Avoiding for-profit scrutiny

In March, EDMC announced its intent to sell to Dream Center most of its assets, including 31 Art Institute schools, as well as the Georgia-based South University and the California-based Argosy University educational systems.

The company, headquartered Downtown on Fifth Avenue, portrayed the deal as a lifting of the cloud hanging over for-profit education colleges.

Once seen as a business model that, like community colleges, expanded college access for underprivileged families, the private education bubble burst amid a decade of government investigations into illegal recruitment and deceptive marketing practices.

In November 2015, EDMC paid $100 million to settle lawsuits from the U.S. Justice Department and attorneys general from 39 states that claimed the company illegally paid incentives to recruiters based on the number of students enrolled.

Dream Center, a philanthropic organization affiliated with a Pentecostal church, funds programs across the country for underprivileged people.

The nonprofit received more than $11 million in grant and donation income in 2014, according to its tax filing, and spent most of that on programs ranging from hunger relief and human trafficking shelters to transitional housing and job training services for homeless families.

David Halperin, a prominent Washington, D.C.based attorney who has blogged about EDMC’s downfall, said the demographic of people depending on Dream Center for services,

Sources: EDMC filings with Pa. Department of Education, press releases Research: Daniel Moore; graphic: James Hilston/ Post-Gazette

and now possibly for higher education, are even more vulnerable to the kind of predatory schemes uncovered at EDMC schools.

“What EDMC and similar schools have done to that demographic has ruined their lives,” Mr. Halperin said. “Why would the Dream Center want to feed these struggling people to a school that the U.S. attorney general said was a ... fraud?”

Multiple attempts to reach officials with the Dream Center for this story were unsuccessful, so it is difficult to know exactly how the organization plans to run the schools.

Documents filed with regulators tell some of the story.

Dream Center agreed to abide by the terms of EDMC’s 2015 settlement, according to a partially redacted purchase agreement filed with the Pennsylvania Department of Education, obtained through a public records request. That settlement required prospective students to receive singlepage disclosures about their post-graduation job prospects and potential debt loads.

Dream Center has created an Arizona-based entity, the Dream Center Education Holdings LLC, which will be governed by an independent, seven-member board of directors.

EDMC promised Pennsylvania regulators that the mission of the state’s two Art Institutes will not change under new ownership. There will be no changes in coursework, program offerings, requirements for admission and graduation, and there will be not be any new locations or facilities.

What’s the intent?

The Pennsylvania Education Department is currently reviewing the terms of the deal, a spokesperson said.

A spokesman from the federal Education Department declined to comment on what questions regulators were asking of the schools or to give a time frame for approval.

A number of accreditation agencies declined to comment, pending their boards’ review. Accreditors — regional nonprofits that periodically review educational institutions and programs using broad guidelines from the federal Education Department — also evaluate any sale or change in legal status. Colleges of any kind want accreditation to show they meet basic standards.

Different colleges have different accreditors. For example, the Middle States Commission on Higher Education accredits the Art Institutes in Pittsburgh and Philadelphia, and the Southern Association of Colleges and Schools accredits Southern University.

One official with the Alameda, Calif.-based Western Association of Schools and Colleges, which accredits Argosy University, said the scope of the EDMC deal required employing one more person “with a deep financial background.”

Christopher N. Oberg, the agency’s vice president and chief operating officer, said a committee had visited Argosy’s campus in Orange, Calif. That committee recommended a decision to the accreditor’s board last week, which could be made public as soon as this week.

“Part of the question they had in the back of their minds — although they never said it — was where’s the money coming from and where’s the money going to? What’s the intent here?” Mr. Oberg said. “What’s important on the visit is to look for all the evidence you can get and to understand intention.”

According to filings with state education regulators, EDMC has disclosed to Pennsylvania regulators the resumes and short biographies of the two top executives slated to lead the schools, and it shared the terms of the financing.

Brent Richardson, the chief executive of Dream Center Education Holdings, has spent the last 12 years leading Grand Canyon University, a for-profit Christian school in Arizona, which he left in January. Before he left, Mr. Richardson tried to convert the school to a nonprofit, but an accreditation agency denied the move last year.

Mr. Richardson helped turn around Grand Canyon with investments from Michael K. Clifford, an influential supporter of for-profit schools who founded Significant Systems, a consulting firm advising dozens of colleges on how to grow.

Meanwhile, Randall Barton, who will become executive chairman of Dream Center Education Holdings, spent two years as chairman of Significant Systems, helping Mr. Clifford promote for-profit education.

Mr. Clifford, a former Dream Center board member who calls the group his “charity of choice,” has long been active in buying nonprofit schools and turning them into for-profit operations.

After Grand Canyon in 2004, he bought a bible college in Memphis in 2009, christened it Victory University, and installed former Arkansas governor Mike Huckabee as chancellor. That school closed in 2014.

Mr. Clifford has denied any direct involvement in the EDMC deal, though he called himself a “prayer warrior for whatever the Dream Center does to help the poor via education.”