THIRD ANNUAL REPORT 

OF THE SETTLEMENT ADMINISTRATOR 

UNDER THE 

CONSENT JUDGMENTS WITH 

EDUCATION MANAGEMENT CORPORATION 

(EDMC) AS SUCCEEDED BY 

DREAM CENTER EDUCATION HOLDINGS

Thomas J. Perrelli

Settlement Administrator

Jenner & Block LLP

1099 New York Avenue, NW

Washington, DC 20001

October 1, 2017 – September 30, 2018
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TABLE OF CONTENTS

I. INTRODUCTION..............................................................................................................1

A. Consent Judgment and Administrator ..........................................................................1

B. Summary of Findings ...................................................................................................2

1. The Transition to DCEH .......................................................................................2

2. Results ...................................................................................................................2

3. Concerns Looking Forward...................................................................................5

II. DCEH..................................................................................................................................6

A. Consent Judgment Background ....................................................................................6

1. EDMC and the Consent Judgment ........................................................................6

2. The Dream Center Transaction .............................................................................7

B. DCEH ...........................................................................................................................7

1. New Management..................................................................................................7

2. Non-Profit Status...................................................................................................8

3. Organizational Changes.........................................................................................9

III. EVALUATING DCEH’S COMPLIANCE EFFORTS..................................................9

A. Compliance Culture ......................................................................................................9

1. Initial Structure......................................................................................................9

a. Initial Compliance Leadership .......................................................................9

b. Staffing .........................................................................................................11

2. Initial Compliance Tone ......................................................................................11

3. Compliance Restructuring and Recent Improvements........................................13

B. DCEH’s General Structures in Place to Implement Consent Judgment’s 

Requirements..............................................................................................................14

1. Compliance Policies............................................................................................14

2. Training ...............................................................................................................15

3. Business Practices Committee.............................................................................16

4. Call Monitoring, Voice Analytics, and Mystery Shops ......................................17

a. Background ..................................................................................................17

b. Issues Going Forward...................................................................................19

C. Non-Profit Status........................................................................................................20

1. Woz U..................................................................................................................21

a. The Use of DCEH’s Non-Profit Status........................................................24

b. Accuracy of Disclosures to Prospective Students........................................24

c. Resolution and Issues of Concern ................................................................26

2. Gainful Employment ...........................................................................................28

D. Ground Campus Closures and Potential for Loan Discharge.....................................31

E. Admissions and Financial Services............................................................................35

1. Misrepresentations, Omissions, Unfair Practices, Abusive Recruiting 

Methods...............................................................................................................35

2. Parent to Campus.................................................................................................36
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3. Downplaying or Misstating Financial Aid Obligations.......................................37

4. Licensure and Enrollment....................................................................................38

a. Criminal History...........................................................................................38

b. Licensure ......................................................................................................39

5. Single Page Disclosures and Statistics................................................................39

6. Disclosure of Accreditation Status......................................................................41

a. Changes in Accreditation Status ..................................................................42

b. Losses of Accreditation Status.....................................................................43

7. VA Comparison Tool ..........................................................................................45

8. Job Placement Data .............................................................................................45

a. The Role of Core Skills Determinations and Methodology to Date ............46

b. The Revised Methodology ...........................................................................48

c. The Current Status........................................................................................50

F. Marketing and Third-Party Vendors...........................................................................50

1. Context ................................................................................................................50

a. Industry Background ....................................................................................50

b. EDMC’s Efforts ...........................................................................................52

2. DCEH’s Efforts...................................................................................................53

a. Structural Changes .......................................................................................53

b. DCEH’s Performance...................................................................................53

3. Future Plans.........................................................................................................54

G. Withdrawal Policies....................................................................................................56

H. Student Finance ..........................................................................................................57

1. Institutional Debt Forgiveness.............................................................................57

2. Implementation of Electronic Financial Impact Portal (EFIP)............................59

3. Debt Collection....................................................................................................60

IV. CONCLUSIONS AND RECOMMENDATIONS.........................................................61
EDMC – Third Settlement Administrator Report Outline

I. INTRODUCTION

A. Consent Judgment and Administrator 

This is the Third Annual Report prepared by the Settlement Administrator in connection 

with the 2015 settlements between Education Management Corporation (“EDMC”) and 39 

individual states and the District of Columbia (collectively, “the Consent Judgment”) to resolve 

consumer protection claims arising out of EDMC’s recruitment and enrollment practices. It is 

also the first report that describes the company’s operations and compliance efforts under 

entirely new management: In October 2017, EDMC sold substantially all of EDMC’s assets to 

Dream Center Education Holdings, LLC (“DCEH”), an educational affiliate of the Dream Center 

Foundation (“Dream Center”),1 a Los Angeles-based non-profit organization that provides a 

variety of social and religious services to individuals in difficult situations. 

The Consent Judgment imposes a variety of terms that bound EDMC and that now bind 

DCEH.2

 Some of the terms required action in a compressed period of time, like the Consent 

Judgment’s requirement that the company forgive the institutional debts of certain students 

within 90 days of the Consent Judgment’s effective date.3

 Other requirements require the 

company to provide certain consumer protections for periods of seven years, like maintaining a 

call monitoring system,4 or twenty years, like providing a single-page disclosure sheet that 

provides specified information to prospective students.5

 

The Consent Judgment specifies that the Administrator’s term is to last three years,6 but 

the Attorneys General may extend that term for up to two additional years if there is “a failure by 

[DCEH] to achieve and maintain substantial compliance with the substantive provisions of the 

Consent Judgment.”7 This Report is the Administrator’s third and final report of the three-year 

term, and is based on the monitoring of calls recorded in the admissions process, reviews of 

marketing material, job data, and other materials, rounds of formal employee interviews in May 

and August 2018, ongoing discussions with compliance personnel, reviews by third-party 

consultants, participation in EDMC trainings, observations of team meetings, and mystery shops. 

At times during the course of this Consent Judgment, the Administrator has also received 

unsolicited information from individuals involved with the company or its schools, through the 

Administrator’s website, complaints forwarded by State Attorneys General, and other channels, 

and the Administrator has investigated issues arising from that information.

 1 Dream Center Education Holdings, LLC, is the affiliate that acquired the schools in the transaction, which closed 

October 17, 2017.

2 See Consent Judgment ¶ 134. 3 Consent Judgment ¶ 120-21. 4 Consent Judgment ¶ 95.

5 Consent Judgment ¶¶ 56, 124. 

6 Consent Judgment ¶ 38. 7 Consent Judgment ¶ 49.
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B. Summary of Findings

1. The Transition to DCEH

As described in prior reports, the first year of the Consent Judgment was characterized by 

significant investment in compliance infrastructure and efforts at pushing that infrastructure and 

a revamped culture of compliance into the outer reaches of a large and diffuse organization. In 

the second year of the Consent Judgment, progress somewhat stagnated: EDMC was clearly 

struggling financially and preparing to be sold; while the company was largely able to maintain 

the status quo, it was unable to invest in new initiatives, and senior compliance personnel left in 

advance of a transition.

This third year has been dominated by a major shift in compliance culture and approach 

from DCEH and its new management. The Dream Center Foundation has described the new 

educational endeavor as an expansion of the services that the Foundation provides to individuals 

in transition, and consistent with that mission, is transitioning the schools from for-profit to nonprofit status. That transition is being overseen a management team with a history of for-profit 

endeavors. DCEH leadership is clearly driven to save what they believe to be a business at 

serious risk of failure – one they believe to be worse off than they expected or were led to 

understand at the acquisition – and have found limited capital available to invest in its long-term 

compliance future. 

With respect to the core issues of compliance at the heart of the Consent Judgment, the 

third year has been characterized by two distinct periods: a very rocky period in the first half of 

the year, raising new and troubling issues, followed by signs of improvement after a restructuring 

of the compliance team in August and September 2018. Had that significant change of direction 

not occurred, the Administrator has no doubt that the conclusions of this report would be dire. 

Since August, there have been positive signs of improvement, but the critical question is whether 

DCEH leadership will support continued compliance improvements going forward.

The goal of the Consent Judgment no doubt was to bring about significant compliance 

reforms at EDMC that would last far beyond the term of the Settlement Administrator. There 

have been important changes that have eliminated or at least reduced the incidence of consumer 

protection issues that led the state Attorneys General to begin investigating in the first place. But 

the company is at an inflection point; there remains real uncertainty about whether the progress it 

has made will continue into the future or whether the company, under DECH’s leadership, will 

backslide. 

2. Results

The change in management has brought several changes in results.

Call monitoring. First, there is one area in which the new management has not changed 

EDMC’s prior results, and which is an unqualified success of the Consent Judgment: DCEH has 

maintained the call monitoring system required by the Consent Judgment, randomly listens to a 

meaningful number of calls to identify violations and training opportunities, and has, for the 

most part, eliminated the incidence of high-pressure, abusive, or deceptive sales tactics that 

characterized EDMC and the industry in the years prior to the Consent Judgment. With 
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occasional inaccuracies that are best described as isolated, admissions and financial services 

representatives are providing accurate, comprehensive information to the prospective students 

whom they are attempting to enroll.8 The call monitoring system is a critical component of the 

compliance architecture, and the focus of the state Attorneys General on that system has paid 

significant dividends.

Other infrastructure investments required by the Consent Judgment have also been 

beneficial. Prospective students are in a position to make better-informed decisions as a result of 

the Single-Page Disclosure Sheets9 and Electronic Financial Impact Portal10 that EDMC and 

DCEH have made available. And early in the Consent Judgment, EDMC successfully 

implemented the institutional debt forgiveness program that the Consent Judgment required.11

Outside these areas, however, the third year of the Consent Judgment has raised new and 

problematic issues that could not easily be addressed through training, job aids, and 

modifications to policies and procedures. As discussed further below, the Administrator 

identified three incidents constituting substantial non-compliance with the Consent Judgment and 

requiring corrective action plans.

Woz U. In March 2018, DCEH’s Art Institutes announced a partnership with a for-profit 

educational entity – also controlled by DCEH leadership – called Woz U. The partnership 

contemplated a 12-week, full-time, intensive software coding “boot camp” under the Woz U 

brand. From a Consent Judgment perspective, DCEH provided or endorsed misleading 

information to prospective students regarding the nature of the partnership (whether an Ai 

program or something else), the status that completers of the Woz U boot camp would obtain 

(whether “graduates” or something else), and the job placement successes that previous 

completers had enjoyed. Apart from the Consent Judgment, the arrangement raised questions 

about DCEH leadership’s use of their new company’s non-profit status to benefit their separate 

for-profit projects. Ultimately, DCEH agreed that it would not proceed with Woz U. It is now 

separately developing a different suite of “boot camp” offerings, developed entirely in-house.12

Gainful Employment. Department of Education regulations require that for-profit schools 

provide significantly more disclosures than non-profit schools, including clear and conspicuous 

warnings for degree programs that fail to meet minimum “Gainful Employment” requirements. 

While DCEH is organized as a non-profit entity for tax purposes, the Department of Education 

had not approved the transition to non-profit status for Department of Education regulatory 

purposes. Accordingly, DCEH should have been making all of the Gainful Employment 

disclosures – including clear warnings for programs that had failed – required of for-profit 

schools. While aware of its formal regulatory position as a for-profit school, DCEH elected to 

make the narrower disclosures required of non-profit schools. DCEH explained that it did so 

because the Department of Education had signaled that it would approve the transition to nonprofit status, making enforcement against DCEH unlikely for making only the narrower 

 8 More information regarding DCEH’s call monitoring capabilities is available beginning on page 17, below. 9 More information regarding the Single-Page Disclosure Sheets is available beginning on page 38, below. 10 More information regarding the Electronic Financial Impact Portal is available beginning on page 58, below. 11 More information regarding the institutional debt forgiveness program is available beginning on page 56, below. 12 More information regarding the Woz U issue is available beginning on page 21, below.
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disclosures during the transition. DCEH ultimately agreed to post all of the disclosures required 

of for-profit schools, pending a decision by the Department of Education.13

Accreditation Disclosures. On January 20, 2018, the Higher Learning Commission 

(“HLC”) downgraded the status of the Illinois Institute of Art and the Art Institute of Colorado 

from “accredited” to “candidate” – a move that, in HLC practice, means that the schools were 

unaccredited. DCEH did not inform students that the schools had lost their accreditation for 

several months – during which time students registered for additional terms and incurred 

additional debts, for credits that were significantly less likely to transfer to other schools and 

towards a degree that was to have limited value. DCEH explained that it disagreed with and was 

appealing HLC’s decision, and hoped to have the accreditation reinstated retroactive to January 

20. Whatever conclusions are reached regarding DCEH’s status under the Consent Judgment on 

other issues, DCEH should not be said to be in substantial compliance with the Consent 

Judgment until it completes the corrective actions necessary to resolve this issue. 

While not itself a violation of the Consent Judgment, the “tone” that new DCEH 

management set upon arrival was also distinctly different from the tone set by the new 

management’s predecessors. 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. The CEO accused the compliance team of being “the place 

where everything goes to die.” Employees who identified compliance questions and risks were 

not thanked, but accused of being obstructionist. The new tone was one that suggested 

compliance was a burden, not a critical element of the company’s mission.14

Concerns about these issues have been a topic of significant discussion between DCEH 

leadership and the Administrator. Importantly, there have been signs of improvement in 

DCEH’s compliance efforts over the final months of this review period. The company hired a 

new Senior Vice President of Compliance and Regulatory Affairs, reporting to the General 

Counsel and the Chief Academic Excellence Officer. The company has begun working more 

proactively to raise compliance issues. Where the company had initially, and implausibly,

denied violating relevant requirements, DCEH has begun implementing corrective action plans. 

And the company’s new Chief Marketing Officer has developed plans to dramatically reduce 

DCEH’s reliance on some of the industry’s more problematic recruiting tactics.

The change in tone and attention to compliance following the restructuring was 

necessary. But the unevenness of DCEH’s commitment to compliance over the past year does 

not provide confidence that DCEH has truly turned the corner for the future. If the compliance 

team continues to operate as it has in the last few months and is given the freedom, authority, and 

support necessary to do its job, there is a basis for optimism. 

 13 More information regarding the Gainful Employment issue is available beginning on page 26, below. 14 Issues regarding tone are addressed throughout the report, including in a focused discussion beginning on page 11, 

below. 
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3. Concerns Looking Forward

As this third review period comes to a close, it is worth looking ahead. There are a 

number of areas in which DCEH’s recent history suggests that backsliding is at least a 

possibility.

First, notwithstanding improvements in recent months, DCEH’s commitment to a culture 

of compliance is uncertain. While DCEH hired a senior compliance manager, many of the 

challenges over the past year have been driven by senior leadership; even the strongest Risk and 

Compliance department cannot change a company whose employees doubt the leadership’s 

commitment to compliance. Time will tell whether the compliance team receives the 

institutional support that it needs, whether leadership promotes additional initiatives that are 

flawed from a compliance perspective, whether the organization resists them, and how leadership 

responds.

Second, DCEH is still in the process of completing a corrective action plan that the 

Administrator required for violation of the Consent Judgment. As a result of DCEH’s failure to 

advise students that certain schools had lost their accreditation on January 20, certain students 

stayed in the unaccredited schools, incurring additional debts to obtain credits that were less 

likely to transfer or a degree that was worth less than they expected. The Administrator has 

asked DCEH to prepare a corrective action plan to assist the affected students. While DCEH is 

appealing the accreditation decision at issue, and a decision is unlikely before the 

Administrator’s term expires on December 31, 2018, DCEH is aware that the Administrator will 

expect it to provide and complete a corrective action plan if the appeal is unsuccessful. 

Third, DCEH announced in July 2018 that for financial reasons, it would be closing thirty 

of its schools. The closures would affect about half of DCEH’s total schools and about a quarter 

of its total enrollment, and would have significant consequences for students. As DCEH 

encourages students at these teach-out locations to enroll in other DCEH schools, it must provide 

accurate and materially complete information to students. In the initial steps of the closures, the 

Administrator has worked to ensure that DCEH informs students at these schools of the 

Department of Education’s Closed School Discharge program, through which students at closed 

schools who meet certain criteria can apply to have their federal loans forgiven. DCEH is still 

working to inform students at some of these schools of the actual date on which their schools 

will close, which can be a key piece of information for students considering applying for a 

Closed School Discharge. As the teach-outs proceed, the accurate and complete communication 

required by the Consent Judgment will be important in helping these students make the choices 

that are best for them. 

Fourth, the issue of DCEH and its non-profit status will continue to require scrutiny. The 

abandoned Woz U initiative would have involved DCEH, the non-profit, making payments to a 

for-profit entity controlled by DCEH’s own leadership. Perhaps it was a sensible business or 

educational arrangement, but the rationale for it was by no means clear, and the legal and 

appearance issues of personal benefit to the management of the non-profit were cause for serious 

concern. While DCEH decided not to move forward with the Woz U initiative, DCEH also 

indicated that it would consider other arrangements going forward, some of which might include 
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contracting with for-profit entities for substantial services. Such efforts in the future would merit 

close scrutiny by the Dream Center Foundation, the DCEH Board, and the Attorneys General. 

Fifth, while one of the DCEH Consent Judgment’s successes has been the accuracy of the 

data and nature of the discussions that DCEH representatives provide prospective students, there 

are reasons to be vigilant going forward. With respect to the data, there are concerns in the 

company that DCEH is not adequately investing in its data reporting infrastructure, and over 

time, the information will become less accurate. With respect to the nature of the discussions 

that admissions representatives have with students, the Administrator has been encouraged by 

the Risk and Compliance team’s shift towards random call monitoring over this review period, 

and would want to see call monitoring proceed at present levels or higher.

Sixth, DCEH has laid out a three-year goal of nearly eliminating its use of third-party 

lead generators. These vendors are difficult to monitor and have caused compliance challenges 

for DCEH, EDMC, and others in the industry for years. DCEH’s new Chief Marketing Officer 

believes that reducing its reliance on these vendors will give the company better control over 

how its brand is perceived, and lead to better, more cost-effective marketing. It is also worth 

noting that at schools that have eliminated the use of third-party lead generators entirely, they 

have saved substantially on the large compliance infrastructure that that marketing channel 

requires. Reducing reliance would be beneficial from a compliance perspective – but it is worth 

noting that at the beginning of the Consent Judgment, EDMC also laid out a three-year plan 

along similar lines. Reducing such reliance is difficult.

II. DCEH 

A. Consent Judgment Background

1. EDMC and the Consent Judgment

At the time of the November 2015 Consent Judgment with the state Attorneys General, 

EDMC was one of the largest for-profit providers of post-secondary education in the country. 

Formerly a public company, EDMC had delisted from the NASDAQ in 2014, eighteen years 

after its first public offering. At the time of the Consent Judgment, EDMC claimed to manage 

109 locations in 32 U.S. states and in Canada and serve over 90,000 students in its four separate 

brands, or systems: The Art Institutes (Ai), Argosy University, Brown Mackie College, and 

South University. 

EDMC became the subject of several state investigations beginning in 2010. Over a twoand-a-half year period, EDMC received subpoenas from the Attorneys General of Florida, 

Kentucky, New York, Colorado, and Massachusetts.

15 The subpoenas were followed by requests 

for information from thirteen states in January 2014, with the Pennsylvania Attorney General’s 

office serving as the states’ principal point of contact.16 Following more than a year of 

subsequent discussions, EDMC entered into a settlement with 39 states and the District of 

Columbia to resolve consumer protection claims arising out of its recruiting and enrollment 

 15 See Education Management Corporation, Form 10-K (Oct. 14, 2014) at 36. 16 See Education Management Corporation, Form 10-K (Oct. 14, 2014) at 36.
7

practices. The settlement was resolved through nearly identical consent judgments entered in the 

various states,17 referred to in this Report as the Consent Judgment.

The Consent Judgment appointed an independent Settlement Administrator to monitor 

EDMC’s compliance with the Consent Judgment’s requirements and issue annual reports. The 

Consent Judgment imposes requirements on EDMC and, as discussed below, successor 

companies for varying number of years: seven years of maintaining a call recording system,18

twenty years of most other requirements.19 

2. The Dream Center Transaction

At the beginning of this review period, EDMC closed a sale of substantially all of its 

assets to Dream Center Education Holdings, LLC (“DCEH”), an educational affiliate of the 

Dream Center Foundation (“Dream Center”),20 a Los Angeles-based non-profit organization that 

provides a variety of social and religious services to individuals in difficult situations. DCEH 

announced that it would convert the EDMC schools into “community focused not-for-profit 

educational institutions” that, among other things, provide educational opportunities for Dream 

Center volunteers and the recipients of its services.21 DCEH leadership has also discussed 

building a stronger connection between its programs and the private employers with whom 

DCEH hopes to place graduates, through redesigned academic offerings and partnerships with 

prospective employers. 

That sale to DCEH is one part of an even longer period of transition. In the years since 

the Consent Judgment was entered, EDMC had sold or closed several of its schools, including 

the entire Brown Mackie system, and had been in the market for a purchaser for some period 

before the Dream Center announcement. From a compliance perspective, the period during this 

uncertainty meant that following significant initial investments at the Consent Judgment’s 

beginning, there was little investment in proactive compliance initiatives and an otherwise 

effective compliance staff. This was the situation that DCEH faced when it acquired EDMC’s 

assets.

B. DCEH

1. New Management

With the change in ownership came a change in management. DCEH installed a new 

leadership team. Its new CEO, Brent Richardson, had previously served as chairman and chief 

executive officer at Grand Canyon University, where he oversaw the school’s conversion from 

non-profit to for-profit status, and ultimately to an initial public offering, and has had roles in 

 17 The various consent judgments all share identical requirements for the core provisions, although certain states also 

added additional provisions that apply specifically to that state. EDMC is implementing the Consent Judgment 

provisions in every state in which it operates, regardless of whether that state participated in the Consent Judgment.

18 Consent Judgment ¶ 95.

19 Consent Judgment ¶ 124. 20 Dream Center Education Holdings, LLC, is the affiliate that acquired the schools in the transaction, which closed 

October 17, 2017.

21 See Dream Center Foundation Press Release, “Education is the Key” (Mar. 3, 2017), available at 

https://dreamcenter.org/about-us/foundation/.
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numerous for-profit education companies. His brother, Chris Richardson, became DCEH’s 

General Counsel; Shelly Murphy, who had roles in other Richardson companies, became 

DCEH’s Chief Officer, Regulatory and Government Affairs. The new leadership brought in 

other key managers who had worked with Richardson previously or who had other for-profit 

education experience.

The new management did not appoint a C-suite level officer who was focused on 

compliance issues, as the Administrator’s Second Annual Report had recommended; instead, the 

company’s compliance functions reported up to Murphy.

2. Non-Profit Status

A critical part of DCEH’s vision for the network of schools was their conversion from 

for-profit to non-profit status. This change would be consistent with the purposes of the new 

company’s owner, The Dream Center Foundation, and the Foundation’s social and religious 

mission. 

The change also has regulatory significance, as the Department of Education treats forprofit and non-profit schools differently. First, non-profit schools are not subject to the 

Department of Education’s “90/10 rule,” a mechanism that ensures that for-profit schools are 

receiving at least some level of market-based support. In short, the 90/10 rule requires for-profit 

colleges to receive at least 10% of their revenue from sources other than federal financial aid. 

Non-profit colleges are subject to no such restriction, and are permitted to cover all of their costs 

through reliance on federal financial aid provided for students. While there are financial tradeoffs, the shift to non-profit status thus can be a significant benefit from a revenue perspective –

particularly for schools that have had difficulty generating revenue from sources other than the 

federal government.

Second, the Department of Education has different disclosure requirements, particularly 

regarding the typical debt and earnings of program graduates, for for-profit and non-profit 

schools. The disclosures provide important information for prospective students, as programs 

that are subject to these Gainful Employment rules and that fail to meet minimum requirements 

must issue clear warnings to students and prospective students about their programs’ failure.

22 

The Gainful Employment regulations apply more broadly at for-profit schools; programs that 

would fail the Gainful Employment regulations and require disclosure at a for-profit school may 

not need to make that disclosure once a school becomes a non-profit.

For purposes of the Consent Judgment and compliance purposes, it is important to 

distinguish between DCEH’s and its schools tax status and its Department of Education 

regulatory status. As a matter of tax law, DCEH has been organized as a non-profit entity under 

Section 501(c)(3) of the tax code since the time of the EDMC-DCEH transition. However, for 

Department of Education regulatory purposes, DCEH schools remain treated as for-profit

institutions – notwithstanding DCEH’s tax status – until the Department of Education 

specifically approves the transition to non-profit status. Until that Department of Education 

recognition, DCEH and its schools must comply with the various state and federal laws 

 22 34 C.F.R. § 668.410.
9

governing non-profit management – such as restrictions on using a non-profit to personally 

benefit the organization’s management in certain prohibited ways – but is treated as a for-profit 

for purposes of the Department of Education’s 90/10 and Gainful Employment rules. While 

DCEH believes that the Department has begun treating DCEH as a non-profit in certain 

important ways, the Department has also advised DCEH that it remains a for-profit institution for 

regulatory purposes until final approval is obtained. 

3. Organizational Changes

DCEH has faced ongoing financial pressures since taking over, and its management 

believes that the company was in a weaker position than they expected when they took the helm. 

In a year of organizational change, two changes had particular impact.

First, in April, DCEH engaged in a significant round of layoffs. While the layoffs 

affected other parts of the company more dramatically, employees with compliance 

responsibilities for the Business Practices Committee, state regulation, and Department of 

Education issues departed through the layoffs. 

Second, in July 2018, DCEH announced the closing of 30 of its ground campuses, 

affecting all three brands but the Art Institute schools most heavily. The closures would affect 

about half of DCEH’s total schools and about a quarter of its total enrollment. As discussed 

further below, the closures had significant consequences for the business, and dramatic 

consequences for students. The closures also put a focus on DCEH’s ability to provide accurate, 

complete information to its students at the closing schools – students whom DCEH was also 

trying to recruit to attend other DCEH schools. 

III. EVALUATING DCEH’S COMPLIANCE EFFORTS

A. Compliance Culture

While there were signs of improvement towards the end of the review period, most of the 

early signs from DCEH’s new management were problematic. 

1. Initial Structure

a. Initial Compliance Leadership

DCEH did not install a C-suite-level chief compliance officer. The Administrator had 

recommended such a hire in the Second Report, noting the void that had existed when EDMC’s 

Chief Compliance Officer departed in May 2017:

The company has now operated without its compliance and audit leadership for 

several months. Regardless of how capable the existing team may be, long-term 

vacancies in those positions have consequences. They leave the team less able to 

break through internal logjams and elevate issues for resolution, and more focused 

on maintaining existing initiatives than on making improvements proactively. 

Particularly following several months of uncertainty surrounding a potential 
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transaction and the resulting hesitance to invest in upgrades, vacancies in these 

positions have stalled the company’s compliance efforts.23

The Second Report concluded, “Installing strong compliance and audit leadership and investing 

in those aspects of the organization should be a priority of DCEH’s incoming management.”24 

While Risk and Compliance reported up to a “cabinet-level” officer in Shelly Murphy

during this time, her portfolio included all regulatory and government affairs, not just 

compliance, and her position required an extensive focus on obtaining Department of Education 

approval for the EDMC-DCEH transition. The issues that had once occupied the full-time Chief 

Compliance Officer could not occupy the full attention of a senior leader whose responsibilities 

included several other pressing issues.

There was a significant perception in the company during this time that no one in 

DCEH’s senior leadership was well-versed in the Consent Judgment and its requirements. 

Discussions that emerged from company management sometimes contemplated courses of action 

that were flatly inconsistent with the Consent Judgment. Often, those discussions were either 

halted or abandoned, but the mere contemplation of those courses of action contributed to a 

belief that leadership did not believe that the Consent Judgment, or compliance generally, was 

important.

While a lack of high-level understanding of compliance perspectives matters from a 

cultural perspective, it also has operational consequences. Decisions at DCEH are often made 

within a circle of high-level leaders referred to as the “cabinet.” Each member of the cabinet 

oversees various functions within the company; a cabinet member with operational 

responsibilities (or the CEO himself) may propose a course of action, the cabinet will discuss it, 

and leadership may decide to pursue the idea further. In that decision-making process, it is 

critical that someone in the cabinet have sufficient understanding of the company’s compliance 

obligations to identify potential issues in the proposal, so that leadership can then assign lowerlevel operational and compliance personnel to work together to resolve them. Leadership would 

thus be deciding to proceed in partnership with Risk and Compliance to explore the proposal 

further.

Because no one in DCEH’s cabinet during this period was laser-focused on, and wellversed in, compliance, leadership often considered an operational proposal and then elected to 

proceed – without having the proposal vetted for compliance concerns. While lower-level 

compliance subject-matter experts would eventually become aware of, work on, and identify 

potential issues in the proposal, they were identifying issues only after company leadership was 

perceived to have – and may have understood itself to have – issued a “go” order. Compliance 

questions raised after that point were perceived as obstructionist foot-dragging, rather than 

fulfillment of a critical commitment to compliance.

 23 Second Report at 11. 24 Second Report at 11.
11

b. Staffing

DCEH took over operations with a compliance infrastructure that was already in need of 

investment. As discussed in the Second Report and briefly above, both the Chief Compliance 

Officer and Vice President of Internal Audit had left the company prior to the DCEH transition. 

The two senior compliance analysts most involved in implementing the Consent Judgment 

departed during the first six months of the DCEH transition and this review period. 

With the reductions in force in April, DCEH employees became concerned that any 

further staffing reductions, whether through attrition or further layoffs, would threaten the 

company’s ability to meet its obligations. Three areas stand out in which staffing shortages may 

pose a particular compliance risk.

First, in a highly regulated industry, DCEH must track, calculate, and report significant 

amounts of information regarding dozens of schools, scores of programs, and thousands of 

students. Staffing shortages can be particularly acute in the quality control process. Looking 

ahead, these shortages may degrade the accuracy of the information that DCEH is required to 

provide to accreditors, regulators, and prospective students. This degradation would likely take 

place over time, and not be noticeable immediately.

Second, as discussed in detail below, DCEH’s ability to implement a compliant recruiting 

process depends in large part on the company’s capacity to listen to, identify violations in, and 

provide appropriate responses regarding the conversations that admissions representatives have 

with prospective students. The effective call recording and monitoring program is a significant 

success of the Consent Judgment. But its continued success depends on having adequate staffing 

to listen to a meaningful proportion of the company’s calls. 

Third, the lack of an internal audit team has reduced the company’s ability to self-identify 

problems. Particularly in light of concerns regarding the company’s ability to maintain accurate 

reporting over the long term, EDMC’s and now DCEH’s failure to replace the internal audit 

function leaves the company weaker from a compliance perspective. 

2. Initial Compliance Tone

At the outset, the vision that new DCEH management communicated to employees was a 

step backwards, particularly in an industry and company that had a long history of compliance 

challenges. While all businesses must make risk-based judgments with respect to their 

compliance programs, the perception – created by statements made and actions taken by senior 

DCEH officials – was that, even where the compliance team identified actions that were or 

would be contrary to the company’s legal and accreditation requirements, such determinations 

were merely advice that could be rejected by business personnel if the business nonetheless 

wanted to proceed. 

That a company might take “compliance risks” is not necessarily fatal. Not all 

compliance questions are clear-cut; a sophisticated compliance team will recognize the 

difference between conduct that clearly violates a legal or accreditation requirements, and 

conduct that may create the risk of non-compliance, perhaps due to a lack of controls or the 

novelty of an approach or a lack of clarity about what the company intends. These latter kinds of 
12

questions may properly be described as compliance risks, and the relevant business unit will then 

have to weigh the nature of the conduct and the risk, and choose the appropriate course. If 

DCEH’s new compliance vision was that the compliance team should provide nuanced 

judgments where appropriate, that vision could be consistent with a well-functioning 

organization.

That is not how the new vision was understood, or conveyed. DCEH employees 

understood that in the new structure, even the most clear-cut compliance issues would be viewed 

as “risks” for the business team to weigh – and the business team could proceed with the 

problematic conduct even if it was unquestionably improper, so long as the business justification 

was strong enough. On some of the issues described further in this Report, Risk and Compliance 

personnel described expressly informing senior management that a course of conduct was illegal, 

and were told that the business would proceed regardless.

Some DCEH employees described the shift in focus to “compliance risks” was important, 

even if imperfectly implemented, because the stricter compliance culture under EDMC had 

become more likely to cause compliance problems. On this view, EDMC employees had 

become afraid to engage Risk and Compliance on issues, either because the employees feared 

being punished for non-compliant conduct or because an overly cautious compliance approach 

would kill compliant, important initiatives due to the smallest, most mis-conceived compliance 

risk. According to these DCEH employees, the fear of engaging Risk and Compliance meant 

that EDMC would actually proceed with risky, problematic ideas that could have been corrected 

had they viewed Risk and Compliance as a more constructive partner.

This concern appears overblown. Legacy EDMC employees, who worked under both 

EDMC and DCEH, did not report any fear of engaging the Risk and Compliance team under 

EDMC. Moreover, the Administrator did not observe the kind of riskier conduct that is alleged 

to have occurred under prior management. If anything, as described throughout this Report, the

riskier conduct has arisen during the DCEH era.

The new tone towards compliance also affected the company’s relationship with the 

Administrator. Previous management had appeared to view the Administrator as a partner in the 

company’s efforts to improve its compliance culture: Administrator requests for documents and 

information were prioritized, and new ideas were vetted with the Administrator team for 

feedback and improvement. While the new DCEH management at the beginning of this review 

period did not outright refuse any Administrator requests, there was a distinct shift in tone. 

Whether as part of an intentional design, competing priorities, or a tighter control on information 

from DCEH leadership to compliance staff, information requests were filled more slowly and 

with more difficulty. The company was less proactive in bringing compliance issues to the 

Administrator’s attention, and instead left the Administrator to discover issues through more 

traditional, resource-consuming investigative practices. When DCEH did bring changes to the 

Administrator’s attention, it was more likely to do so after the change had been implemented, 

rather than in advance of the change to solicit feedback. 

While this shift in tone ultimately did not defeat the Administrator’s efforts to obtain 

information, it was symptomatic of the more problematic change in tone that was directed 

toward the company’s compliance personnel. 
13

The message, from both the CEO and the company’s initial officer overseeing 

compliance was clear to both current and former DCEH employees and was reported to the 

Administrator. 

• Sometimes the tone was dismissive: 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.

• Sometimes the tone was flippant: At an initial opportunity for the senior officer 

overseeing compliance to meet with the compliance staff, the officer referred to 

the Business Practices Committee – a group that had historically provided 

compliance feedback on a wide range of public-facing materials, among other 

things – as the “Business Prevention Committee.”

• Sometimes the tone was angry: The CEO, frustrated with concerns raised by the 

Pittsburgh-based compliance team, told the team words to the effect of, 

“Pittsburgh is the place where everything goes to die. . . . 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.”

While the Consent Judgment did not mandate a particular “tone” towards compliance, a 

problematic compliance culture inevitably has concrete results.

3. Compliance Restructuring and Recent Improvements

Importantly, there were signs in the final months of the review period that the tone would 

be changing. DCEH installed a new Senior Vice President of Compliance and Regulatory 

Affairs, Kate Dillon Hogan, who had a background in compliance at for-profit and non-profit 

schools. While the new Senior Vice President was not a C-suite-level officer, she reports to the 

General Counsel, and has a dotted-line report to the Chief Academic Excellence Officer, Dr. 

Stacy Sweeney, who has a background on accreditation issues. It is worth noting that following 

the compliance restructuring towards the end of this review period, Dr. Sweeney also became 

more engaged in compliance issues.

The change in compliance management has had meaningful positive benefits. In recent 

months, the company has become more responsive to Administrator requests, more proactive in 

bringing issues to the Administrator’s attention, and more interested in getting additional 

compliance perspectives before proceeding. More importantly, whereas DCEH had initially 

contested certain obvious compliance violations, it has begun working towards remediating those 

issues. And the lack of more recent compliance problems may suggest that the addition of 

compliance to the cabinet has helped issue-spot and resolve problems before they gain 

momentum. These signs are important – though sufficiently late in the game that it is difficult to 

determine whether they reflect a brief stand-down as the Administrator’s presumptive three-year 

terms approaches its end, or constitute a long-term commitment to providing sufficient 

institutional support to the compliance team and promoting a compliance culture.
14

B. DCEH’s General Structures in Place to Implement Consent Judgment’s 

Requirements

1. Compliance Policies

DCEH has not initiated major shifts in the policies that have been in place over the prior 

few years. Most of the policies that governed compliance matters during the Consent 

Judgment’s initial years remain in place. The guidance that Risk and Compliance personnel 

provide via a listserv through which admissions personnel raise compliance questions has not 

changed – even if the admissions personnel who once used the listserv several times a week, in 

the early days of the Consent Judgment, now turn to it only once every few months, and only 

three times thus far in 2018. Dream Center’s 2018 Compliance Guide does not vary in any 

substantial way from previous guidance issued by EDMC. And the critical “Compliance Grade 

Key,” for example, which determines the “level” of various categories of infractions employees 

might commit in the admissions process – and thus the type of coaching or discipline that the 

company might impose – has changed very little, particularly in identifying and describing the 

most serious “Level 4” offenses. 

Yet while there may have been little formal change in the violation and remediation 

process, employees nonetheless described a distinct change in how policies were enforced when 

DCEH took over. In their view, infractions that once triggered disciplinary action became

viewed more as coaching opportunities. The change was driven, as DCEH management 

described it, by the new management’s view that business and operational employees had 

become “scared” of the Risk and Compliance organization, and were to so hesitant to violate a 

policy that they were deterred from doing their jobs. From this perspective, a shift towards 

treating compliance infractions as teaching opportunities was part of an effort to make 

Compliance a less threatening, and more integrated, part of their work. Indeed, one employee 

viewed that change as “a weight lifted off [the employees’] shoulders,” because, in that 

employee’s view, some categories of violations that could be viewed as merely “technical” could 

have disproportionately negative effects on an employee’s career with the company. 

It is unclear whether the perception of compliance violations as teaching opportunities

has continued since the compliance restructuring occurred towards the end of the review period. 

From a compliance perspective, employees’ perception of how their company views compliance 

is important, and whether employees think the company views violations as teaching 

opportunities or something different is less critical than how employees think the company views 

compliance overall. If employees believe that the company values compliance generally, then a 

perception that certain kinds of compliance infractions are coaching opportunities can contribute 

to a positive, beneficial cycle. In contrast, where compliance is devalued, even a perceived shift 

away from a disciplinary framework to a more educational and coaching framework can be 

viewed as a further weakening of the compliance commitment. That was how compliance was 

viewed in the company when employees described the shift in attitudes towards compliance 

violations. If the restructuring of the compliance team towards the end of this review period is 

successful, then whether employees view violations as teaching opportunities or something 

different may have less significance.
15

2. Training

Beginning in 2016, EDMC launched a number of online training modules to teach 

employees about compliance policies related to the Consent Judgment. These interactive 

trainings were mandatory for all EDMC admissions personnel and covered topics such as how to 

accurately and comprehensively discuss certification and licensure issues, how to describe 

features of various programs of study, how to recruit students without making false, deceptive, or 

misleading statements, and how to discuss information provided to prospective students during 

the recruiting process.

DCEH has made modest changes to the training process and policies, and has reorganized 

the on-boarding training process for new admissions representatives. Previously, EDMC 

conducted training over 10 days, with a mix of classroom and simulated call-time.25 DCEH’s 

revised training schedule is 15 days, with a greater emphasis on simulated call-time over 

classroom instruction.26 The Administrator has reviewed the revised on-boarding schedule and 

has interviewed DCEH staff responsible for the revisions, and is comfortable that the new 

schedule covers the same substantive topics from prior iterations and provides adequate training 

to new representatives.27 The revised schedule contains a new module entitled “Resolve 

Engagement Barriers,” a title that could raise concerns of pre-Consent Judgment practices 

returning. However, the new material focuses on resolving barriers to engagement at the 

beginning of a call – for example, lack of time to talk – rather than overcoming objections to 

pursuing education. Separate modules on Confirming Educational Interest and Engaging 

Students the Right Way are still part of the onboarding process, and the Resolving Barriers

materials do not contain objectionable or problematic content from a Consent Judgment 

perspective.

Overall, DCEH’s training materials are consistent with the general change that EDMC 

made from the pre-Consent Judgment training: a move away from a recruiting approach that 

focused on “overcoming barriers” and toward a framework that confirmed whether the 

prospective student was actually interested in pursuing an education.28

Admissions staff are still required to take and pass an Admissions Compliance Test as 

part of New Hire Training and semi-annually thereafter. There have been no changes to this 

policy.29

DCEH has, however, made one noteworthy change to the periodic compliance refreshers 

that EDMC had hosted. In the first year of the Administrator’s term, EDMC’s Call Monitoring 

team also hosted a monthly compliance training webchat with mandatory participation by all 

admissions supervisors. The Administrator’s team was invited to observe these sessions, which 

typically began with a 30-minute presentation on a specific compliance issue, followed by 30 

 25 See EDMC 2017 Training Schedule. 26 See DCEH 2018 Training Schedule. 27 Note, however, that while the Administrator team participated in on-boarding in prior years, it has not personally 

attended sessions under the revised schedule.

28 Compare Argosy University, Training Program: Engagement Barriers (2014) with EDMC, Training Program: 

Confirming Educational Interest (Mar. 16, 2016), at 18.

29 See Admissions Compliance Guide (July 2018).
16

minutes of discussion. In the second year of the Administrator’s term, EDMC reduced the 

frequency of these calls from monthly to quarterly. This change was reasonable, given that 

fewer new changes related to the Consent Judgment went into effect in the second year, and 

many EDMC staff had been previously trained on compliance-related topics. There were simply 

fewer topics to discuss, and rather than continue holding calls that employees found unnecessary 

and stopped attending, EDMC reduced the calls’ frequency. 

DCEH has now ceased the calls entirely. According to Dream Center staff, those calls no 

longer take place because the volume of new compliance-related materials has fallen. The last 

webchat was held on January 31, 2018 and concerned the transition to non-profit status.30 

DCEH staff believe more frequent calls would not be useful given that staff are well-versed in 

the Consent Judgment. 

As the Administrator noted in the Second Report, in an organization whose goal is “to 

help everyone make compliance an integral part of your teams’ culture and conversations,”31

there is value in having regular, frequent discussions that reinforce the centrality of a compliance 

mindset. At the same time, calls that are perceived not as improving compliance but as merely 

talking about compliance, for the sake of talking about it, can build a resentment that is counterproductive. The Administrator has not seen signs that the compliance challenges during this 

review period were related to the reduction of calls with admissions staff; the compliance 

challenges generally occurred at other levels of the operation.

3. Business Practices Committee

The role that DCEH’s Business Practices Committee (“BPC”) plays in ensuring 

compliance has been in flux during this review period. The BPC is comprised of a variety of 

compliance and subject-matter experts who were charged with ensuring the accuracy of materials 

submitted for their review. Historically, EDMC policies required all marketing and 

communications materials, including marketing efforts by third-party vendors, to be submitted in 

advance to the BPC for review.32 Reviewers include those with expertise in legal, financial aid, 

state licensure, military, accreditation, and other relevant subject matters. For example, when 

academic catalogues go through the portal for review, reviewers will include those familiar with 

requirements by state regulators and accreditors. Reviewers would provide comments on 

materials submitted; where the review identified compliance deficiencies, the material would be 

categorized as, “Changes Required, Resubmit.” Those materials could not be used until they 

were revised33:

 30 Admissions Call, “Transition to Non-Profit” (Jan. 31, 2018). 31 See Monthly Admissions/NCC Management Compliance Call (Dec. 8, 2016). 32 See EDMC, Marketing Compliance Handbook at 5 (updated Jan. 12, 2015); EDMC, Marketing Vendor 

Compliance Guide at 1 (updated July 19, 2016). 33 See EDMC, Marketing Compliance Handbook at 7 (updated Jan. 12, 2015).
17

Under that process, if a BPC reviewer identified an inaccuracy or other compliance 

deficiency in proposed marketing materials, the material could not be distributed until it had 

been revised and had obtained BPC approval.

DCEH employees report that the new Dream Center management viewed BPC 

unfavorably. Indeed, at one early meeting with compliance personnel, a senior leader with 

compliance responsibilities referred to BPC not as the “Business Practices Committee,” but as 

the “Business Prevention Committee” – a remark, perhaps inadvertent, that employees received 

as a strong signal that compliance was no longer a company priority. 

New management also planned operational changes for BPC. Employees report that 

whereas BPC approval had previously been required before materials could be related publicly, 

new management thought BPC should provide “recommendations” to the business unit that had 

proposed the material – but should let the business unit decide whether to accept the 

recommendations or proceed with the identified “compliance risk.” Some employees described 

the new role for BPC as one in which the compliance team would be “consulted” but would not 

have “authorit[y].” Employees also describe the new management as telling them that further 

down the road, marketing materials would not require compliance staff review at all.

The changes that DCEH management discussed were not implemented, and since the 

compliance restructuring, there appears to be an effort to make BPC more involved in the 

decision-making process, not less. This would be beneficial: While there is nothing “magical” 

about the BPC and its practices to date, a shift towards a decreased role for BPC, coupled with a 

tone at the top suggesting that the BPC was “prevent[ing]” business, would be concerning. A 

plan designed to give business units more discretion to weigh compliance risks would mean, if 

nothing else, that they are more likely to take them. 

4. Call Monitoring, Voice Analytics, and Mystery Shops

a. Background

As discussed in previous reports, the DCEH compliance infrastructure has historically 

relied on three primary tools to monitor how its admissions representatives speak with 

prospective students: targeted call reviews, using the speech analytics software PerformMatch; 

random recorded call listening; and telephonic and in-person mystery shops in which individuals 

pose as prospective students and test various compliance scenarios. The speech analytics and 

random call listening depend on a call monitoring system through which, under the Consent 

Judgment, DCEH is required to “record all telephone calls and online chats between Admissions 

Representatives or Student Financial Service Representatives, on the one hand, and Students or 

Prospective Students, on the other.”34 

The three tools each play a role and should not be considered redundant. 

Speech analytics. DCEH’s PerformMatch software analyzes the calls saved on DCEH’s 

call recording system, using a set of static search terms and rules, flags calls that appear to have 

 34 Consent Judgment ¶ 95. 
18

violated DCEH compliance standards.35 By looking for certain words or phrases, PerformMatch 

can detect potentially problematic calls for DCEH’s Call Monitoring team to review.

This speech analytics system enables DCEH to gain compliance insights on thousands of 

calls per month, and is particularly helpful for identifying problems that can be reduced to 

particular words or phrases. The Consent Judgment’s requirement that DCEH advise 

prospective students that discussions with admissions representatives are recorded is a good 

example: Because the mandatory recorded-line warning involves an established script, 

PerformMatch can scan tens of thousands of calls each month to determine whether the required 

words were present. PerformMatch is similarly useful in determining whether prohibited words 

were used, and thus is well-suited, for example, for determining whether admissions 

representatives used designated offensive terms in their calls. Speech analytics is not perfect for 

these purposes, because like any voice recognition software it can mis-hear terms that are 

enunciated differently. But it enables DCEH to search large volumes of calls for specified words 

and phrases – whether a recorded line disclosure, offensive language, or specified phrases that 

could signal a misleading recruiting tactic, like “you’ll definitely graduate.” The Administrator 

has used DCEH’s speech analytics capacity for this purpose, to identify calls in which 

representatives may be discussing particular issues of interest.

That said, speech analytics software is not a complete solution, as it leaves two important 

gaps. First, speech analytics software looks for its search terms imperfectly, missing words and 

phrases that are enunciated in a manner other than the manner the software expects. Second, 

more fundamentally, speech analytics software looks only for what it looks for: It seeks 

particular words and phrases from a list of terms compiled by DCEH staff and bolstered with 

terms added by the Administrator team. And not only is it impossible to anticipate and identify 

all potential variations of a non-compliant statement, but many behaviors that create the risk of a 

misrepresentation or an unfair practice are subtle and context-specific. Speech analytics 

software can apply black-and-white rules to large volumes of calls, but it will miss many 

instances of deceptive or misleading discussions with prospective students. 

The Consent Judgment required EDMC, and now DCEH, to “acquire and implement an 

automated voice interaction analytics platform ... capable of analyzing all of the call recordings” 

by July 1, 2017.36 As noted in the Second Report, EDMC had installed its call recording system 

for the vast majority of its campuses by that deadline, but had delayed installing a call recording 

system on Argosy University locations in Guam and American Samoa. According to EDMC, 

installing the system at those locations was prohibitively expensive, and unwarranted given the 

relatively low volume of calls fielded at those locations. The Administrator has reviewed that 

claim; because DCEH is now closing the Guam location, the issue focuses on the request that 

DCEH not be required to install the call monitoring system at the American Samoa location. 

After discussions with DCEH regarding the costs of installation and a proposal to provide 

increased mystery shops at that location, the Administrator believes that the purpose of the call 

recording requirement can be accomplished through much more cost-effective strategies at that 

 35 The Administrator has access to PerformMatch and can have search terms or rules added to the system. 36 Consent Judgment ¶ 95 & Ex. A.
19

location. The Administrator has endorsed DCEH’s proposal for increased mystery shops at 

American Samoa in the absence of the call recording system.

Random call listening. Random call monitoring is an important complement to 

monitoring using speech analytics. Whereas speech analytics finds only those problems that 

have been previously identified and that are articulated in pre-defined ways, random call 

listening can pick up emerging issues and issues that manifest themselves in unanticipated or 

subtle ways. And whereas speech analytics software enables listeners to review only that narrow 

slice of a call in which the software detected an issue, random call listening lends itself to 

reviews of entire calls – which, again, provides a more complete picture of the nature of DCEH’s 

interactions with prospective students. Random call listening is also labor-intensive; whereas the 

speech analytics system can pinpoint brief passages of potentially problematic discussions; 

random call listening requires the call monitoring team to listen to long calls, in their entirety, 

that in the end are often perfectly compliant.

Mystery shops. Finally, unlike the speech analytics and random call monitoring strategies 

that only work where the call recording system is installed, DCEH can use mystery shops to test 

admissions and financial aid discussions that focus on particular campuses, programs, and 

scenarios. Mystery shops are useful for focusing in on particularly difficult issues, the 

effectiveness of particular training, or particular representatives. DCEH, like EDMC, has relied 

on a third-party firm, RD Associates, to conduct both telephonic and in-person mystery shops. 

From a high point of 3,000 telephonic and 80 in-person shops each year, RD Associates 

conducted 1,950 telephonic and 60 in-person shops during this review period – a drop attributed 

primarily to the reduction in admissions staff to review, as schools have closed. 

b. Issues Going Forward

As noted above, the key to effectively monitoring the performance of its admissions 

representatives does not necessarily lie in any one of the three tools described. Speech analytics, 

random call listening, and mystery shops all play a role in a strong compliance framework, and 

address different parts of the problem. An approach that relies exclusively on random call 

listening would leave vast parts of the company’s work unreviewed; similarly, an approach that 

relies exclusively on speech analytics would miss unquestionable – and unquestionably harmful 

– violations. Accordingly, the question should be not just how many calls DCEH can review, but 

how DCEH reviews those calls. The increased number of recorded calls has certainly enabled 

DCEH to review more. With speech analytics software that can find preselected problematic 

phrases and pinpoint the few minutes around those phrases for focused listening, it is possible to 

assign compliance scores to tens of thousands more calls per month. However, assigning 

compliance scores is not the same thing as ensuring compliance. Speech analytics, while 

helpful, should supplement random call listening, not replace it. It is through random call 

listening that reviewers find the more subtle kinds of infractions, and identify new problems 

requiring attention.

The new speech analytics software has identified more compliance issues than would 

have been identified using random call listening alone, and has been particularly valuable for 

catching violations that necessarily involve the presence or absence of specific key words (such 
20

as failures to disclose that a call is on a recorded line). For that reason, speech analytics has been 

a valuable compliance tool, and an important requirement of the Consent Judgment. 

Ultimately, a successful compliance program will dedicate sufficient resources to support 

the use of all three of these tools. As the Second Report noted, when EDMC first installed the 

call recording and speech analytics software across its schools, EDMC struggled to find the 

proper balance: With the speech analytics software flagging numerous calls as involving 

potentially problematic phrasing, EDMC dedicated thousands of hours to listening to the flagged 

calls – a helpful exercise, but ultimately an effort that over-focused on formulaic violations, like 

the failure to include a recorded line disclosure, and under-focused on other, potentially more 

pernicious violations that could only be identified through random call listening.

DCEH’s call monitoring team was responsive to the Administrator’s concern regarding 

the risk of speech analytics crowding out the company’s capacity for random call monitoring. 

DCEH changed its protocol for flagging calls through its speech analytic software, reducing the 

volume and focusing on more problematic violations – and thus freed up more capacity for 

random call monitoring. As a result, DCEH’s compliance team was able to listen to 

approximately 18% more randomly selected calls than in the prior year.

The key now will be continuing to dedicate the resources to speech analytics, random call 

listening, and mystery shops. There are reasons to be concerned for all three, as call listening is 

a resource-intensive effort at a time when DCEH has been laying off staff. Employees have 

raised questions about DCEH management’s commitment to the effort, notwithstanding the 

Consent Judgment’s requirement that the call recording program last seven years. Mystery 

shopping, in particular, may be particularly at risk; while some reduction may be appropriate as 

the company’s call recording system has ramped up and enrollment has dropped, eliminating 

mystery shopping entirely would sacrifice an important part of the compliance toolbox.

Overall, the improvement of DCEH’s admissions representatives over the past three years 

shows the value of this compliance infrastructure and the Consent Judgment. DCEH’s 

admissions representatives have generally continued to improve, and had relatively few 

compliance gaps during this review period. The Administrator attributes this bright spot largely 

to the call recording and speech analytics infrastructure that the Consent Judgment imposed. The 

key going forward, as mentioned above, will be to dedicate the necessary resources to this 

program in the years to come. 

C. Non-Profit Status

DCEH’s compliance structures faced a new set of issues during this review period as a 

result of the schools’ transition, as part of the Dream Center Foundation purchase, into 

“community focused not-for-profit educational institutions.”37 That is, the shift in the 

organization’s mission also gives rise to different compliance and regulatory issues. 

Some of those issues relate to the purpose of the company’s new non-profit structure, and 

whether, as one lawmaker asked prior to the transaction, the company “may be attempting to 

 37 See Dream Center Foundation Press Release, “Education is the Key” (Mar. 3, 2017), available at 

https://dreamcenter.org/about-us/foundation/.
21

skirt federal accountability rules and protections for taxpayers by converting its institutions to 

non-profit status while maintaining key elements of for-profit governance, including ... a 

financial arrangement that allows institution leaders to personally profit from the institution’s 

operations.”38 These issues arose during this review period in connection with a potential 

partnership that DCEH explored with Woz U, a for-profit provider of technological education 

offerings in which DCEH management also had a financial interest.

Other issues arose when the Department of Education did not approve the DCEH 

schools’ transition to non-profit status as quickly as DCEH had hoped or expected. As a matter 

of corporate form and taxation, DCEH may have organized itself as a non-profit organization 

relatively quickly. But notwithstanding that non-profit corporate or tax status, DCEH schools 

would remain subject to the regulations that govern for-profit schools until the Department of 

Education grants them an Eligibility Certification and Approval Report. Though the Department 

of Education has issued a “Preliminary Determination” that it “does not see any impediment” to 

that transition to non-profit status, final approval would be contingent on a number of factors. In 

a letter to EDMC and DCEH before their transaction closed, the Department stated the 

following:

[T]he Department has preliminarily concluded that, based on the information and 

documents provided to date, it does not see any impediment to EDMC’s request 

for approval of the [change in ownership, or “CIO”,] or its request for approval of 

nonprofit institution status (“Preliminary Determination”) following the CIO. 

Please note, however, that formal approvals of the CIO and nonprofit institution 

status are contingent on the [parties’] compliance with the requirements of 34 

C.F.R. § 600.20(g) and (h), the Department’s review and approval of any 

submissions required by those regulatory provisions, and any further 

documentation and information requested by the Department following the CIO 

or in this Preacquisition Review Response, including all documents related to the 

Transaction and the Institutions’ conversion to nonprofit status.39

Until the transition to non-profit status is approved, DCEH’s schools remain for-profit for 

Department of Education purposes, and are thus subject to more robust disclosure requirements 

than non-profit schools. As discussed further below, for a significant portion of this review 

period, DCEH was not providing prospective students with the disclosures that consumers could 

expect under the relevant Department of Education framework. 

1. Woz U

DCEH’s flirtation with a “Woz U” partnership provides some important insights into the 

company’s strategic mindset and the associated compliance risks. Woz U markets itself as 

“inspired by Steve Wozniak, co-founder of Apple Computer,” and that provides unaccredited, 

technology-focused education through both online and in-person offerings. Some of its offerings 

 38 Letter from Sen. Richard Durbin to Mary Ellen Petrisko, President, WASC Senior College and University 

Commission (June 22, 2017), available at https://www.durbin.senate.gov/imo/media/doc/2017-6-

22_Letters_to_accreditors_re_EDMC[1].pdf. 39 Letter from Michael Frola, Department of Education, to Brent Richardson, Dream Center Education Holdings, 

LLC at 2 (Sept. 12, 2017).
22

are branded as “Woz U Academy,” through which the company “partner[s] with schools to 

create campus-based programs ... to help students along their technology career path.”40

Woz U, a for-profit entity, is also closely tied to the non-profit DCEH’s leadership. Brent 

Richardson, DCEH’s CEO, has a financial interest in Woz U. Shelly Murphy, who oversaw 

DCEH’s regulatory, compliance, and government affairs operations during much of this review 

period, serves as a Woz U spokesperson. 

In March 2018, DCEH’s Art Institutes announced a partnership with Woz U to offer a 

full-time, 12-week software development program. The announcement came amidst significant 

internal discussion. The partnership appears to have originated at the top, with senior leadership 

agreeing to roll out a Woz U software coding training “boot camp” at Ai. Lower-level 

employees charged with implementing the arrangement and ensuring its compliance with Ai’s 

accreditation and related requirements had a number of questions regarding its precise structure –

whether Woz U students would be Ai students, the relationship between the Woz U boot camp 

and Ai credits, and the need for any regulatory or accreditor approval. The questions, and the 

pace of resolving them, frustrated DCEH leadership, who ultimately 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 DCEDH. 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.” Richardson has acknowledged making remarks along 

these lines.

It was thus with significant internal uncertainty that DCEH rolled out a Woz U 

partnership that it described as an Ai offering. For example, the initial March 15, 2018 

announcement on the Art Institutes’ blog was headlined, “The Art Institutes to Offer Technology 

Curriculum in Partnership With Woz U.” The announcement described the offering as “a new 

partnership” through which “The Art Institutes will provide Woz U’s tech-based curriculum.” A 

quote from Ai President Claude Brown contrasted Ai’s “traditional[] ... programs” with “The 

Art Institutes’ Woz U Academy.” The announcement also described Ai’s Woz U courses as 

“non-credit bearing” and said that they do not transfer into Ai programs. Ai’s announcement on 

its blog directed interested parties to a Woz U webpage for more information. 

 40 See https://woz-u.com/about/.
23

Other Ai materials conveyed the impression that Woz U was in some meaningful respect 

an offering of Ai. For example, the lead graphic on the Ai landing page similarly announced that 

“Woz U is coming to Ai”:41

Clicking on the “Learn More” button on this Ai webpage sent users not to another Ai or 

DCEH webpage, but to Woz U’s website.42 Sending Ai webpage visitors to a private third-party 

site for information about “The Art Institutes’ Woz U Academy” – the curriculum that Ai was 

“offer[ing]” – was apparently a cause of concern within DCEH: Employees who reviewed the 

Ai website content specifically asked that where the Ai site linked to an external site for more 

information about the Woz U offering, the company should have the opportunity to review that 

site – Woz U’s – for accuracy.43 

These external-facing materials that describe this program as an Ai offering, or similar, 

are consistent with internal discussions that the Administrator has reviewed. For example, 

DCEH also considered a standalone website for the relationship with Woz U, with the web 

address www.woz-uatai.com (i.e., “Woz U at Ai”). While that site appears not to have gone live, 

it appeared to contemplate a close relationship between Ai and Woz U.44 In addition, internal 

personnel reviewing the program understood that the Woz U course would be led by “a Woz U 

certified Art Institute instructor,” and noted that applicants would be accepted into Ai, not Woz 

U.45

Ultimately, DCEH determined at some point after the public roll-out that the company 

would not move forward with the Woz U partnership at this time. But the initiative raised two 

primary sets of questions.

 41 https://www.artinstitutes.edu/. 42 https://woz-u.com/AI/. 43 BPC Submission Job 36338. 44 BPC Submission Job 36338. 45 BPC Submission Job 36413.
24

a. The Use of DCEH’s Non-Profit Status 

One set of issues dealt with whether, given the involvement of DCEH CEO Brent 

Richardson and others in Woz U, DCEH management was using their non-profit educational 

institution to provide themselves financial benefits through other vehicles.

In discussions and publicly, DCEH has described Ai and Woz U in a number of different 

ways: as partners, as separate, and as part of a variety of possible business arrangements. 

Among other things, DCEH told both its employees and prospective students, at times, that Ai 

was operating as a landlord, providing space to Woz U.

The contract between DCEH and Woz U suggests that Ai was not just providing space, 

but had agreed to pay Woz U for operating Woz U on its campus. DCEH was to pay Woz U a 

$20,000 start-up fee, $10,000 for every additional campus on which Woz U opened, “30.00% of 

the actual amount of money received in payments” for tuition, a $1500 “Admissions Support” 

fee, plus additional per-student fees for finance and career services assistance, and a 10% markup on certain of Woz U’s lead generation costs.46 DCEH also agreed to incur the costs of hiring 

and paying the Woz U instructors.47 

Had DCEH proceeded with the Woz U initiative, there could have been reasonable 

questions regarding whether the arrangement constituted ordinary prudent business practices or 

an impermissible private inurement.48 For purposes of the Consent Judgment, it is sufficient to 

note that DCEH’s explanation that it was simply providing space for Woz U was inaccurate. 

b. Accuracy of Disclosures to Prospective Students 

There were also a number of questions regarding the accuracy of information provided to 

prospective students regarding the Woz U offering at Ai. 

Relationship to Ai. Notwithstanding the marketing materials that advertised a close 

relationship, prospective students who called Ai and sought to move forward in the process were 

given a different message. They were more consistently told words to the effect of, “[I]t is not 

an Ai accredited program,” Woz U “has their own representatives,” or “[I]t’s completely 

separate” – suggesting that the Woz U / Ai partnership was not as close as the advertisements 

had communicated, and that Woz U was simply using Ai’s space. Given the importance that a 

program’s reputation plays in its completers’ job prospects, students who enroll in “The Art 

Institutes’ Woz U Academy” – an unaccredited, non-degree program that was advertised using 

its connection to the accredited, degree-granting institution – should have been given clear, 

accurate information regarding the nature of the relationship.

 46 Exeter Education – Dream Center Education Holdings, LLC Master Services Agreement at Ex. A ¶¶ B.4 & Tbl.1, 

I (Mar. 7, 2018).

47 Exeter Education – Dream Center Education Holdings, LLC Master Services Agreement at Ex. A ¶ K.3 (Mar. 7, 

2018).

48 See Internal Revenue Service, Overview of Inurement/Private Benefit Issues in IRC 501(c)(3), at 3 (1990)

(providing multi-factor test to determine whether incidental benefits to non-profit managers are appropriate or 

impermissible). 
25

Status of completers. The page through which applicants were invited to apply to the 

program, bearing the Ai logo and description of the Ai system, referred to “graduates” of the AiWoz U offering – when it was unclear that completers of the 12-week offering could accurately 

be described as “graduates.”49

Job prospects. Clicking on the “Learn More” page on the Ai landing page took users to a 

Woz U webpage,50 bearing the “Woz U @ Ai” logo, with the following claim:

The description of the 12-week program as “prepar[ing] students to pursue an in demand career 

as a Software Developer” was questionable. Clicking on the “in demand” link took users to 

Bureau of Labor Statistics Occupational Outlook Handbook data that contains salary and job 

outlook information for software developers; that data could support the claim that software 

developers are, as a general matter, “in demand.” However, that page also indicates that a 

“typical entry-level education” for the position is a bachelor’s degree – which the Ai-Woz U 

offering would not have provided, and which would not have been available in Software 

Development at many of the Ai campuses in question.51 The government statistics relied on thus 

did not appear to support the claim that “The Art Institutes’ Woz U Academy prepares students 

to pursue an in demand career.”

Outcomes. That Ai-Woz U “Learn More” description linked to additional information 

that, while presented in a manner that suggests the additional information relates to the specific 

Ai-Woz U offering, likely related to other, longer, more involved offerings. At the end of the 

brief paragraph regarding the 12-week “Art Institutes’ Woz U Academy” was a link for those 

who want to “[l]earn more about our Software Developer program.” That link took users to 

another Woz U webpage52 that provided the following statistics:

 49 http://www.cvent.com/events/software-developer-javascript-application/event-summaryd5d6a78c6dde4ddd9ec55fbfb40140a1.aspx (visited May 23, 2018). 50 https://woz-u.com/AI/ (visited May 16, 2018). 51 https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm. 52 https://woz-u.com/software-developer/. 
26

While the webpage refers both to a “coding bootcamp” and to 24-33-week programs, it 

appeared that these statistics do not relate to the 12-week Ai offering that was described in the 

paragraph that linked to this page. 

c. Resolution and Issues of Concern

Woz U was the rare issue on which DCEH and the Administrator disagreed about the 

scope of the Consent Judgment. When presented with the Administrator’s concerns regarding 

the accuracy of information that Ai was providing regarding the Woz U offering, DCEH did not 

respond by defending the accuracy of the statements. Rather, it argued that because the Woz U 

offering was not for credit, that offering itself did not constitute a “program of study” as defined 

by the Consent Judgment, and thus DCEH’s statements regarding Woz U were not subject to 

review under the Consent Judgment.53 Indeed, many of the Consent Judgment’s restrictions are 

tied to “programs of study” as defined in the Consent Judgment. However, Ai’s partnership with 

Woz U was not marketed to only some niche set of students for enrollment solely in a separate, 

standalone program; rather, it was marketed generally to encourage students to enroll in Ai. The 

statements were thus made “[i]n connection with the recruitment of ... Prospective Students” and 

were subject to the Consent Judgment’s prohibition on false, deceptive, and misleading 

statements. 54

Ultimately, following numerous inquiries, DCEH informed the Administrator that it 

would not be proceeding with the Woz U partnership. While no formal explanation was given, 

CEO Brent Richardson indicated in discussions that he was concerned that linking the two 

companies would be bad for Woz U – suggesting that given Ai’s financial troubles, he had 

decided not to link his Woz U enterprise with the Ai brand. DCEH has not ruled out other 

 53 Consent Judgment ¶ 28 (“‘Program of Study’ shall mean a series of courses, seminar, or other educational 

program offered at an EDMC school in the United States, for which EDMC charges tuition and/or fees, which is 

designed to lead toward a degree, certificate, diploma, or other indication of completion, and which is (a) eligible for 

Title IV funding, (b) involves more than 25 contact hours in a credit bearing course, (c) is designed to make a 

Student eligible to sit for any state or national certification or licensing examination, or (d) is designed to prepare a 

Student for another series of courses, seminar, or other educational program that is eligible for Title IV funding. 

Notwithstanding anything in the foregoing sentence to the contrary, non-credit courses or programs offered for 

personal enrichment, i.e., hobby courses, that are not Title-IV eligible, courses that are not taken for the purpose of 

ultimately obtaining a degree, certificate, diploma, or other indication of completion, and review courses that are 

designed to assist with a Student’s preparation for a state or national certification or licensing exam for which the 

Student is already eligible to sit, shall not be programs of Study.”).

54 Consent Judgment ¶ 74; see also Consent Judgment ¶¶ 76 (prohibitions on “guarantees concerning Student 

outcomes”), 77 (prohibitions on false or misleading statements regarding financial aid), & 78 (prohibition on false or 

misleading claims about the “likelihood of obtaining employment as a result of enrolling”).
27

arrangements with for-profit entities, including entities in which its leadership or their family 

members have interests – though it is worth noting that in a current initiative to develop “boot 

camp” style courses, which DCEH is calling “Nano Credentials,” DCEH is developing the 

courses fully in-house without any separate vendor, whether affiliated or unaffiliated.

While DCEH ultimately decided not to proceed with Woz U, the initiative raised three 

sets of compliance concerns. The first are those discussed above: the accuracy of 

representations made in connection with DCEH recruitment efforts. Whether made directly by 

DCEH, like its statements regarding the nature of the relationship, or endorsed by DCEH through 

a joint marketing effort, these kinds of statements need to be accurate. DCEH needs to have 

review mechanisms in place that are sufficiently robust and respected internally to ensure they 

are not misleading.

Second, while has DCEH indicated that it is not proceeding with Woz U, close attention 

should be paid to any arrangements that could be perceived as using DCEH’s non-profit status to 

benefit its leadership. Organizations that are tax-exempt under Section 501(c)(3) of the Internal 

Revenue Code55 are prohibited from entering into certain transactions in which a non-profit 

organization’s activities provide the organization’s insiders, or their family members, with a 

disproportionate share of a benefit of the activity in question.56 Relatedly, state laws governing 

charitable organizations impose fiduciary and other duties on the directors and officers of nonprofit organizations, that can be threatened when directors have conflicting interests.57 Given the 

importance of these federal and state laws to the mission of non-profit entities like DCEH and 

the Dream Center Foundation, DCEH should be very careful to ensure the independence of any 

decisions – like a contract to pay a company in which DCEH’s CEO has a financial interest –

that could benefit its insiders.

Third, DCEH’s internal deliberations regarding the Woz U initiative confirm DCEH’s 

need for stronger compliance mindset. An organization that dismisses compliance concerns, 

makes decisions without thorough vetting, and relies on lower-level employees to stand up 

against higher-level decisions that are presented as faits accomplis will have difficulty building 

the compliance culture that it needs. A better decision-making process in this highly regulated 

space would have involved a Chief Compliance Officer identifying the need for further review 

before any commitments were made, an openness to that review and the questions it invited, and 

either an embrace or dialogue regarding any concerns. Here, the perception that the leadership 

team – including those with compliance responsibilities – had committed to proceed with Woz 

U, regardless of what concerns or risks it presented, and then dismissed questions and concerns, 

undermined the company’s ability to promote a culture of compliance.

 55 26 U.S.C. § 501(c)(3). 56 IRS regulations identify a number of factors when determining whether an activity provides an impermissible 

private inurement: (1) size and scope of the organization’s regular and ongoing activities that further exempt 

purposes; (2) size and scope of the excess benefit transaction in relation to the size and scope of the organization’s 

activities; (3) whether the organization has been involved in repeated excess benefit transactions; (4) whether the 

organization has implemented safeguards that are reasonably calculated to prevent future violations; and (5) whether 

the excess benefit transaction has been corrected or the organization has made good faith effort to seek correction 

from the disqualified persons who benefitted. See 26 C.F.R. §§ 1.501(c)(3)-1(f)(2)(ii)(A–E). 57 See, e.g., Ariz. Rev. Stat. § 10-3860 (2018). 
28

2. Gainful Employment

Under U.S. Department of Education regulations, in order to remain eligible to receive 

Title IV federal financial aid, educational programs must either (1) lead to a degree at a public or 

non-profit institution or (2) lead to gainful employment. When the current DCEH schools were 

under EDMC’s for-profit umbrella, they had to satisfy a set of regulations known as the “Gainful 

Employment Rule.”58 Under the Gainful Employment Rule, non-degree programs at public and 

non-profit institutions and all programs at for-profit institutions are required to calculate and 

disclose certain data regarding the typical debt and earnings of program graduates. The Gainful 

Employment Rule also establishes thresholds under which programs are considered passing or 

failing the gainful employment requirement.

59 Failing programs must issue warnings to students 

and prospective students through several channels, including via Department-provided templates, 

verbally during discussions with students and prospective students, and in writing via handdelivery or email.

60

Once DCEH schools are fully recognized as non-profit entities for Department of 

Education regulatory purposes, they will not be subject to the same level of disclosure 

requirements under the Gainful Employment Rule. Whereas both degree programs and nondegree programs are subject to Gainful Employment disclosure requirements at for-profit 

schools, only non-degree programs are subject to the disclosure requirements at non-profit 

schools. 

Importantly, while DCEH is, unlike its predecessor EDMC, a non-profit, its schools are 

still subject to the more extensive Gainful Employment requirements of for-profit schools. 

Whether a school is treated as for-profit, or as non-profit, for Gainful Employment Rule purposes 

is not determined solely by their corporate tax status. Rather, a school that is transitioning to 

non-profit status is still subject to for-profit treatment until the Department of Education issues a 

final Eligibility Certification and Approval Report. While ultimate Department of Education 

approval may be likely, it has not been received. DCEH is thus still subject to the Gainful 

Employment Rule’s requirements for for-profit schools – as the Department of Education 

reminded DCEH in its September 2017 preacquisition, Preliminary Determination letter: 

“Unless and until the conversion to nonprofit institution status is approved by the Department, 

the [parties] are reminded that the Institutions must continue to report their ... gainful 

employment data.”61

Some of the DCEH programs were deemed “failing” under the Gainful Employment Rule

during this review period, triggering DCEH’s obligation to post Gainful Employment failure 

warnings for the degree programs in question. DCEH initially indicated an intent to appeal the 

Department’s failure designations, an action that would have delayed its obligation to provide 

 58 34 C.F.R. § 668.401 et seq. 59 34 C.F.R. § 668.403. 60 34 C.F.R. § 668.410. 61 Letter from Michael Frola, Department of Education, to Brent Richardson, Dream Center Education Holdings, 

LLC at 16 (Sept. 12, 2017).
29

warnings to students and prospective students.

62 In late 2017, however, DCEH abandoned its

appeals,

63 triggering its obligation to issue Gainful Employment failure warnings.64 

DCEH did not put up its Gainful Employment failure warnings for degree programs as 

required for for-profit institutions when it withdrew its appeal to the failure determinations. 

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 forprofit 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.

After those discussions with their employees, DCEH’s outside counsel informed 

personnel at the Department of Education that in light of their “transition,” DCEH schools were 

“now remov[ing] their 2017 GE disclosure templates from the program webpages of their degree 

programs.”65 DCEH has explained that in light of its transition to non-profit status, and its 

reasonable expectation that the Department of Education would not enforce the Gainful 

Employment disclosure requirements for for-profit programs against DCEH during this transition 

period, its decision not to post the Gainful Employment failure warnings is justified.

However, until DCEH receives a final Eligibility Certification and Approval Report, it is 

subject to the Gainful Employment disclosure requirements for for-profit programs. More 

specifically in this context, Paragraph 74 of the Consent Judgment prohibits DCEH from making 

false or misleading statements about its programs, omitting material facts about its programs, and 

“making any representation inconsistent with required Disclosures of the U.S. Department of 

Education found in Title 34 of the Code of Federal Regulations Chapter 668.”66 As long as 

federal regulations require DCEH to disclose its Gainful Employment failures, consumers have a 

right to expect that the information will be provided – regardless of whether the Department of 

Education intends to enforce the regulations under those circumstances or not.

Ultimately, the Administrator formally requested that DCEH provide a Corrective Action 

Plan pursuant to Paragraph 116(a) of the Consent Judgment. Under its Corrective Action Plan, 

DCEH agreed to take a number of steps. First, DCEH reinstalled its Gainful Employment 

webpages for degree programs:

 62 34 C.F.R. § 668.406. 63 See https://studentaid.ed.gov/sa/about/data-center/school/ge. 64 GE Electronic Announcement #108, available at 

https://ifap.ed.gov/eannouncements/081817GEEA108AnnouncementofAppealsDeadlines.html. 65 Email from Ronald Holt to Michael Frola, Re: DCF/DCEH Institutions – Nonprofit Status: Gainful Employment

(Feb. 6, 2017). 

66 Consent Judgment ¶ 74; see also Consent Judgment ¶ 75(a) (prohibiting “false, misleading, or deceptive statement 

about any governmental (federal, state, or other) approval related to a Program of Study”).
30

This warning, along with program completion rates, job placement rates, and related information 

were linked to directly to from the relevant program overview webpages.67

Second, DCEH inserted a similar disclosure into its digital application process, so that 

prospective students must sign an acknowledgment of having seen it. DCEH also sends students 

seeking to enroll in affected programs the following email:

Third, DCEH updated its academic catalogs, brochures, and admissions training and 

related materials to include Gainful Employment disclosures. The catalogs and brochures were 

typically updated via “supplements” that were posted immediately alongside each catalog on the 

relevant webpage, or via updates to the materials that were linked to in the brochures. 

Admissions training and related materials were updated to provide for DCEH representatives to 

point prospective students to Gainful Employment information, with respect to all programs that 

are covered by the Gainful Employment Rule for for-profit schools. Admissions representatives 

generally did an adequate job implementing this new requirement. Mystery shops commissioned 

by the Administrator revealed that admissions representatives consistently pointed prospective 

students to the relevant program’s gainful employment page, including when the program was in 

failure. 

 67 E.g., http://ge.artinstitutes.edu/programoffering/230.
31

D. Ground Campus Closures and Potential for Loan Discharge

In July 2018, DCEH announced the closure of 30 of its ground campuses in its Art 

Institutes, Argosy, and South brands. The closures would affect about half of DCEH’s total 

schools and about a quarter of its total enrollment. DCEH advised that the closures were 

necessary to put the company and its remaining schools on a more viable financial footing. 

As significant as the closures are from a business perspective, they are in many ways 

more significant from the perspective of individual students’ educational futures. No student 

makes the decision to invest significant time and resources in a particular school with the

expectation that the school will close before the student can finish his or her program. School 

closures are, at a minimum, disruptive.

DCEH initially announced the closures with the following email:

From: _DCEH Comm 

Sent: Monday, July 02, 2018 5:03 AM

To: _DCEH Comm <dcehcomm@dcedh.org>

Subject: Important Organizational Update

At Dream Center Education Holdings (DCEH), we are committed to providing students 

with an accessible, affordable, relevant, and purposeful education. 

Over the last several months, we have taken a strategic and comprehensive look at each 

of our three education systems and their respective campuses, evaluating them to be sure 

that they are meeting the needs of today’s learners and providing the best student and 

graduate outcomes.

What has become clear is that we have a critical need and responsibility to become a 

much more agile organization, responsive to the needs of our students and the changing 

demands of higher education. 

As a result of that examination, we have made the decision to cease new enrollments for 

the following schools within The Art Institutes, Argosy University, and South University 

systems:

• The Art Institutes Arlington, VA; Charleston, SC; Charlotte, NC; Chicago, IL; 

Denver, CO; Fort Lauderdale, FL; Indianapolis, IN; Nashville, TN; Novi, MI; 

Philadelphia, PA; Phoenix, AZ; Raleigh-Durham, NC; Portland, OR; San 

Bernardino, CA; San Francisco, CA; Santa Ana, CA; Sacramento, CA; and 

Schaumburg, IL

• Argosy University Alameda, CA; Dallas, TX; Denver, CO; Nashville, TN; Ontario, 

CA; Salt Lake City, UT; San Diego, CA; Sarasota, FL; and Schaumburg, IL

• South University Novi, MI; High Point, NC; and Cleveland, OH
32

We will cease new enrollments at these locations, providing prospective students with 

access to online offerings or programs at one of our other campuses. 

This decision was made for a number of reasons, including significantly declining 

enrollment and an increase in the demand for online programs in higher education. 

It is important to note that current, active students should continue to attend class as 

scheduled. However, we are continuing to assess the viability of our current offerings at 

these locations. 

This is a necessary step in ensuring that we best support our students, both present and 

future, in response to the changing landscape of higher education. 

Sincerely,

That email, notably, did not provide the dates on which the schools would close or any concrete 

information regarding future options. When asked to provide any additional information or 

guidance that the company provided to its school representatives to whom current students 

would turn to understand what these changes would mean for them, DCEH provided nothing. 

Current students were told only that their schools were closing, sometime. DCEH advises that it

did not provide students with additional information because during this time, the Department of 

Education instructed DCEH not to announce that the schools were closing.

DCEH later distributed guidance to its campus presidents, laying out three options DCEH 

was making available for students:

• Finish their studies before the school’s closing date, at a 50% tuition discount.

• Transfer to another DCEH program, whether ground or online, and continue studies 

at a 50% tuition discount.

• Students whose programs are not available through the school’s online systems could 

transfer to an institution that accepted the DCEH school’s transfer credits, with a 

$5000 voucher from DCEH. DCEH Staff are being laid off at these campuses, and 

media reports indicate the campuses will close all operations by the end of 2018.68

That information about student options was not distributed widely to students until later 

in the month, when it was included on a “Student Acknowledgment Form” that DCEH asked 

students to sign, acknowledging that it had been provided.

 68 See Ai, “FAQ’s Regarding Transition – For Verbal Use Only – Not For Distribution.”
33

Importantly, the information initially made available to students during this time period 

did not include sufficiently clear information about a fourth option, available through the 

Department of Education and required by federal law: the Department of Education’s Closed 

School Discharge program.69 Federal regulations authorize the discharge of federal loans for 

students who were enrolled in a school at the time of closing or within 120 days of the closure, a 

critical form of relief for students whose educations would be cut short by DCEH’s closure of 

thirty schools. Without the discharge program, students who are unable to complete a 

comparable educational program at another school may be left with crippling debt and no degree. 

The Closed School Discharge program provides a path, for students who are eligible, to regain 

their footing after attending a school that closed. It is thus imperative that DCEH, in advising 

students of their options – and while recruiting students to remain enrolled or transfer to another 

DCEH school – inform them of this option.

It was also important that information about the Closed School Discharge be provided 

timely, because under the regulations as written, students’ eligibility for the program requires 

them to be enrolled within 120 days of the school’s closure. The timing of student decisions thus 

is important. If a school were scheduled to close at the end of December 2018 – as many DCEH 

schools now are – students would have to remain enrolled until late August in order to be eligible 

for the discharge. Absent information about the benefits of remaining in school for the Closed 

School Discharge program, though, students who were told on July 2, 2018 that their school was 

closing before they could complete their program could have made the very reasonable choice to 

withdraw at that time. Withdrawing in July, and avoiding incurring further debts, might have 

seemed like the sound financial choice, when information about the Closed School Discharge 

could have shown that staying in school longer would have been a far better choice. 

DCEH did not provide students with any information about the Closed School Discharge 

until late July, when it provided Ai students the “Student Acknowledgment Form.”70 That form, 

however, did not actually refer to the discharge possibility, but simply added a link to a 

Department of Education website at the bottom of the page, with no context to suggest that the 

website described the possibility of discharging the student’s federal student loan debts:

The Administrator informed DCEH that its communications were inadequate, and that 

the schools needed to inform students more clearly of two things: the availability of the Closed 

School Discharge option, and their school’s closing date – key information for students who may 

be interested in pursuing the discharge program. The Administrator offered to review DCEH’s 

proposed communications, to ensure that the information was communicated clearly. 

DCEH’s subsequent communications regarding the teach-outs did not go smoothly. In 

mid-August, six weeks after DCEH announced the closings, DCEH emailed students to inform 

them of the first key piece of information: a clear disclosure of the Closed School Discharge 

option. However, that August communication did not include the second key piece of 

 69 See 34 CFR 674.33, 34 CFR 682.402(d), 34 CFR 685.214. 70 DCEH advises that it provided this information as soon as the Department of Education approved it.
34

information: a sufficiently clear statement of the schools’ closing dates, so that students would 

know to stay in school if they ultimately wanted to take advantage of the discharge. To be sure, 

as discussed further below, the closing dates were not known for some of the schools, because 

closing dates for some schools would not be set until students’ transition plans were known; 

however, that lack of clarity for some schools was not the reason that closing dates were not 

included in the August communication. Indeed, the closing date for the majority of schools was 

known to be December 28, 2018. The reason that this information was not highlighted in the 

August communication is that DCEH did not provide the Administrator with a meaningful 

opportunity to review that communication, as the Administrator had requested. According to 

DCEH, the Department of Education pressed DCEH to send the communications out 

immediately, without an opportunity for DCEH input.

Following the August communication, DCEH expressed a willingness to provide a 

clearer statement of school closing dates, where known. But the process took another month: 

While the Administrator approved a communication that sufficiently disclosed closing dates, 

DCEH inadvertently sent out the wrong, unapproved communication. It was not until September 

20, 2018 – two-and-a-half months after the closing announcement – that DCEH issued the clear, 

direct communication to its students regarding the Closed School Discharge and the relevant 

date.

It is important to note, too, that DCEH has provided clarity now only to students at 

schools for which it has established a definitive closing date; there are a number of schools at 

which DCEH has yet to set a closing date. At schools with programs that lead to licensure, 

DCEH is refraining from setting a closing date until the school has worked out transition plans 

with the students pursuing those degrees. Because students who are particularly far along in 

licensure programs can have a difficult time transferring to other schools, DCEH has advised that 

it is aiming to keep schools open where its current students have the need. 

That decision to keep schools with licensure-related programs open pending further 

information about individual students’ plans is likely in the long-run interest of certain students, 

but it also puts other students in a difficult position vis-à-vis the Closed School Discharge. There 

may be students at those schools, for example, who learned on July 2, 2018, that their school was 

closing, will not be able to finish their degree, do not wish to incur further debts under those 

circumstances, and desire to apply for the Closed School Discharge, but have no ability to 

determine how long they must continue to incur debts at the closing school in order to remain 

eligible for it. 

Perhaps even more difficult is the situation of students whose programs at these schools 

will end this year, leaving those students with no ability to finish their program, while the school

remains open to accommodate those students in the relevant licensure programs. 

One state party to the Consent Judgment has proposed a resolution that would provide 

many of these affected students a path to potential relief under the Closed School Discharge 

program. A request is pending with the Department of Education to declare the “closing date” 
35

for purposes of the Closed School Discharge to be July 2, 2018, so that students who reacted to 

the closing announcement by immediately withdrawing would be eligible for the discharge.71 

The Consent Judgment does not govern DCEH’s decision to close its schools, nor does it 

govern the manner in which the Department of Education exercises its discretion in applying the 

Closed School Discharge. However, the Consent Judgment does prohibit DCEH, particularly in 

the course of encourage students to transfer to other DCEH schools, from omitting any material 

fact.72 The initial disclosures of the Closed School Discharge were inadequate, and DCEH has 

worked to provide additional information – information that may be too late for some students, 

who may have withdrawn immediately without knowing, whether from DCEH or other sources, 

that remaining in the closing school could make the student eligible for significant financial 

relief. As the teach-outs proceed, there will be further need to convey important information, 

and DCEH should be careful to ensure that it is providing accurate, complete information in a 

timely manner.

E. Admissions and Financial Services

1. Misrepresentations, Omissions, Unfair Practices, Abusive Recruiting 

Methods

A core element of the Consent Judgment is its provisions that bar DCEH from making 

deceptive statements, engaging in abusive recruitment methods, or violating state Unfair and 

Deceptive Acts and Practices laws. Some of the Consent Judgment’s prohibitions on these 

issues are stated broadly: Among other things, DCEH may not omit material facts, or make 

false, deceptive, or misleading statements.73 It also may not make representations inconsistent 

with facts required to be disclosed by the U.S. Department of Education in connection with its 

communication regarding recruitment, financial aid or financial costs, the student’s ability to 

obtain a license or certification following graduation, the schools’ academic standing, or other 

communications with students or prospective students.74 Other provisions bar certain specific 

kinds of representations, prohibiting misrepresentations regarding how many of a student’s 

credits will transfer into or out of the school;75 statements implying that financial aid or military 

funding will cover the entire costs of the education, if not true;76 and statements implying that 

statistics regarding EDMC generally are true of specific programs of study.77 Importantly, a 

number of the prohibitions on these kinds of misleading statements focus on statements 

regarding the future success of DCEH students: their completion rates,78 students’ ability to sit 

 71 See Letter from Matt Liles, North Carolina Department of Justice, to Acting Assistant Secretary Diane Jones, U.S. 

Department of Education Office of Postsecondary Education, “Dream Center – Request to Extend Closed School 

Discharge Eligibility Due To Exceptional Circumstances” (Oct. 9, 2018). At the request of States party to the 

Consent Judgment, the Administrator asked DCEH whether it would support that request. DCEH declined to 

support the request, and the Administrator informed the attorneys general of that response.

72 Consent Judgment ¶ 74. 73 Consent Judgment ¶¶ 74-75. 74 Consent Judgment ¶¶ 74-75, 76, 80-82. 75 Consent Judgment ¶ 76(c). 76 Consent Judgment ¶ 77(c). 77 Consent Judgment ¶ 79. 78 Consent Judgment ¶ 79.
36

for (or pass) licensure exams in relevant fields upon graduation,79 job placement rates,80 and 

salaries.81

The Consent Judgment also provides that the company “shall not continue a telephone 

call after a Prospective Student has expressed a desire to conclude the call or has clearly stated 

that he/she does not want to apply to or enroll at [a DCEH] school.”82

In order to protect the youngest prospective students from these and other 

misrepresentations and tactics, the Consent Judgment also requires DCEH to invite prospective 

students who are under 18 to bring an adult with them to any interview or meeting on campus 

prior to enrollment.83

The sections below discuss DCEH’s ability to handle, in a compliant manner, a number 

of specific situations that arise in its dealings with prospective students. With some exceptions, 

the company has continued to handle most issues generally well. The exceptions generally do 

not involve abusive or high-pressure tactics, but misstatements of more technical issues –

although it is worth noting that some of these issues have been repeated challenges over the 

Consent Judgment’s three years.

2. Parent to Campus

The Consent Judgment requires DCEH to invite prospective students who are under 18 to 

bring an adult with them to any interview or meeting on campus prior to enrollment.84 It also 

bars DCEH from preventing prospective students “from consulting with or obtaining advice from 

a parent, adult friend, or relative with respect to any issue relevant to enrollment.”85 These 

provisions are designed to ensure that prospective students who are under 18 are able to make 

informed decisions about their futures. DCEH has not exhibited any problems complying with 

the latter prohibition on preventing prospective students from seeking and obtaining consultation 

or advice from others. DCEH has shown marginal improvement on the proactive requirement 

that prospective students who are under the age of 18 be “invite[d] . . . to bring an adult with 

them to any interview/meeting on campus prior to enrollment,”86 but has not fixed an issue that 

should be fixable.

Implementing this requirement can be difficult. When a prospective student explicitly 

states that the student is 17 or younger, admissions representatives do a good job inviting the 

student to bring an adult. When a prospective student is less explicit – perhaps mentioning that 

the student is still in high school – DCEH can have somewhat greater difficulty. In the First 

Report, the Administrator found that, while EDMC had trained its admissions personnel on the 

requirement, 20% of the admissions representatives who the Administrator tested through 

mystery shops failed to invite a prospective student who was under 18 to bring an adult to 

 79 Consent Judgment ¶ 80. 80 Consent Judgment ¶ 79. 81 Consent Judgment ¶ 79. 82 Consent Judgment ¶ 100. 83 Consent Judgment ¶¶ 100-01. 84 Consent Judgment ¶¶ 102. 85 Consent Judgment ¶ 101. 86 Consent Judgment ¶ 102.
37

campus. During the second review period, 15% of the admissions representatives who the 

Administrator tested through telephonic mystery shops failed to invite a prospective student who 

was under 18 to bring parents or guardians to campus. 

The Administrator conducted 13 additional mystery shops on this topic during this third 

review period. In these calls, the prospective student disclosed that he or she was still in high 

school and/or under the age of 18, and was invited to visit the campus. DCEH representatives 

invited the prospective student to bring a parent, guardian, or family member in 9 of 13 of the 

calls. In two additional calls, the representative generically invited the prospective student to 

bring “anyone” or “friends” on a visit, but did not specifically encourage the minor to bring a, 

adult, parent, or guardian.

87 In the remaining two calls, the admissions representative did not 

invite the prospective students to bring anyone to the campus visit.88 DCEH has provided 

revised instructions to its representatives, to reiterate – consistent with the Consent Judgment’s 

terms and the purpose of encouraging adult guidance for minors – that the invitation should 

specifically include an adult, parent, or guardian.

3. Downplaying or Misstating Financial Aid Obligations

As noted above, the Consent Judgment also bars DCEH from making deceptive 

statements or misrepresentations regarding financial aid or the financial costs associated with 

attending a DCEH program. Because the potential resulting financial consequences for a student 

pursuing higher education can be enormous, it is exceedingly important that institutions provide 

accurate information about financial aid obligations to prospective students. Inaccurate 

statements and attempts to minimize significant financial consequences can lead to life-altering 

levels of debt. Prospective students are often understandably concerned about the debt load that 

further education may impose, and need to fully understand and appreciate the consequences of a 

decision to enroll. 

In its First and Second Reports, the Administrator identified a significant issue relating to 

representatives’ descriptions of Federal Pell Grants. The Federal Pell Grant Program provides 

need-based grants to low-income undergraduate and certain graduate students, as eligible, to 

promote access to postsecondary education. The amount granted depends on a student’s 

financial need, costs to attend school, status as a full-time or part-time student, and plans to 

attend school for a full academic year or less. Pell Grants are distinct from student loans in that 

they may not need to be paid back, but Pell Grants do often require repayment when students 

drop out in the middle of a semester or quarter.89 Admissions representatives too often missed 

this nuance during the first two review periods, leaving prospective student with the materially 

incorrect impression that significant portion of their financial aid would need not be repaid even 

if they withdraw. To be sure, EDMC admissions representatives were not the only people who 

sometimes missed this nuance; some of the statements made by company representatives were 

 87 See 7/25/18 Mystery Shop 532/0362; 72518 Mystery Shop 537/1498. 88 See 7/20/18 Mystery Shop 483/8023; 7/24/18 Mystery Shop 530/4872. DCEH issued a compliance violation for 

both calls.

89 There are other instances in which a student may need to repay part or all of a Pell Grant. For example, a student’s 

eligibility for the grant could change if the student’s enrollment status changes from full time to part time. A 

student’s eligibility may also be affected if the student receives outside scholarships or grants that reduce the 

student’s need for federal student aid. Other conditions may also apply.
38

similar or identical to those in published materials by others, including those that could 

reasonably have been viewed as authoritative. But the statements were inaccurate nonetheless. 

Pell Grant disclosures improved significantly during this review period. Representatives 

consistently advised prospective students that a Pell Grant may have to be repaid if the student 

withdraws or does not complete an enrollment period. Indeed, in only one of 15 mystery shops 

did the representative fail to accurately describe the Pell Grant.90 In that instance, the 

representative accurately indicated that the student may have to repay the Pell Grant in certain 

circumstances, but also suggested that repayment may be dependent on being honest, or doing

something “fraudulent,” in the application process. The representative did not state that 

withdrawing prior to completion of an enrollment period may trigger a requirement to repay the 

Pell Grant.

4. Licensure and Enrollment

The Consent Judgment also imposes particular protections for students who express an 

interest in pursuing certain careers for which the DCEH programs in question will not qualify 

them. In addition to a general prohibition on advertising that a program that lacks a relevant 

accreditation will qualify students to pursue an occupation that requires the accreditation in 

question,91 the Consent Judgment also imposes more specific requirements in certain 

circumstances.92 

For example, the Consent Judgment bars DCEH, with certain exceptions, from enrolling 

students in programs that are designed to prepare students for employment in a field that requires 

a state license or other authorization but the program does not qualify the student to sit for the 

relevant exam.93 This arises most commonly in circumstances in which a state’s licensing 

regulations require that professionals have attended schools that possess certain accreditations 

that a particular DCEH program may have lacked. The Consent Judgment also imposes a 

specific obligation when “DCEH knows that a criminal record may disqualify a Student from 

employment in the field or a related field for which the Program of Study is a prerequisite.”94

Problems were not identified with DCEH’s compliance with these requirements during 

this review period. 

a. Criminal History

Mystery shops were conducted to test DCEH’s compliance with the provision that bars it 

from enrolling students in programs when DCEH knows that the student’s criminal history 

 90 See 7/17/2017 Mystery Shop 475/6332. DCEH has issued a compliance violation for this call.

91 Consent Judgment ¶ 85. 92 Some of the Consent Judgment’s requirements on these issues, particularly regarding licensure and accreditation, 

have become less relevant as the Brown Mackie schools are either in teach-out or have been sold. See, e.g., Consent 

Judgment ¶ 84(a)-(d). Many of the specific requirements addressed disclosures to students interested in pursuing 

particular programs that led to careers more typically subject to state licensing requirements and that were more 

common at the Brown Mackie schools. 

93 Consent Judgment ¶ 86; see also Consent Judgment ¶ 89 (barring EDMC from enrolling students in programs that 

not possess accreditation “typically required by employers in the Student’s locality”).

94 Consent Judgment ¶ 90.
39

would disqualify the student from employment in the field for which the program is a 

prerequisite.95 The shops were tested using prospective students who expressed an interest in 

Criminal Justice programs, indicated that they wanted to become police officers, and disclosed 

that they had previously been convicted of felonies. The test was designed to determine whether 

the DCEH admissions representatives barred the student from enrolling, or provided disclosures 

required by the Consent Judgment to permit enrollment, in a Criminal Justice program when the 

student’s felony conviction would likely prevent the student from obtaining employment as a 

police officer.

In 2018, the Administrator conducted additional mystery shops to assess DCEH’s 

compliance with this requirement. Admissions representative generally made clear to the 

prospective students that a criminal record may be disqualifying for employment as a police 

officer and urged the student to research it further.

96 

b. Licensure

The Consent Judgment’s restrictions on enrolling students in online programs that would 

not qualify the student for licensure in the state in which the student resides have become less 

prominent since EDMC closed or taught out the Brown Mackie schools.

97 Certain remaining 

schools do have licensure-related programs, however, and the Consent Judgment’s restrictions 

remain relevant. The Administrator did not identify problems in DCEH’s enforcement of the 

Consent Judgment’s restriction during this review period. 

5. Single Page Disclosures and Statistics 

The Consent Judgment also requires that DCEH provide all prospective students with a 

“Single-Page Disclosure Sheet” (SPDS) prior to enrollment. The SPDS must contain a range of 

specified information regarding the program’s anticipated total cost, median debt loads, 

completion and default rates, the transferability of credits, median earnings, and job placement 

statistics.98 The SPDS must be disclosed to a prospective student twice: once during the 

application process, prior to the student’s submission of a completed application, and once 

during the financial planning process, when a school representative reviews or discusses with the 

prospective student the completed FAFSA and/or financial plan.99 In addition, the SPDS must be 

discussed with the student at the second point of disclosure, during this financial planning 

process.100 Combined with other Consent Judgment requirements regarding the accuracy of such 

 95 Consent Judgment ¶ 90. 96 Only one call on this issue was problematic: when a prospective student interested in police work asked if a

criminal record may pose a problem, the admissions representative responded the record may be an issue for some 

employers, and it would be dependent on the employers’ policies. The representative neither encouraged the student 

to conduct independent research, nor disclosed that, beyond employer hiring preferences, employment by law 

enforcement agencies of people with criminal records is often governed by state laws. This response was 

inadequate. See 7/24/2018 Mystery Shop 531/2852. 97 Consent Judgment ¶ 86(c).

98 Consent Judgment ¶ 56(a)-(g). 99 Consent Judgment ¶ 57. 100 Consent Judgment ¶ 57.
40

information, the SPDS – or “Facts You Should Know” (FYSK), as DCEH calls its document –

can provide important information to a student at a critical time in the admissions process.

Several DCEH employees or managers involved in the admissions process noted to the 

Administrator that they believe the FYSK required by the Consent Judgment is beneficial. They 

note that financial aid and financial planning can be complicated, and the FYSK generally strikes 

the right balance of information to be of assistance in the student’s decision-making process.

The SPDS disclosure requirement was implemented electronically, through the schools’ 

online application process, so that prospective students automatically see the SPDS at the 

relevant time. Students must acknowledge having received the SPDS before they can submit 

their application. As long as the online application process is working properly, the first required 

disclosure of SPDS should occur. The electronic application process also emails students a copy 

of the SPDS.

Prior to the DCEH transition, EDMC had created a “Facts You Should Know – FAQs” 

guide providing more context to the SPDS’s specific statistics and categories of information. 

The FAQs provided answers to questions like “Will it really take me the time disclosed to 

graduate?” and “What does ‘job placement rate’ mean for me?” This document indicated that 

the information was being provided in connection with the Consent Judgment, and that EDMC 

did not believe any comparable information is available from other schools or programs a student 

might be considering. The FAQs are also sent to prospective students via email, as an 

attachment to the email that contains the FYSK.

In general, EDMC successfully provided the disclosure or discussion of the FYSK as 

required, and DCEH has continued to properly disclose the SPDS data. With the FYSK being 

disclosed reliably through the automated electronic application process, the greatest risks are that 

the information is described in ways that downplay or cast doubt on the accuracy of unfavorable 

statistics, that the data is discussed in ways that are not “clear or conspicuous,” or that the 

information is inaccurate. 

With respect to the first and second issues, regarding the way in which representatives 

discuss the FYSK, the Administrator has not observed any recurring or systematic problems in 

the manner of disclosure of the FYSKs. There have been individual instances of admissions 

representatives neglecting to provide the FYSK at the appropriate time,101 or discussing the 

information quickly,102 but nothing to suggest a broader pattern of non-compliant behavior. 

Representatives have generally presented FYSK information clearly, without downplaying its 

significance or “speed reading” the data to the prospective student, and have been providing an 

opportunity to ask questions once the disclosures are read. The Administrator’s mystery

 101 See Call Copy Record ID 44927114 (agent discussing financial aid introduction and plan and completing 

memorandum of understanding with student without discussing FYSK).

102 In the most egregious incident, the representative provided a copy of the FYSK but declined to discuss the 

document. The representative in that instance refused to answer direct questions about median earnings and other 

information contained in the FYSK, while simultaneously seeking a verbal commitment from the mystery shopper 

to sign the application. See RJD Associates, Mystery Shop (July 16, 2018). DCEH recorded several infractions 

against the representative and provided remedial coaching. 
41

shopping has likewise uncovered no evidence of systematic failures to disclose the FYSKs in a 

compliant, clear and conspicuous manner. 

It is worth noting that while DCEH representatives have presented the FYSK clearly, 

prospective students rarely ask any questions about these disclosures. Perhaps this is because the 

student previously read the FYSK when first presented during the application process. 

Alternatively, this may be an indication that the oral presentation of this detailed data, at a time 

when student is in the process of completing a variety of paperwork, does not result in the 

prospective students’ full absorption of the information. That is, listening to the representative 

read this form and then checking a box confirming receipt becomes just another of several 

administrative steps to complete enrollment. 

On the third issue, regarding the accuracy of FYSK information, a sampling of data 

contained in FYSKs during this review period suggests that they are accurate reflections of the 

relevant underlying data sources. Some of the data in the FYSK can be verified using publicly 

available sources: The length and cost of attendance figures that can be checked against 

academic catalogs and enrollment agreements; median earnings data can be checked against the 

Department of Education’s gainful employment figures. The remaining data in the FYSK is 

drawn from DCEH’s own internal databases, and in some cases is calculated with the help of a 

third-party vendor who disaggregates and re-aggregates data supplied by the Department at the 

institutional level. Reviews of information produced from DCEH databases found no variances 

in the FYSK from the underlying source information, but did note that the FYSK inaccurately 

described the median earnings of program graduates as “starting salaries” when in fact, those 

figures represent all earnings, not starting salaries. DCEH’s compliance team recognized the 

inaccuracy, and amended the FYSKs, reverting to the original median earnings language without 

the additional “starting salary” qualifier.

Yet while the information appears accurate today, there is reason to be concerned 

regarding the FYSK and related disclosures in the future. At this point, the Compliance 

Reporting Team is relatively thinly staffed. This team, responsible for collecting, aggregating, 

and reporting much of the company’s data for internal and external purposes, has shrunk over the 

past year. The Administrator is concerned that the company’s ability to maintain current, 

reliable information in the database it uses for federal reporting purposes, and the database it uses 

for communications with regulators and accreditors, will degrade. These databases feed much of 

the information that populates the FYSK documents. As time passes, and as DCEH implements 

additional changes, those databases may become outdated; the data used in the FYSK – and data 

provided to regulators and accreditors – may become inaccurate. 

6. Disclosure of Accreditation Status

Few attributes of an institution of higher education are more consequential for its students 

than whether the school is accredited. Accreditation by a Department of Education-approved 

accrediting body is a prerequisite for federal student aid funding. The accreditation status of an 

institution is also often a factor in whether a student is able to transfer credits from that 

institution when enrolling in another school. Given the importance of a school’s accreditation 

status, the Consent Judgment prevents DCEH from making “express or implied false, deceptive, 

or misleading claims to Prospective Students with regard to the academic standing of its 
42

programs and faculty including, but not limited to misrepresenting ... the accreditation” status of 

its schools and programs.103 This obligation was particularly important this year, as the 

accreditation status of some DCEH schools changed. Some of the changes were, while 

potentially significant, relatively incremental; other changes involved outright losses of 

accreditation. 

a. Changes in Accreditation Status

When accreditation statuses change, the schools retained their accreditation but were 

placed on some level of disfavored or probationary status. The most important of these changes 

came in July, when the Middle States Commission on Higher Education (“Middle States”) 

required DCEH’s Art Institute of Pittsburgh, which encompasses the Art Institute network’s 

online offerings, and its Art Institute of Philadelphia “to show cause ... as to why its 

accreditation should not be withdrawn.”104 That directive put the schools on an official status of 

“Accredited on Show Cause”105 and required them to demonstrate why they should remain 

accredited and prepare for Middle States to withdraw their accreditation. In less significant 

moves in this category, accreditors may have simply asked for additional information about an 

issue, placed a school on probation, or moved a school off of probation after gaining assurance 

that the school continued to meet the accreditor’s requirements following its transition from 

EDMC to Dream Center.

Accreditors generally provide detailed guidance regarding how schools’ written materials 

should describe the schools’ accreditation status when subject to these various levels of action. 

Typically, the accreditor directs that the school or program may continue to call itself 

“accredited,” but must also include specific language disclosing its status in its catalogs and 

related materials. 

Oral discussions with prospective students regarding these situations can be difficult, and 

receives relatively less guidance from accreditors than written materials. While it may remain 

true that a school remains accredited, it is also true that the school’s accreditation may be in a 

precarious position. The nuances of the various statuses, as reflected in the 574-word paragraph 

from Middle States describing the showing that it expects from Ai-Pittsburgh, are complex, often 

outside the interest of the average prospective student, and may often be immaterial. The 

Administrator has thus instructed DCEH to ensure that its oral disclosures regarding 

accreditation status track the guidance provided for written disclosures by the accreditors 

themselves: In most cases, this will mean that when providing a broad overview, it is accurate to 

describe a school as accredited; when a more detailed or focused discussion is called for, DCEH 

must provide the nuanced caveat that the accreditor provides – whether directly, by pointing to 

 103 Consent Judgment ¶ 81(b). 104 Letter from Gary L. Wirt, Chair, Middle States Commission on Higher Education, to Dr. Elden Monday, Interim 

President, The Art Institute of Pittsburgh at 1 (July 19, 2018), available at https://www.msche.org/non-compliancedisclosure-statements/the-art-institute-of-pittsburgh/; Letter from Gary L. Wirt, Chair, Middle States Commission on 

Higher Education, to Robert A. Kane, President, The Art Institute of Philadelphia at 1 (July 19, 2018), available at

https://www.msche.org/non-compliance-disclosure-statements/the-art-institute-of-philadelphia/. 105 See https://www.msche.org/institution/0840/ (visited Sept. 1, 2018).
43

the more detailed website disclosure, or by arranging a discussion with staff who has more 

expertise on the accreditation issue.

b. Losses of Accreditation Status

The more significant development from an accreditation perspective came in January, 

when the Higher Learning Commission (“HLC”) downgraded the status of the Illinois Institute 

of Art and the Art Institute of Colorado from “accredited” to “candidate” – a move that HLC 

describes as an “adverse action” it can take when it determines that the institution, among other 

things, “no longer meets all of the Criteria for Accreditation.”106 It is the only other status that 

HLC recognizes: either a school is accredited, or it is a candidate seeking to become accredited. 

In short, HLC stopped viewing the schools as “accredited” and started viewing them as 

unaccredited. The change in status occurred in connection with the transition from EDMC to 

DCEH.

That change on January 20 carried significant consequences for the students of those 

institutions – including consequences for their federal financial aid and their ability to transfer 

any credits they earned after January 20 to other schools. These consequences became more 

dramatic once DCEH announced in July that those schools would close – and thus that many of 

the students would need those credits to transfer to other schools.

The loss of accreditation – and the risk of losing accreditation – put students in a difficult 

position. When the Middle States Commission on Higher Learning issued its “Show Cause” 

notice, requiring Ai Pittsburgh to demonstrate that it still satisfied accreditation standards, the 

school eventually stopped accepting transfer students because it did not want to put students in 

an “unstable environment.”107 Yet current students who sought to pause their education, lest 

they accrue and pay for credits that would be of little value, had to finish their terms or face 

withdrawal penalties.108 The accreditation problems put these students between a rock and a 

hard place, financially: Either stay in the course, and potentially waste that tuition if the 

accreditation is withdrawn, or withdraw from class, and pay the financial penalties associated 

with withdrawal.

Given these consequences that loss of accreditation status can have, HLC requires 

institutions that are moved from accredited to candidate status to 

notify ... students, prospective students, and any other constituencies about the 

action in a timely manner not more than fourteen (14) days after receiving the 

action letter from the Commission; the notification must include information on 

how to contact the Commission for further information; the institution must also 

disclose this new status whenever it refers to its Commission affiliation.109

 106 HLC, Accredited to Candidate Status, Policy No. INST.E.50.010, available at 

http://download.hlcommission.org/policy/HLCPolicyBook_POL.pdf. 

107 Call Recording 48347923 (Sept. 24, 2018). 108 Call Recording 48243262 (Sept. 11, 2018).

109 HLC, Accredited to Candidate Status, Policy No. INST.E.50.010, available at 

http://download.hlcommission.org/policy/HLCPolicyBook_POL.pdf.
44

Simply put, when these schools lost their accreditation status, they were obligated to inform their 

students and prospective students within 14 days.

DCEH did not inform Illinois Institute of Art or Art Institute of Colorado students or prospective 

students that it had lost its accreditation. Instead, DCEH revised the accreditation statement on 

its website to expressly claim that the schools “remain accredited as a candidate school”110:

That revised accreditation statement was inaccurate and misleading, and obfuscated HLC’s 

distinction between accredited institutions and candidates. DCEH argued that it disagreed with 

HLC’s view that the schools’ “candidate for accreditation” status meant they were unaccredited, 

but there is no ambiguity in HLC’s view of what that status means.

Following discussions with the Administrator, DCEH removed the “remain accredited” 

language from the accreditation websites of the two schools111:

That change occurred prior to June 29, 2018.

While the corrected language was necessary, it did not resolve the consequences that had 

arisen for students who either enrolled or decided to remain enrolled during the period of the 

misleading disclosure. Among other consequences, those students may have used limited 

financial resources to acquire credits that could not be transferred to other schools – a problem 

that was exacerbated dramatically when DCEH announced in July that it would be closing those 

schools, leaving many of those students dependent on the transferability of their credits to further 

their education.

The Administrator has requested a corrective action plan from DCEH to provide 

appropriate relief to students affected by the failure to disclose the HLC accreditation action. 

DCEH has begun identifying affected students. The completion of an appropriate corrective 

action plan on this issue is clearly a necessary prerequisite to being in substantial compliance 

with the Consent Judgment.

 110 See https://www.artinstitutes.edu/accreditation-and-licensing (visited May 1, 2018). 111 See https://www.artinstitutes.edu/chicago/about/accreditation (visited June 29, 2018).
45

7. VA Comparison Tool

The Administrator also evaluated whether DCEH was providing accurate information to 

students who inquired about information that the U.S. Department of Veterans Affairs provide 

about the schools. The Department of Veterans Affairs (VA) provides a GI Bill Comparison 

Tool to assist veterans in comparing various educational options, allows a user to search for and 

compare information on education programs by school. The tool places a yellow caution flag 

next to the names of certain schools, a mark that the VA website says means, “This school has 

cautionary warnings.” A category, or basis, for the warning is also indicated. The VA describes 

these as “indicators VA has determined potential students should pay attention to and consider 

before enrolling in a program of education. A caution flag means VA or other federal agencies 

like the Department of Education or Department of Defense have applied increased regulatory or 

legal scrutiny to a program of education.”112 Examples of the categories of cautionary warnings 

shown on the Comparison Tool include, inter alia, “Settlement with U.S. Government,” 

“Heightened Cash Monitoring (Financial Responsibility)” and “Accreditation.” 

When asked by prospective students who had expressed an interest in using military 

funding about the meaning of the yellow caution flag on the VA’s GI Bill Comparison Tool, 

representatives consistently indicated that they did not know its significance, and offered to ask a 

financial aid representative at the campus who works with military students. One call was more 

problematic; the admissions representative affirmatively downplayed any significance to the 

caution flag, called it “odd,” and told the student that the representative personally would not 

worry about the issue – adding there are many students currently using military benefits. DCEH 

properly responded to that isolated improper response. 

8. Job Placement Data 

One important metric on the Single-Page Disclosure Sheets is the Job Placement Rate, 

showing the percentage of graduates and completers who are placed in a position in their chosen 

field of study. While DCEH’s transition to a non-profit status for Department of Education 

purposes will obviate certain federal regulatory obligations to calculate and publish this data, the 

Consent Judgment imposes an independent obligation to calculate the job placement rate 

according to an exacting formula.113 The Consent Judgment’s requirements regarding the 

publication of Job Placement Rates are in effect until January 1, 2036;114 for programs for which 

DCEH does not calculate and publish a job placement rate, DCEH is prohibited from making any 

claims or representations to prospective students about their likelihood of completing the 

program.115

During the first review period, the Administrator determined that EDMC was not 

collecting the data that would be necessary to make one of the Job Placement Rate’s most critical 

determinations. As discussed further below, to determine whether a placement is “in field” or 

not, the Consent Judgment requires the school to determine, in many instances, whether a student 

“use[s], during a majority of the time while at work, the Core Skills” taught in the program of 

 112 See https://www.benefits.va.gov/gibill/comparison_tool/about_this_tool.asp#caution. 113 Consent Judgment ¶ 62. 114 Consent Judgment ¶ 124. 115 Consent Judgment ¶ 64.
46

study.116 The First Report noted that EDMC’s post-graduation career services contacts were not 

likely collecting information necessary for that determination. 

During the second review period, the Administrator worked with EDMC to revise the 

data it collected. As reported in the Second Report, the Administrator ultimately approved a 

revised approach that would result in usable data for making the Consent Judgment’s Core Skills 

determinations. The Administrator subsequently worked with DCEH on a back-up methodology 

for making appropriate Core Skills determinations in those instances when obtaining the data is 

difficult. 

Three years into the Consent Judgment, while DCEH has begun collected data using the 

forms that the Administrator approved, neither EDMC nor DCEH has published job placement 

data that complies with the Consent Judgment’s requirements. That is, given the time it took to 

propose a compliant data collection process, the additional time involved in DCEH’s further 

request for a back-up approach when collecting that data proved difficult, and the time lag 

involved in implementing a job placement methodology over a July 1 to June 30 cohort period, 

DCEH did not fully implement its compliant processes until the end of this cohort period. The 

job placement rates published during this review period still use the collection process that was 

in place at the beginning of the Consent Judgment. 

These issues are explained in greater detail below. 

a. The Role of Core Skills Determinations and Methodology to Date

The Consent Judgment’s formula for determining job placement rates is complicated, but 

a key component of the calculation is the manner in which a former student is counted as 

employed in “the field of study or a related field of study” for which the student was enrolled in 

the school’s program. That is, prospective students should be able to know not only whether 

those who complete the program they are considering can find a job, but also whether the job 

they find is related to that course of study. For a student who studies psychology in order to 

become a psychologist, knowing whether graduates tend to get jobs in psychology or, for 

example, retail is relevant information. 

The Consent Judgment thus lays out criteria for determining whether a particular 

student’s employment should qualify as being in the field of study or a related field of study. 

The first question involves a bright-line determination: If the recent student’s job title is one that 

the school publishes as associated with the particular program of study and is a job that the 

Departments of Education and Labor have recognized as associated with that course of study, 

then the job placement can be counted as in the field of study.117 However, if that bright-line, 

 116 See Consent Judgment ¶ 69(a)(1)(ii). 117 Consent Judgment ¶ 69(a)(1)(i) (looking to whether the job title is included in the crosswalk established by the 

Department of Education’s National Center for Education Statistics and the Department of Labor’s Bureau of Labor 

Statistics for relating the Classification of Instructional Programs and the Standard Occupational Classification, or 

the “CIP to SOC crosswalk”); id. (allowing placement as “in field” if the job title is listed as a “lay title” on the 

O*Net Code Connector for one of the related SOC titles). 
47

job title determination is not satisfied, the Consent Judgment calls for a more qualitative 

determination. That determination looks to whether, among other things:

(ii) the position requires the Graduate/Completer to use, during a majority of the 

time while at work, the Core Skills listed in the school’s published program and 

course descriptions expected to have been taught in the Student’s program.118

That question, regarding whether a recent student “use[s], during a majority of the time while at 

work, the Core Skills” taught in the program of study, is a difficult determination.

Until recently, DCEH and, before it, EDMC have sought to make the Core Skills 

determination by determining the percentage of the graduate’s courses that the graduate uses in 

his or her new job. Drawing links between each job responsibility, whether drawn from the 

company’s position description or information provided by the graduate, and the graduate’s 

coursework, DCEH uses a grid to determine whether the graduate was using at least 51% of the 

program’s core courses in his or her new position. For example, if the graduate’s program 

involved 11 “core courses,” DCEH would count the graduate as placed in field if the career 

services representative concluded that the graduate was using 6 of those courses in the new 

job.119 

DCEH’s methodology has two key problems. First, the employees making the 

connections between coursework and job duties too often make dubious judgments. Importantly 

from a compliance perspective, several of the judgments seen in this year’s job placement data 

are judgments that the Administrator’s Second Report specifically identified as questionable in 

last year’s review:

• A stylist at a bridal shop whose job responsibility of “helping each bride find the 

dress of her dreams” was linked to her course in Early History of Fashion – a course 

covering fashion from the ancient Egyptians through the French Revolution.120

• A hotel banquet prep cook whose work “[p]repar[ing] foods as directed by Chefs” 

was linked to courses on Latin Cuisine, Asian Cuisine, and World Cuisine – without 

any evidence that the prep work involved any of those cuisines.121

• A supermarket deli clerk whose five job duties were linked not in a tailored manner, 

but by linking the five job duties, en masse, to a set of seven courses.122

 118 Consent Judgment ¶ 69(a)(1)(ii).

119 The grid method used by EDMC and then DCEH is discussed in greater detail in the Second Report. See Second 

Report at 32-37. 120 Compare Placement No. 301628, with Second Report at 35 (expressing concern regarding linking of Fit 

Specialist, “work[ing] with guys that are trying on their suits,” to Early History of Fashion course).

121 Compare Placement No. 299940, with Second Report at 34 (expressing concern regarding linking of fryer station 

work to various cuisines “without any evidence that the fryer station work involved any of those cuisines”).

122 Compare Placement No. 301588, with Second Report at 35 (expressing concern that when job responsibilities are 

linked “not in a tailored manner, but ... en masse, to a set of” courses, “the Grid looks less like a systematic way for 

evaluating the use of particular skills, and more like an assertion, ipso facto, that a job is counted as a placement in 

field”).
48

• A school system’s Food Service Assistant whose responsibility to “[f]ollow[] 

money-handling procedures and assure[] accurate cash intake when cashiering” was 

linked to her course on Food & Beverage Operations Management, a course 

“designed to provide students ... a managerial perspective of providing exceptional 

service to increasingly sophisticated and demanding guests.”123

While the Administrator continues to believe that judgment and discretion can be part of the 

Core Skills analysis in a company with a proper compliance culture, repetition of the same 

mistakes here confirms that it is time for this approach to be phased out.

The second, more fundamental problem with this approach is that it asks the wrong 

question. That is, DCEH’s grid does not ask what percentage of the student’s time is spent using 

Core Skills?, but what percentage of the student’s courses are used? These questions are 

different, and the grid’s focus on the percentage of the student’s courses that are used could 

produce data that has little to do with the Consent Judgment’s goals. That a graduate uses all of 

the skills she learned in her program is irrelevant under the Consent Judgment, if the student 

spends 95% of her time doing other things, unrelated to her program. The question that the 

Consent Judgment asks focuses on what percentage of her time is she using those skills. If she is 

using her Core Skills more than 50% of the time, she can be counted as place in her field. 

Because the grid methodology does not answer that question, the Administrator’s First Report 

made clear that the methodology would have to change.

b. The Revised Methodology

By the time that the Second Report was published, a new methodology for collecting core 

skills information had been approved. In the new Core Skills Form, graduates are presented with 

a summary of their program’s Core Skills and asked to fill in some version of the following 

statement:

After reviewing the core skills listed above, on average, what percentage of the 

time do you use the core skills in your current employment?

In my current employment, I spend ____% (0-100) of my time using the Core 

Skills of my program.

To be sure, asking graduates to describe how they spend their time in this way will be imprecise 

and subjective. But asking the relevant question, as defined by the Consent Judgment, directly is 

a better proxy than the Grid. Further, a graduate’s subjective view of whether his or her new job 

is in the field for which she was studying may be the most relevant information available, as 

prospective students looking at Job Placement Data are surely just as interested in whether recent 

graduates have found jobs that they consider appropriate for the education they pursued as they 

are in certain more objective measures. The new Core Skills Form, as described here, is an 

improvement over the initial methodology, and will collect data that can be used for a compliant 

Consent Judgment Job Placement Rate. 

 123 Compare Placement No. 301542, with Second Report at 35 (expressing concern regarding linking of “math skills 

as well as the ability to estimate” with Introduction to Accounting Principles and Foodservice Financial 

Management).
49

Before implementing the new Core Skills Form, EDMC raised a concern regarding its 

ability to capture enough data using this Form. The concern was that data collection through the 

attestation will miss some segment of graduates who were properly placed in field but who do 

not respond to and submit the attestation form. When relying on the Grid, EDMC was often able 

to obtain data that it would use – a published job description – even when students did not 

themselves respond to EDMC’s outreach. With the new attestation requiring an affirmative 

response, EDMC was concerned that students who do not respond may go uncounted, even if 

placed in field.

The concern was legitimate, as many students fall out of contact with the school 

following graduation. The Consent Judgment’s goal was not to impose a survey response 

requirement, but to provide accurate information regarding the employment outcomes for 

graduates of the programs in question. Accordingly, the Administrator considered additional 

proposals from EDMC, and then DCEH, for a “backup” methodology that would enable the 

company to discern, for graduates who do not respond with the approved attestation, whether the 

graduate was placed in field.

While the concern was legitimate, there was not an easy or perfect solution. This is 

because an important part of the Consent Judgment's Core Skills determination was its focus on 

how the graduate spends her time at work – a question that is very difficult to answer in the 

absence of information from the graduate. Any backup methodology intended to capture 

additional information regarding graduates who fall out of contact would have to rely on some 

proxy. The goal was to find a backup methodology that would reasonably assess whether the 

graduate’s job requires her to use, during a majority of the time while at work, the Core Skills of 

her program.

After considering several alternatives, the Administrator approved a proposal that relied 

on the formal position description for the job in question to develop a reasonable understanding 

of how the graduate spends her time on the job. The proposal looks at the various job duties 

listed, removes those that focus on non-job-specific “soft” skills like cooperation and 

trustworthiness, and then assumes that the employee’s time is divided equally among the various 

duties described in the posting. That assumption is, of course, imperfect: The fact that a formal 

position description or job posting lists four duties does not mean an employee will spend 25% 

of her time on each duty. That said, the approach will distinguish between jobs that barely use 

the graduate’s Core Skills and jobs that use those skills extensively; it provides a way to 

distinguish, for example, between the “Server/Manager” who functions primarily as a server, not 

using the skills learned in her Culinary Manager program, and one who functions primarily as a 

manager. Moreover, to the extent this assumption is imperfect, it is not consistently biased either 

for or against finding a placement to be in field; it may overcount in some cases and undercount 

in others, but test cases reviewed before the methodology was approved showed that it provided 

Core Skills determinations that were generally reliable.

This approach provided a reasonable backup to the primary method of asking graduates 

directly how they spend their time, but it is important that it remain a backup. The backup 

approach was intended only for use when graduates fall out of contact with their schools and do 

not respond. Were DCEH to give up too easily on reaching its graduates and asking them the 

Core Skills question directly, the benefits of the primary approach, using the form that requests 
50

the graduate’s or employer’s own estimate of the time spent using core skills, would be diluted. 

Accordingly, DCEH policy allows its admissions representatives to utilize the backup approach 

only after they have made three separate attempts to get a response using the primary, approved 

form and provided a reasonable time for response.

c. The Current Status

Job placement data using the new methodology that complies with the Consent Judgment 

will not be calculated and published until the Summer of 2019. While the issue has been 

apparent since the First Report, the solution has taken time to develop. Because DCEH did not 

start collecting data using the compliant methodology until the backup approach was approved in 

March 2018, the job placement data that was published in the summer of 2018 was collected 

entirely using the previous, non-compliant methodology. DCEH advises that in practice, the 

company has not relied on the new “backup” form, and its more discretionary judgments, at all 

for public reporting purposes: While that backup form had been constructed for use when recent 

graduates failed to respond to requests for additional information, DCEH has not yet used the 

form for determining whether to count a placement as in-field under the Consent Judgment in 

those circumstances. While DCEH has not ruled out the possibility of using the backup form in 

certain circumstances, the relevant circumstances arise infrequently, and DCEH has not used it 

yet. Given the annual cycle on which these numbers are completed and published, and the length 

of time it took to institute the new methodologies, the Administrator has not had an opportunity 

to review and confirm the reliability of information prepared under the new methodologies.

F. Marketing and Third-Party Vendors

1. Context

a. Industry Background

While marketing and recruiting are essential to the growth in enrollment and revenue in 

for-profit colleges, they have also posed significant compliance and legal challenges for the 

industry. In-house admissions representatives responsible for recruiting new students at some 

schools over the years have been responsible for tactics that are perceived as abusive and 

deceptive. Many schools have largely out-sourced the initial phases of recruiting new students to

third-party vendors often referred to as “lead generators.” These organizations and their 

affiliates use a variety of techniques, ranging from online advertisements and websites to email 

and call center campaigns. Typically, lead generators use a web of affiliates and sub-affiliates to 

operate multiple locations across the web, where they gather contact information for potential 

students, and then sell that information to one or more schools who will contact the prospective 

student. 

Lead generation has been big business in other industries, and the same is true for 

education. Many lead generators use websites on which, for example, they create rankings of 

schools, purporting to list the “top” or “best” degree programs for a field of study or for schools 

for military personnel and veterans. They cast themselves as helping prospective students match 

their interests and needs based on location and academic preferences. But many feature or 

“rank” only schools that have paid to be there – largely for-profits schools. Legislators and 
51

critics fear that the prospective students who find these sites expect to be shown appropriate 

options out of the entire range available; instead, they are steered to the for-profit schools that 

pay to be promoted, and which are typically more expensive than community colleges or state 

universities. 

Similarly, some lead generation efforts target the unemployed and underemployed 

seeking employment. Some websites that purport to offer available job opportunities are actually 

designed to collect the contact information for consumers who consent to be contacted about 

various job and educational opportunities. It is by no means clear what role some of these “job 

sites” play in assisting people with job opportunities – or whether the individuals who provide 

information to these sites have ever gotten jobs through them.

Moreover, the lead generation industry has historically lacked transparency. Neither 

regulators nor even the for-profit colleges themselves have a good sense of who runs these 

operations or all of the tactics lead generators use to pursue students. Stories of employees 

signing up residents in homeless shelters and enticing contact information by promising jobs are 

just a few examples of the tactics that have been exposed. To date, the lead generation industry 

also has been largely unregulated. Effective regulation and policing of lead generator tactics is 

made more difficult by the somewhat transient quality of the industry; websites appear and 

disappear (or, at least, cease to be updated) frequently. 

While for-profit schools can at times get some insight into the vendors with whom they 

directly contract, and who actually send them the leads, the “sub-vendors” on whom those 

vendors rely has been more challenging. The vendor who sells the lead to a school may not 

actually have had any contact with the prospective student, but often will have simply bought 

that lead from a third party. That third party – often referred to as a sub-vendor, but in reality 

often acting as a “sub-sub-vendor” or entity even further down the chain – placed an ad and 

collected information about the prospective student, but then sold the lead to others who 

ultimately sold it to the school. The school will know the identity of the vendor who sold it the 

lead, but it will not be in a position to identify the sub-vendor, let alone a sub-sub-vendor, unless 

the vendor provides that information – if the vendor even knows. The result is that if the content 

that produced the lead was problematic, the school may have little ability to enforce its 

compliance standards against the creator of the content. Indeed, the problematic sub-vendor may 

be selling non-compliant leads to the school through multiple channels.

The relationship between for-profit schools and lead generators is complicated. Many 

for-profit schools are heavily dependent on lead generators, and lead generators earn substantial 

sums from their clients. But they are also, in some sense, competitors, because for-profit schools 

can do their own marketing, using the same kinds of tools that lead generators use (such as 

targeted internet advertising). This potential competition appears to be one of the reasons why 

for-profit schools often have limited visibility into the steps lead generators take to identify 

prospects. In some sense, that has worked for both industries: For-profit schools have not 

wanted to be responsible for lead generators, and lead generators have not wanted for-profit 

schools to learn the tools of the trade and then ply that trade themselves. 

Finally, lead generators often work for multiple for-profit schools that are competitors 

with each other and even sell the exact same leads at the same time to several schools. This 
52

dynamic can create a frenzy of communication – shortly after a consumer provides information 

to the lead generator, the consumer is likely to be contacted by several schools within a few 

minutes (each school seeking to be the first to get the person on the phone), or repeatedly 

contacted over several days.

b. EDMC’s Efforts

Prior to the change in ownership, EDMC had taken a number of steps to improve the 

nature of the third-party leads it was receiving. Three of EDMC’s efforts at the early phases of 

the Consent Judgment merit mention here. First, EDMC began an effort to reduce its reliance on 

the pay-per-lead channel overall. This effort was most pronounced with respect to the Ai 

schools, but the Argosy and South brands also made reductions in their pay-per-lead spending. 

Second, EDMC worked, at the beginning of the Consent Judgment, to revise the 

“pathing” used to generate leads for EDMC from job sites to include more conspicuous and 

direct questions, and to require consent to be contacted about educational opportunities. As a 

result, vendors were thus required to – among other things, and as described in more detail in the 

First Report – specifically ask whether a consumer is interested in furthering his or her 

education. EDMC also required its vendors to include an unequivocal negative response as an 

option for that question: “No,” or “No, I am not interested.” While vendors could still pass 

along leads to EDMC for consumers who give equivocal responses, like “Maybe” or “Maybe 

Later,” EDMC would not pay for leads for consumers who chose the negative response.

Third, given the importance – despite difficulty – of imposing consequences on vendors 

who provide non-compliant leads, EDMC relied on a number of compliance-related vendors to 

assist it in identifying violations and in tracking the leads that EDMC received back to the noncompliant material and vendor that generated them:

• One vendor looked at EDMC’s vendors’ web materials (though not vendors’ 

affiliates’ materials) to assess whether consumers provide adequate permission to be 

contacted. 

• A second vendor “mystery shopped” the internet and tracked the representations that 

were made to consumers whose information was eventually sold to EDMC, 

ultimately identifying the original sub-vendor and content that produced the lead sold 

to EDMC.

• A third vendor crawled the internet in search of uses of EDMC brands, and flagged 

instances in which the brands are used in connection with certain keywords. EDMC 

then reviewed those pages to assess whether its vendors were portraying the schools 

in a manner consistent with its policies.

As discussed in previous reports, while EDMC’s efforts could not be expected to change the 

industry, they did constitute steps forward and were undoubtedly an improvement.
53

2. DCEH’s Efforts

a. Structural Changes

While DCEH has largely left EDMC’s policies and the contours of its third-party vendor 

compliance infrastructure in place, it has made a handful of changes of significance. 

First, it has replaced the online mystery shopper that identified representations being 

made to prospective students whose information was sold to DCEH and the sub-vendor who 

created the content. While the Administrator has not observed a significant change in the 

coverage or capacities of the new vendor, IntegriShield, there was an initial period of 

“calibration” in which IntegriShield worked to align the content that it was searching for and 

providing with the content that DCEH wanted captured – and, generally speaking, that the 

Consent Judgment prohibited. While some content may have been missed during that period, the 

challenges during that brief period were consistent with an ordinary transition between vendors. 

More significant were changes in the structure of DCEH’s marketing partnerships 

themselves. DCEH began the review period using three primary vendors, which it referred to as 

“agencies,” for purchasing leads. These three agencies, in turn, purchased leads from the 

networks of sub-vendors (or as discussed above, sub-sub-vendors) that created content or bought 

and sold leads from others. DCEH changed that structure during this review period, 

consolidating its purchases down to a single agency, Quinstreet, from which it would purchase 

all leads and on which it relied to manage all of the sub-vendor relationships. The Quinstreet 

platform had benefits from a compliance perspective, as Quinstreet was able to provide subvendor information that DCEH did not have access to from its other agencies; with Quinstreet, 

DCEH had a greater capacity to “pause” – or ban – purchases from sub-vendors, or sub-subvendors, who had previously passed non-compliant leads on through to DCEH. DCEH used this 

power, occasionally pausing purchases from certain sub-vendors who had previously sent noncompliant material. These pauses of sub-vendors in certain circumstances were not required by 

the Consent Judgment, and reflected a proactive effort by DCEH.

b. DCEH’s Performance

While DCEH has maintained positive elements of the EDMC third-party vendor 

compliance infrastructure and has taken additional steps in some respects, continued progress 

will be important. Indeed, as for other for-profit schools, achieving a compliant marketing 

program that relies on third-party lead generators will always remain a work in progress. 

Overall, the number of compliance violations that DCEH’s monitoring infrastructure 

identified during this review period fell 10% over the previous period – though it is difficult to 

discern the extent to which that drop is due to improved vendor compliance, a modest drop-off in 

violation identifications during the transition from the previous online “shopper” to 

IntegriShield,124 or some other gap. At a minimum, though, it is worth noting that DCEH cannot 

 124 The Administrator’s team compared materials “flagged” by IntegriShield and its predecessor before and after the 

transition to evaluate the effect on compliance monitoring. In the period immediately following the transition, 

IntegriShield flagged new digital properties and flagged potential violations at a number of third-party sites that had 

not regularly appeared in its predecessor’s reviews. However, the IntegriShield reviews also systematically missed 
54

itself change the industry: As long as it relies on third-party lead generators, and other for-profit 

schools do as well, there will be a need for a strong compliance infrastructure designed to 

penalize vendors who provide non-compliant leads. As long as the vendors believe there are 

only incentives, not costs, for deceiving customers, it appears that they will continue to do so. 

Along these lines, it is worth noting that there are ways in which DCEH has become 

more reliant, as least temporarily, on the job sites that are particularly problematic. In FY 2017, 

EDMC purchased 266,274 leads from job sites; in FY 2018, DCEH purchased 376,399 – and 

expects to purchase 315,764 in FY 2019. As a percentage of the total volume of leads that the 

company purchased, job site leads constituted 28.9% of the total volume in FY 2017 and will 

constitute 40.3% in FY 2019. While the job sites from which the company buys leads today are 

required provide better consumer disclosures than they did before the Consent Judgment, job site 

leads cannot be described as aimed at students whose goal is to pursue their education. 

All of DCEH’s performance in the third-party vendor space should be evaluated in the 

context of its future plans, discussed further below.

3. Future Plans

There are two significant uncertainties regarding DCEH’s future capacity to promote a 

compliant marketing program.

The first is that after recently reducing its “agency” model to rely on a single agency, 

Quinstreet, and Quinstreet’s ability to provide identifying information about the sub-vendors 

whose leads are being sold to DCEH, DCEH is now in the process of eliminating the “agency” 

model entirely. Under its new vision, DCEH will purchase leads directly from the entities that 

had previously operated as sub-vendors; that is, instead of those entities selling their leads 

(ultimately) to Quinstreet, which was the only entity with whom DCEH dealt directly, DCEH 

will now purchase leads from a number of different sub-vendors – now vendors -- itself. DCEH 

will, in essence, act as its own agency, cutting out the “middle-man” and managing the various 

relationships itself. 

From a business perspective, DCEH believes that this approach will enable it to obtain 

better leads at a lower cost. From a compliance perspective, there are questions, as DCEH will 

be losing Quinstreet’s sub-vendor identification capabilities. DCEH advises that it can mitigate 

against this risk in two ways. First, DCEH intends to maintain direct relationships only with the 

sub-vendors who have historically provided compliant leads. Second, DCEH also believes that it 

will be able to replicate the compliance benefits of the Quinstreet platform because DCEH has 

more sophisticated capacities than it did before working with Quinstreet and because the subvendors, which viewed Quinstreet partially as a competitor, will be more comfortable providing 

information directly to DCEH regarding the sub-sub-vendors or others from whom they are 

 

other third-party sites—particularly those that did not contain express references to DCEH brands but that ultimately 

led consumers to lead generation sites—that had been caught by the predecessor firm. DCEH’s compliance team 

instructed IntegriShield to be more aggressive in flagging potential violations and to “seed” more materials by filling 

out interest forms or submitting contact information to various sites. This effort appeared to be effective, and 

IntegriShield began flagging as much and potentially more relevant third-party marketing material than the 

predecessor had flagged. 
55

purchasing leads. Whether DCEH will actually be able to replicate that compliance capacity is 

unknown at this time.

The second question is how heavily DCEH will rely on third-party lead generators going 

forward. To its credit, the new marketing team aims to be virtually off the third-party lead 

generator channel in three years. This ambition merits close review, as DCEH’s predecessor, 

EDMC, had also expressed an intention to significantly reduce its reliance on the channel over 

the course of the Consent Judgment. At some point, repeated three-year plans will be received 

skeptically.

That said, whereas EDMC had largely expressed a compliance rationale for scaling back 

its third-party vendor spend, DCEH’s new Chief Marketing Officer describes a business 

rationale for the move. The strategy anticipates that the business will be in a stronger position 

when its schools have more clearly defined brands to drive enrollment – and it is difficult to 

develop and promote a brand identity when the company’s marketing efforts rely on third-party 

vendors who are advertising for and selling leads to multiple schools at the same time. DCEH 

will be better able to sell its services, the thinking goes, when its marketing budget is spent to 

advertise DCEH’s product. 

DCEH has thus put forward a plan under which each of its schools would significantly 

decrease its reliance on third-party lead generators by 2022. Specifically, DCEH plans that by 

2022 it will purchase just 43% of the volume that it had purchased for Ai in 2018 (or, given Ai’s 

previous significant third-party spend reduction, 24% of Ai’s lead purchases in 2017), 14% of its 

2017 purchases for Argosy, and 15% of its total 2018 purchases for South. While DCEH does 

not expect to eliminate third-party lead purchases entirely, they plan to purchase a fraction of 

what the company had purchased when the Consent Judgment began.

DCEH believes that this three-year timeline is realistic, based on the new Chief 

Marketing Officer’s experience bringing two other for-profit schools through a similar transition. 

The timeline it proposes here contemplates more time than was required at the other schools, 

given DCEH’s belief that Argosy and South, in particular, will need more time to build a brand 

that is sufficiently strong to generate enrollment in the absence of a robust third-party vendor 

spend. In other words, DCEH believes it needs three years to reach the point of a virtuous circle: 

It will take three years to improve the strength of its brands sufficiently, while still using thirdparty leads, so that their brands are strong enough to drive enrollment without using third-party 

leads. 

Time will tell whether DCEH actually reduces its reliance on third-party lead generators. 

If it does not, its new in-house approach to vendor management will be put to the test.

As DCEH’s experience trying to reduce its reliance on third-party lead generators shows, 

this industry’s ties to third-party lead generators are difficult to untangle. While DCEH has 

taken steps to improve the quality of leads that it receives, the third-party vendors are continuing 

to generate problematic leads for other customers – they simply filter out (or are supposed to 

filter out) certain problematic leads from the batches that they send on to DCEH. In some ways, 

marketing practices in the for-profit schools industry are getting worse. DCEH’s new Chief 

Marketing Officer notes that as traditional public, non-profit institutions are developing and 
56

marketing programs for adult learners, the lead generators that serve for-profit schools are facing 

greater competition for prospective students; lead generators that were once thought to be 

improving are facing economic pressures to collect lower-quality leads using less compliant 

methods. 

Some for-profit schools, following the marketing model that DCEH has laid out for the 

next three years, may elect to reduce their reliance on third-party lead generators for their own 

business reasons. These marketing strategies will vary from company to company, though, and 

companies that lack strong brands – like those who are perceived, often properly, as shady – will 

often rely on third-party lead generators to bring them potential students. As long as for-profit 

schools perceive that their own reputations will not attract the students and revenue they need, 

and as long as lead generators feel little risk of penalty for the least compliant tactics, the 

practices will not change. Thus, the DCEH Consent Judgment has made an appreciable 

difference in DCEH’s marketing practices; changing the marketing practices of the industry will 

require an industry-wide approach.

G. Withdrawal Policies

The Consent Judgment also requires DCEH to comply with certain refund practices for 

newly enrolled students who withdraw shortly after they enroll. The refund policy covers 

students who are newly enrolled in a DCEH undergraduate program and who have fewer than 24 

credits of post-secondary education – essentially non-transfer, first-term enrollees.125 Students at 

ground schools who meet those criteria and withdraw within seven days of the start of their first 

term – or 21 days for students in online programs – are entitled to a full refund of their tuition 

and fees.126 Further, while DCEH may retain the full amount of tuition and fees for students 

who attend 60% or more of an academic term, students are entitled to a proportionate refund for 

students who withdraw at an earlier point in a term.127 DCEH must publish its refund policies in 

its schools’ enrollment agreements,128 and may not change those policies to the students’ 

detriment without Administrator approval.129

During the second review period, EDMC’s compliance with these provisions was 

reviewed extensively. With respect to the refund policies, students were adequately advised that 

refunds are available if they withdraw within seven days at a ground campus or 21 days at an 

online school. The relevant policies regarding the availability of these refunds in each school’s 

enrollment agreement, as the Consent Judgment requires.130 

The Administrator also reviewed EDMC’s actual provision of refunds during the second 

review period, reviewing both individual student accounts to ensure that withdrawing students 

received the refunds owed them based on the date they were recorded as having withdrawn, and 

reviewing EDMC practices and overarching data to assess whether students were properly 

withdrawn on the “correct” date of their withdrawal or were in any way slow-walked in order to 

 125 Consent Judgment ¶ 104. 126 Consent Judgment ¶ 104. 127 Consent Judgment ¶ 105. 128 Consent Judgment ¶ 104.

129 Consent Judgment ¶ 105. 130 Consent Judgment ¶ 104.
57

minimize the number of refunds required. That review examined individual student ledgers to 

confirm that students who withdrew before classes began or within seven days of the start of 

ground schools or 21 days of the start of online schools received full refunds; it did not identify 

any students who were entitled to full refunds who did not receive them. The review also 

examined patterns in withdrawal dates, to assess whether students were disproportionately 

recorded as having withdrawn shortly after the seven- or 21-day cut-off dates – which could 

suggest that withdrawals were being slow-walked. Neither the data nor interviews of employees 

involved in the process indicated that withdrawals were not being processed effectively. 

The Administrator re-visited this review during this third review period, to assess 

whether there were indications that the processes had changed or bore indicia of problematic 

issues. Once again, interviews of past and current employees did not indicate any pattern or 

frequency of problematic withdrawals. Data regarding withdrawal dates similarly revealed no 

unusually high distribution of withdrawals following the seven- and 21-day cut-offs. 

H. Student Finance

1. Institutional Debt Forgiveness

One of the Consent Judgment’s most consequential financial components is its 

requirement that then-EDMC forgive all amounts that certain qualifying students owed the 

company. The forgiveness requirement did not encompass loans owed to other entities, such as 

federal financial aid, which was outside of EDMC’s power to forgive. But its effect on former 

students’ lives would be significant: As of the time of the settlement, EDMC estimated that the 

program would result in the forgiveness of approximately $102.8 million. 

Unlike the many provisions that were focused on improving EDMC’s recruiting of future

students, the institutional debt forgiveness requirement was designed to provide relief to students 

who may have been harmed by the company’s past recruiting practices. Indeed, the population 

of eligible students was defined to assist former students who were most likely to have been 

“lured” into a program that was not a good fit: students who had little previous undergraduate 

experience, left the program soon after starting, and attended an EDMC school during a period in 

which the company’s problematic practices were more prevalent. Specifically, students were 

eligible for debt forgiveness so long as they were

Enrolled in a Program of Study with fewer than twenty-four (24) hours of transfer 

credit, (b) withdrew from the Program of Study within forty-five (45) days of the 

first day of their first term, and (c) whose final day of attendance at an EDMC 

school was between January 1, 2006, and December 31, 2014.131

The Consent Judgment also required EDMC to make reasonable best efforts to refuse any 

payment on the forgiven amounts, ask the credit reporting agencies to delete any associated trade 

line information, and send a notice to affected students within 90 days of the Consent Judgment’s 

effective date.132

 131 Consent Judgment ¶ 120. 132 Consent Judgment ¶¶ 120-21. 
58

Most of the company’s forgiveness-related work was completed in December 2015 and 

January 2016, well within the Consent Judgment’s 90-day timeline and long before the Dream 

Center transaction. EDMC ultimately concluded that 78,417 students were entitled to a total of 

approximately $104.6 million in forgiveness. 

To assist in its review of EDMC’s implementation of the debt forgiveness program, the 

Administrator retained Bates White, LLC, an economic consulting firm that performs 

compliance and data verification services.133 The goal was to ensure as rigorously as reasonably 

possible that all of the students entitled to forgiveness of their EDMC debts actually received the 

forgiveness. Accordingly, the Administrator team had access to certain narrowly defined, 

anonymized enrollment information regarding all of the approximately 800,000 students who 

enrolled in EDMC schools between 2006 and 2014. The Administrator team then conducted its 

own review of the data to identify the students within that population who met the Consent 

Judgment’s transfer credit, 45-day withdrawal window, and last date of attendance requirements. 

That analysis identified a population of students who met the criteria to have their institutional 

debt forgiven.

Some of the students who met the Consent Judgment’s eligibility requirements did not 

actually appear on EDMC’s records of students who actually received forgiveness under this 

program. This is not surprising, because many students who were eligible for forgiveness did 

not actually have any outstanding debt by the time of the Consent Judgment; they may have 

already paid off all outstanding debt, or in some cases may have graduated without debt. Those 

students, while eligible for forgiveness, had no institutional debt to forgive.

Having determined the initial universe of students who met the eligibility criteria, the 

Administrator team then assessed whether there were students in that population who had debt to 

forgive but did not actually receive forgiveness. This analysis focused on those students who 

met the eligibility requirement but were not sent notifications of forgiveness. Given the volume, 

and taking into account the various systems of record from which the data had been collected, 

Bates White developed a sampling strategy that would ensure a careful review of those students 

who met the eligibility criteria but did not actually receive debt forgiveness.134

Reviewing the financial ledgers of all of the students in the sample population, the 

Settlement Administrator team found no instances in which any of those students had any debt to 

forgive. That is, of the population of students for whom there was most likely to have been an 

error – students who met the eligibility criteria but did not receive a forgiveness notice – this 

review found no instance in which a student was denied forgiveness in error. 

The review found only two small issues of note. First, EDMC’s Internal Audit team 

reported that of the 78,000+ forgiveness notices that were sent, as many as 25% of the notices 

were returned as undeliverable. EDMC was not required to undertake additional efforts to locate 

 133 Shortly after EDMC initially concluded its forgiveness program in December 2015, during the time period in 

which the company still had a Vice President of Internal Audit, EDMC conducted its own internal review of its debt 

forgiveness plan. The Settlement Administrator reviewed all work papers from the audit and discussed the review 

with EDMC’s auditor in charge. The Settlement Administrator determined that in addition to those steps, it would 

retain Bates White to conduct its own review of the company’s compliance with the debt forgiveness requirement. 134 The sample was constructed using a 95% confidence interval and a 1% error rate.
59

those former students, as the company had satisfied the Consent Judgment’s requirement that the 

notices be sent to the students’ last known mailing address. Nor was the returned notice 

particularly consequential for the recipients of forgiveness, because the company had 

successfully forgiven the debt, notified the credit reporting agencies, and was required to further 

return or refund any attempts to make further payments. While those students may not know it, 

they have received the benefits provided by the Consent Judgment. Second, there were a handful 

of students in the broad forgiveness population whose ledgers reflected forgiveness-related 

activity in May 2016, a few months after the Consent Judgment’s deadline and after the 

December 2015 or January 2016 period in which EDMC had indicated the bulk of activity 

occurred. Further investigation showed that for 24 students with a particular type of loan being 

serviced by one particular third-party vendor, an earlier bookkeeping error in the students’ favor 

had suggested that they had no debt to forgive during the initial round of forgiveness; when the 

error was discovered, the debt was “applied” and then immediately forgiven. In the meantime, 

those students had been subject to the hold on collections, and – particularly since the delay in 

forgiveness was the result of an erroneous belief that the students had no debt – there was no 

apparent harm from the delay.

The Administrator also reviewed documentation reflecting EDMC’s requests to the three 

major credit ratings agencies seeking the deletion of the relevant trade lines, as well as talking 

points and job aides distributed to employees who were likely to receive questions regarding the 

forgiveness program. No problems were identified in these materials.

Working with the third-party auditing firm Bates White, the Settlement Administrator 

thus concluded that EDMC complied with the Consent Judgment’s institutional debt forgiveness 

requirements.

2. Implementation of Electronic Financial Impact Portal (EFIP) 

The Consent Judgment requires DCEH to provide, to all prospective students who are 

eligible for financial aid and who are borrowing funds to finance their education, an Electronic 

Financial Impact Platform (“EFIP”) prior to enrolling in a program of study.135 The EFIP is an 

interactive, internet-based program that produces a personalized disclosure of the financial 

impact to a particular student of pursuing a given program and incurring a specific amount of 

debt.136 

Under the Consent Judgment, EDMC could choose whether to implement an EFIP that 

was developed by the Consumer Financial Protection Bureau (“CFPB”) or develop its own, inhouse. The Consent Judgment required that EDMC “undertake reasonable efforts” to provide 

feedback to the CFPB with regard to any preliminary versions of the EFIP platform that CFPB 

presented to EDMC.137 Once CFPB’s final version of the EFIP was ready to implement, EDMC 

 135 Consent Judgment ¶ 71. 136 Consent Judgment ¶ 17. The Consent Judgment’s requirement that a prospective student generate a personalized 

disclosure using the EFIP applies only in the pre-enrollment period. The Consent Judgment notes that “in the event 

that a Student chooses to revisit the [EFIP] after enrolling in a Program of Study, EDMC shall not have any 

additional obligations to that student under this paragraph.” Id. ¶ 71. 137 Consent Judgment ¶ 72.
60

had sixty days from receipt of the EFIP to determine whether it would use the CFPB’s tool.138 

EDMC chose to use the EFIP developed by the CFPB.139 The EFIP provides a user experience 

in three phases, allowing students to (1) review the student’s first-year financial aid offer, (2) 

evaluate the financial impact of accepting that financial aid offer, and (3) learn about options for 

reducing the anticipated student debt load.140 

As indicated in the Second Report, EDMC began using the EFIP on April 9, 2017, and it 

generally proceeded without major problems.141 

From a student perspective, the EFIP receives generally positive reviews. Indeed, 

anonymized feedback collected by the CFPB showed that of more than 5,000 comments received 

since the EFIP was implemented, the vast majority were positive and described the tool is 

helpful. Some DCEH employees have noted that students do not ask extensive questions about 

the EFIP, but employees did not have insights into whether that is because the information 

speaks for itself, because the students are unengaged, or because the students are also receiving 

similar information through another Consent Judgment requirement, the FYSK. 

It is worth noting that the EFIP has some supporters among DCEH employees and 

managers involved in admissions. While some frontline staff who engage directly with students 

during the admissions process appear to view the EFIP as clunky, higher-level managers 

indicated that they believe the EFIP provides useful information – and that there is value in 

providing that information through multiple channels in the admissions process. These

individuals indicated that the EFIP is uniquely helpful in terms of showing students what 

repayment will entail, an important element of enrolling students who are prepared for the 

experience. Some employees expressed a hope that the EFIP will survive beyond the time that 

the Consent Judgment requires. 

3. Debt Collection 

In connection with its student loan offerings, DCEH also necessarily finds itself in a 

position to collect on outstanding student debt and is subject to state and federal laws that 

prohibit unfair and deceptive practices.142 In certain circumstances, DCEH’s debt collection 

practices are also governed by the Consent Judgment’s prohibition on engaging in unfair 

practices: When DCEH is attempting to collect on a debt owed by a former student whom 

DCEH is also attempting to re-enroll – and who is thus both a “student” and a “prospective 

 138 Consent Judgment ¶ 72.

139 Had EDMC determined not to use the EFIP developed by the CFPB, the Consent Judgment established a process 

through which EDMC would have worked, with the Administrator and in consultation with the Attorneys General, 

to develop its own EFIP. Consent Judgment ¶ 73. 140 Before delving into the EFIP process, a prospective student selects the estimated years it will take to complete the 

program, which may be shorter or longer than the program’s designed completion time. The student’s anticipated 

completion timeframe impacts later calculations, including the student’s total anticipated debt after graduation. 

141 This Report focuses on the use of and reactions to the EFIP. For a full description of the CFPB’s EFIP process, 

please refer to Part III.F of the Administrator’s Second Report.

142 See, e.g., 12 U.S.C. § 5531(a) (authorizing the CFPB to take action against any covered person or service 

provider for “committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in 

connection with any transaction with a consumer for a consumer financial product or service, or the offering of a 

consumer financial product or service). 
61

student” under the Consent Judgment – DCEH’s debt collection practices are also subject to the 

Consent Judgment’s prohibition on unfair practices.143

The scenario in which this can occur is not far-fetched. In one instance that ultimately 

proved to involve an idiosyncratic problem due to a unique set of circumstances not commonly 

repeated, a former Argosy University student had finished her coursework but, because she owed 

the school money, had not graduated. Apparently subject to multiple mailing lists, she received 

messages that seemed to acknowledge her debts, and, separately messages that encouraged her to 

contact the school regarding re-enrollment – despite her coursework being done, and the only 

barrier to graduation being the unpaid debt.

From a Consent Judgment perspective, the concern was that a former student would be 

invited to contact the school under the guise of discussing re-enrollment opportunities, but then, 

now that contact with the former student had been re-established, the school would press the 

former student to re-pay the debts. While DCEH is certainly entitled to engage in appropriate 

debt collection efforts, using false pretenses to entice former students to re-establish contact, for 

the purpose of “ambushing” them with debt collection attempts, would raise questions under 

unfair practices laws and the Consent Judgment.

Upon further investigation, while the particular combination of messages to this student 

was confusing, there appeared not to have been any improper debt collection practice behind it –

and no pattern or practice of confusing or misleading emails that would have a similar 

problematic effect. The confusing combination of messages that this student received was the 

result of a human error relating to that student’s somewhat unusual particular circumstances: 

while the student had in fact completed all her coursework, she received messages intended for 

students who had left before completion, because a grade change had not been recorded properly 

in the relevant system of records. This was not a recurring problem that would have resulted in 

other students receiving similar messages, but arose because of the unusual circumstance of an 

unusual grade change that was not recorded properly. 

Given the unique combination of circumstances here, and the potential relationship to 

debt collection practices, DCEH forgave the student’s outstanding debt. There was no pattern or 

practice of noncompliant or unfair practices in this instance.

IV. CONCLUSIONS AND RECOMMENDATIONS

Since the Consent Judgment became effective in 2015, it has caused significant upgrades 

in the compliance infrastructure for schools now managed by DCEH. A system-wide call 

recording and monitoring system, clearly presented and digestible information reflected on 

single-page disclosure sheets, and the Electronic Financial Information Portal have contributed to 

an admissions process that provides generally accurate information without the high-pressure, 

abusive or deceptive practices that have been alleged against this industry and this company’s 

predecessor. Employees involved in the compliance process continue to make sound judgments 

as they seek to comply with the Consent Judgment’s, regulators’, and accreditors’ requirements. 

 143 Consent Judgment ¶ 74.
62

Results have improved in the brief time since the compliance restructuring towards the end of 

this review period.

That said, there are several areas that will require continued compliance attention as 

DCEH moves forward.

First, DCEH leadership must work hard to promote and encourage a culture that values 

compliance as a critical contributor to the company’s success. That tone must be crystal clear, 

come from the top, and be reinforced by appropriate messages of support for compliance 

personnel. 

Second, DCEH must also fully remedy the harms caused by DCEH’s failure to advise 

students that certain HLC-accredited schools had lost their accreditation status on January 20, 

2018. 

Third, school closings create a host of issues for regulators, accreditors, and most of all, 

students. From the perspective of the Consent Judgment, the representations DCEH makes to 

students at the teach-out locations, whom DCEH is also recruiting to complete their educations at 

other DCEH schools, need to be accurate, complete, and timely. This can be difficult when 

decisions are being made under complicated circumstances, but the consequences that the 

closings have on students make this paramount.

Fourth, and related to the need to develop a compliance culture, DCEH should invest 

again in compliance infrastructure. Filling some of the key compliance positions left unfilled 

through attrition, rebuilding the company’s audit function, and shoring up the company’s ability 

to maintain accurate data would all be beneficial – both as a practical matter and from the 

perspective of signaling a commitment to compliance. Yet while investment is important, it will 

not be sufficient if employees believe that compliance is viewed as an obstacle to senior 

leadership’s goals. The tone at the top is critical.

Fifth, attention should also be paid to the extent to which DCEH’s non-profit status is 

used to promote the charitable mission of The Dream Center Foundation, and the extent to which 

it is used to benefit the for-profit missions of other companies – particularly those affiliated with 

DCEH managers. Absent an outright prohibition on partnerships with DCEH managers’ other 

companies, any such arrangements should be reviewed for the degree to which they further the 

non-profit mission and the degree to which they open the company to questions about private 

inurement or private benefits.

Finally, as with other industry players, DCEH’s reliance on third-party lead generators 

should be continually reviewed. The company has indicated an intent to dramatically reduce 

reliance over a three-year period. DCEH’s success in this regard will be important both for the 

company and its prospective students, and instructive for the industry.