For the past year, the Education Department has denied that a top official went out of her way to help Dream Center Education Holdings, owner of the Art Institutes, South University and Argosy University, as the company spiraled into insolvency.
The Trump administration had a keen interest in staving off the collapse of the troubled chain of for-profit colleges, even though congressional investigators found that Dream Center deceptively enrolled students at campuses that had lost accreditation and raked in taxpayer money in the process. The closure would have given more students a clear path to have hundreds of millions of dollars in federal loans forgiven. It also would have embarrassed an administration that has rolled back for-profit education regulations and filled the department with proponents.
A congressional investigation a year ago unearthed emails of Dream Center executives assuring one another that Jones, a former lobbyist for for-profit colleges, was doing her best to soften the landing of their fall. The Education Department accused House Democrats of “personal attacks made against its officials … predicated on unverified statements from the very ‘predatory for-profit’ [company] that the committee states ‘perpetrated misconduct against students and taxpayers.’"
A trove of documents released by the House Education Committee on Tuesday and through a related lawsuit earlier this month undermines the Trump administration’s claims.
As far back as June 2018, Jones sent and received more than 100 text messages from multiple officials at Dream Center, including company chief executive Brent Richardson, government liaison Shelly Murphy and legal counsel Dennis Cariello. Some messages discuss the accreditation problem, while others show Richardson pleading with Jones to release cash held in an escrow account as the company ran out of money.
Taken together, the texts reveal a far more extensive relationship than Jones had disclosed to the House Education Committee last year. Jones, the principal deputy undersecretary, had testified that she did not recall texting with Dream Center’s higher-ups, although she acknowledged “receiving a text from Murphy that she wanted to talk.”
Repeated efforts to reach Jones were unsuccessful. The Education Department did not address the breadth of the messages but said Jones was in regular communication with Dream Center to create a plan to help students complete their degrees after the campuses closed, known as a “teach out.”
In written responses to questions from lawmakers a year ago, the department said Jones became aware of Dream Center’s accreditation problems on July 10, 2018, and learned a week later that the company had lied to students about the matter. The newly released emails discuss her efforts before then. It is unclear from the emails and texts whether Education Secretary Betsy DeVos was aware of those efforts.
“The Education Department’s lack of transparency and the actions described in the documents raise serious questions that must be answered,” said Rep. Robert C. “Bobby” Scott (D-Va.), the chairman of the House Education Committee.
Jones’s efforts stem from Dream Center’s 2017 purchase of the chain of for-profit colleges. The company needed the blessing of the Education Department and several accrediting agencies, including the Higher Learning Commission. As a condition of its approval, the commission downgraded the accreditation of two Art Institute campuses until they could improve the quality of instruction.
The commission instructed Dream Center in January 2018 to inform its students that the two Art Institutes were no longer accredited, but the Los Angeles company waited until June 2018 to do so, according to documents.
Students kept enrolling, earning credits and degrees that were rendered worthless by the loss of accreditation. And the Education Department continued to provide them nearly $11 million in loans, even though for-profit colleges must be fully accredited to participate in federal student aid programs.
A group of former Art Institute students sued DeVos and the Education Department in October 2019, accusing them of unlawfully issuing loans that the students say they should not be forced to repay. That case was resolved after DeVos forgave a portion of the debts. But it has produced emails and text messages that highlight Jones’s role.
When the for-profit schools’ accreditation was downgraded to “pre-accredited,” they were prohibited from accessing federal student loans and grants, even though nonprofit schools with the same status can receive aid. But five months later, in May 2018, the department designated the schools as nonprofits effective Jan. 20, 2018, the date they lost their accreditation, according to letters obtained by the committee.
Not only did that move allow Dream Center to circumvent rules governing for-profit institutions, but it also helped justify the department’s decision to allow millions of dollars to flow to the campuses.
Still, the company needed the blessing of the commission for the credits and degrees it conferred to students during the lapse in accreditation to have value. Without that seal of approval, those degrees and credits would be worthless. As Dream Center hemorrhaged money and the closure of the campuses was imminent, that approval became critical.
‘A more informal and expedited resolution’
Despite accepting the commission’s terms in January 2018, Dream Center sent letters asking that the two schools remain accredited but never filed a formal appeal, documents show. Richardson, the company’s chief executive, said the company was on the verge of suing the commission when Jones called for him in late May or June 2018 to stand down, according to a letter he sent to the House committee in March of this year.
“Undersecretary Auer Jones asked us not to file the lawsuit against [the Higher Learning Commission] so that Ms. Auer Jones could pursue a more informal and expedited resolution on the accreditation issue,” Richardson wrote.
The Education Department confirms that Jones advised against the lawsuit because federal regulation requires an institution to enter into mediation first. According to the department, Jones was confused as to why Dream Center would want to sue the commission and did not understand that the concern was about accreditation.
Text messages provided to attorneys for the Art Institute students through a Freedom of Information Act request show that Richardson and Jones were in contact in early June 2018.
In one text dated June 14, 2018, Richardson thanked Jones for meeting and said her “ideas and comments were very helpful.” Richardson wrote that after the meeting he spoke with A. Wayne Johnson, who then headed the department’s office of financial aid, and told him “there is an elegant solution to our problem and the [department] would not have to put up any money. It would also lower the risk of the schools significantly."
The following night, Jones replied: “Hi Brent - let’s chat next week. It was a good meeting and I’d like to continue the conversation.”
Richardson, contacted through his attorneys, did not respond to requests for comment on the exchange.
“Every time we get new information about the department’s dealings with Dream Center, it reveals more about how focused the department was on its reputation, and Dream Center’s, rather than the needs of students,” said Eric Rothschild, an attorney at the National Student Legal Defense Network who represented the Art Institute students. “High-level department officials were back-channel texting Dream Center executives … while students were kept completely in the dark.”
Within two weeks of the exchange with Jones, Dream Center emailed the commission on June 24, 2018, proposing a retroactive reversal of the downgrade.
The commission had a policy that prohibited backdating accreditation beyond 30 days — six months had passed since the two Art Institute campuses were last accredited. It also thought that such a reversal would run afoul of federal regulations and Education Department rules, so it contacted the department to clarify. Career staff members affirmed the accreditor’s understanding of the rules, citing a 2017 memo.
But a day later, Jones contacted top commission official Anthea Sweeney and Barbara Gellman-Danley, the president of the accrediting body, saying that the memo “was issued in error” and that the department “will be releasing correct guidance … retracting that policy,” according to emails. In subsequent phone calls, Jones asked Sweeney to “work exclusively with her” on the issue, according to documents obtained by the House committee.
When asked by House committee staff members whether it was common for an undersecretary to be closely involved in accreditation matters, Gellman-Danley said, “No,” according to a transcribed interview.
Ultimately, the commission refused to grant the retroactive approval on grounds that it violated its policy, a decision that led to clashes with the Education Department.
By the end of July 2018, Jones issued guidance reversing the department’s policy barring accreditors from providing retroactive accreditation. The department has insisted that the guidance was in the works well before Dream Center started to unravel.
But in emails first reported by the New York Times, company executives said the department alerted them about the policy change weeks before it was announced. In an internal company email dated July 3, 2018, Dream Center Chairman Randall K. Barton said, “We just got off the phone with DOE. It appears [the Higher Learning Commission] is in sync with the retro [accreditation]. … Diane [worked with] all three creditors … and they will all agree to one plan with Department blessing."
The Art Institute campuses were already scheduled to close by the time Barton, who did not respond to requests for comment made through his attorney, sent the email. Still, retroactive accreditation would have protected Dream Center from being sued for lying to students about having the seal of approval. It also would have made it easier for students to transfer their credits elsewhere.
The Education Department did not directly address the discrepancies in the timeline provided to Congress, but a spokeswoman insisted that Jones has been forthcoming about her conversations with the accrediting commission.
“Nowhere in the emails does Diane contradict her testimony; in fact, she stated at the hearing that she had conversations with [the Higher Learning Commission],” said Angela Morabito, a spokeswoman for the department. “Those emails were about policies HLC already had in place, and whether they could still be applied since so much time had lapsed.”
Dream Center’s ill-fated acquisition of the for-profit schools has become a black eye for the Education Department.
DeVos supported the 2017 deal even though the company, an arm of a Christian nonprofit, had no higher education experience. Dream Center struggled to turn the for-profit colleges around and spent months trying to close and sell campuses to meet financial obligations.
When it fell short, the company in January 2019 entered into a form of bankruptcy. By March 2019, the entire chain folded after millions of dollars in federal financial aid owed to Argosy students disappeared and the department cut off the school’s access to grants and loans.
As the Education Department’s role in the Dream Center debacle came to light, DeVos blamed the commission for harming students by withholding its seal of approval and pledged to hold the accreditor accountable.
The secretary made headway on her promise earlier this month when the department recommended that an independent advisory board within the federal agency ban the commission from accrediting new schools for a year. The recommendation follows an investigation the department opened in October into the accrediting commission’s handling of the two Art Institute campuses.
Although the accrediting commission declined to discuss the emails, spokesman Steve Kauffman said, “HLC followed federal regulations and our own policies as we acted within the scope of our authority and with the best interest of Art Institute students in mind at all times."