By BRIDGET FREELAND
DENVER (CN) – More than 700 students and 50 employees complained about “systemic fraud” at for-profit Westwood College, according to a federal class action. Students say the college lied about its accreditation, tuition, fees, job placement services and curriculum, so as to enroll as many student-victims as possible and “maximize its obtainment of federal and private loan money.” The complaint is one of at least three class actions filed around the country late last week alleging fraud at for-profit colleges. (See all three stories on today’s Courthouse News page.)
The U.S. Senate has joined the Government Accountability Office in investigating such colleges, which receive 25 percent of the federal Title IV loans and grants, though they enroll just 10 percent of U.S. college students, according to the class action complaint.
The 32-page complaint cites findings from the GAO and testimony of for-profit college administrators and members of accreditation boards who testified to the Senate Committee on Health, Education, Labor and Pensions (the HELP Committee).
The HELP Committee held its first hearing on the alleged “systemic fraud” in for-profit colleges on June 24. According to the Westwood class action: “The report from the first hearing found that for-profit colleges spend huge sums of Federal Title IV dollars – taxpayer dollars – on TV advertisements. billboards, phone solicitation, web marketing and aggressive sales staff. It noted that the for-profit industry obtains an alarming 25 percent of the $89 billion in Federal Title IV loans and grants, despite enrolling only 10 percent of post-secondary education students. By spending an average of 31 percent of their revenue on advertising as compared to the 2 percent that is usually spent by community colleges, defendants and others in the industry turn profit margins that are among the highest in corporate America. While the HELP Committee’s first report was instructive, it barely brushed the surface of defendants’ deceptive trade practices. (Citations omitted.)
Westwood operated under a slew of corporate umbrellas, including Alta Colleges, Grant Corp., Trav Corp., Wesgray Corp., Paris Management Co., Elbert Inc., Bounty Island Corp., and also did business as Westwood College Online and Redstone College, according to the complaint.
Two individuals also are named as defendants: George Burnett, acting CEO and director of Alta Colleges, and William Ojile, chief legal and compliance officer for Alta Colleges and its subsidiaries.
According to the complaint: “Burnett did not hold an academic position before being tapped as CEO and director of Alta Colleges. Rather, he had a history of marketing, online, and technological business experience from his previous position as the chief marketing officer for Qwest Communications International, a large telecommunications company. Qwest was investigated by the SEC for securities fraud and eventually fined about $250 million for fraudulently reporting $4 billion in revenue and expenses. As CEO of Alta Colleges, Burnett ushered in an era of aggressive sales and marketing tactics that he honed at Qwest geared to raise revenues and maximize profit. To this end, Burnett devised, implemented, authorized, or sanctioned the internal policies and the comprehensive training programs that teach Westwood’s admissions representatives to engage in the deceptive trade practices described herein.” The complaint adds: “Previous to his current position, Ojile worked alongside Burnett at Qwest.”