Thanks, David.

GREENE: That's Anya Kamenetz from NPR's Ed team. Transcript provided by NPR, Copyright NPR.