The Lacaze-Gardner School of Business, which used aggressive advertising to attract low-income, inner-city blacks to its secretarial, typing, keypunch and business management courses, announced yesterday that it will close its downtown Washington classrooms.
Both the U.S. Office of Education and the FBI are investigating allegations that Lacaze-Gardner has abused federal student financial aid programs for obtaining millions of federal dollars for tuition for students who do not complete their courses there.
Lacaze-Gardner, which charges $2,900 tuition for a nine-month course, grossed more than $7 million last year, about $2.1 million of which came from federal student financial aid programs.
In a one-page memo issued to students and staff members yesterday, Daniel Grossman, who owns Lacaze-Gardner, said the downtown school at 710 14th St. NW "will accept no additional future students."
"The metropolitan Washington area is a healthy, thriving community," Grossman said in the memo. "With the job skills you are acquiring here we suspect that your own future will also be bright. We wish you all the best of good fortune in the future."
Grossman said in the memo that the Lacaze-Gardner Schools in Falls Church and Langley Park will continue to operate.
A spokesman for the school said yesterday that the 900 students currently enrolled in the downtown school will be permitted to complete courses. He estimated the last students would be graudating by next July 31.
A review of student financial aid records at Lacaze-Gardner made in May by the U.S. Bureau of Student Financial Assistance indicated that no "need analysis" was completed for some students who received financial aid. In other instances, according to the review, the school incorrectly calculated the amount of refund it was due from federal loans and grants for students who dropped out.
Some other students paid their tuition out of their own money or wound up borrowing money from Lacaze-Gardner itself at higher interest rates than they would have had to pay on the student loans from the federal government.
In recent months, at least six former Lacaze-Gardner students have filed formal complaints with the D.C. Office of Consumer Protection alleging that they were deceived in various ways when they signed up for financial aid to attend Lacaze-Gardner.
One of those who filed complaints, Candida Butler, 25, is a resident of Southeast Washington, where she lives on walfare with her two small daughters. She said she went to Lacaze-Gardner at the suggestion of a friend who thought she could get training there to find a job.
"I went down to the school to see what I had to do to get in. I talked with a well-dressed salesman," Butler said. "He told me I would have no problems getting admitted. And he said the government would pay for everything. All I had to do was sign a few papers."
Butler said she was handed a stack of blank forms June 9 by an admissions officer who she said told her to sign each form and he would fill in the details later.
Butler said she thought she was applying for federal loan money to pay her $2,900 tuition. But she said she discovered a month later, after reading the completed form she signed, that she actually had borrowed $1,300 from Lacaze-Gardner, at 18 percent interest per year.
After seven weeks at the school, Butler said, she became frustrated and dropped out of school, fearing she would not be able to repay the loan, which totaled $2,189.84, including interest. After dropping out, she said, she owed $707 for the seven weeks she attended.
Victor Simons, staff attorney for the D.C. consumer protection agency, said that under the District's usury law, only 8 percent interest can be charged on consumer loans, except those made by banks. However, interest on some other forms of credit are virtually unrestricted, he said.
A spokesman for Lacaze-Gardner said Grossman felt that 18 percent was a "fair" rate of interest on loans made to students by the school and was competitive with interest rates charged by many credit card companies.
Another complainant, Helena Thompson, 20, said she was told by a Lacaze-Gardner sales representative that her tuition would be paid entirely by a federal grant that she would not have to repay. It was nearly a year later, she said, when she found that she had actually received a $1,400 federally insured student loan. "When I went down to Lacaze to talk with them about the loan," Thompson said, "the guy told me I could be sued for owing that amount of money and I'd better pay."
Although Grossman maintains that large numbers of Lacaze-Gardner graduates, and even dropouts, do find jobs, he has refused to produce figures to document the school's job placement rate.