NSLDN Obtains Annual Reports of EDMC/Dream Center Settlement Administrator

NSLDN has obtained, via a public records request, the three annual reports prepared by the Settlement Administrator in connection with the 2015 settlements between Education Management Corporation (“EDMC”) and 40 state attorneys general (“Consent Judgement”) to resolve consumer protection claims arising out of EDMC’s recruitment and enrollment practices. The Consent Judgment imposes a variety of terms that bound EDMC and its successor, Dream Center Educational Holdings (“DCEH”).

A description of just some of the noteworthy portions of Third Report (covering October 1, 2017- September 30, 2018) is below and all three reports are available at the bottom of this post.

Third Administrator Report Confirms NSLDN Allegations in Dunagan v. Illinois Institute of Art & Requires DCEH to Provide a “Full[] Remedy” to Harmed Students

In December 2018, NSLDN filed a lawsuit on behalf of students, suing the Illinois Institute of Art, DCEH, and DCEH’s parent company, the Dream Center Foundation, in Cook County, Illinois for concealing from students that the Illinois school had lost accreditation. The Third Report expressly confirms NSLDN’s allegations, finding that DCEH’s concealment of the loss of accreditation was “inaccurate and misleading” to students and requiring DCEH to develop a corrective action plan “to provide appropriate relief to students affected by the failure to disclose the [loss of] accreditation.” The Administrator concludes that “[t]he completion of an appropriate corrective action plan on this issue is clearly a necessary prerequisite to being in substantial compliance with the Consent Judgment” and that DCEH must “fully remedy the harms caused by [its] failure to advise students that certain HLC-accredited schools had lost their accreditation status.”

Third Report Identifies Two Other Areas of Substantial Non-Compliance with Consent Judgment: Woz U & Gainful Employment

First, the Administrator raises “serious concern[s]” about DCEH leadership’s attempt to partner its non-profit schools with Woz U, a for-profit software coding “boot camp” also controlled by DCEH leadership. The Administrator finds that DCEH provided “misleading information” to prospective students about Woz U and explains that the arrangement “raised questions about DCEH leadership’s use of their new company’s non-profit status to benefit their separate for-profit projects.”

Second, the Administrator finds that DCEH failed to provide the required Gainful Employment disclosures to students, including clear warnings for programs that had failed, because such warnings would hurt enrollment. The Administrator explained:

Internally, DCEH compliance personnel who realized that the appeal had been withdrawn discussed the issue, agreed that the disclosure obligation had been triggered given DCEH’s for-profit status, and sought to activate the failure warnings on the schools’ websites. According to the personnel involved, they were overruled by DCEH management, who acknowledged the disclosure requirement but told the compliance personnel expressly that they could not activate the failure warnings because the warnings would deter new students from enrolling.

While the Administrator was not present for that conversation, the allegation is a serious one: A DCEH manager expressly instructed employees not to comply with federal regulations because doing so would hurt enrollment.

Third Report Raises Serious Questions About DCEH Leadership

The third report also raises numerous concerns about DCEH leadership’s tone and governance, calling it at times “flippant,” “dismissive” and “angry.” Examples cited by the Administrator include:

• “DCEH leadership indicated that under EDMC, Risk and Compliance had too much influence on the business. The newly installed officer called a key compliance team, the Business Practices Committee, the ‘Business Prevention Committee’ – in a meeting with the committee itself.”
• “Employees described being told that if management did not respond to a compliance concern, the employees should understand that the concern had been registered but did not merit a response, and they should proceed with the initiative notwithstanding their concern.”
• In response to questions from lower-level employees about the Woz U relationship and its compliance with accreditation and other standards, DCEH leadership “convened a team meeting that began with an admonition directed at DCEH’s Pittsburgh-based compliance team from DCEH CEO Brent Richardson along the following lines: ‘Pittsburgh is the place where everything goes to die. Understand this. I run DCEH. I run Woz U. You don’t question this. If someone wants to file a formal complaint, do it, but then get back to work or whatever it is you do in Pittsburgh. This meeting is over.’”

The First Report is available here.

The Second Report is available here.

The Third Report is available here.