Online Education Fraud

In the mid-to-late 1990’s, the Department of Education had serious concerns about one of the country’s largest schools, Computer Learning Centers (CLC). With over two dozen locations nationwide, CLC had grown rapidly through its use of federal loan money. In early 1998, the Illinois Attorney General filed a fraud lawsuit against CLC, which prompted a “program review” by the Department of the company’s main campus and several branch schools in the Washington, DC area. WJLA TV in Washington, DC went into the school with hidden cameras, obtaining footage of enrollment counselors violating federal laws. CLC was caught shredding documents the night before federal investigators arrived.

Around 2000 or 2001, the Department of Education published a Final Determination Letter concluding that all of CLC’s enrollment counselors were being paid commission based on the number of students they enrolled (i.e. a quota system.) As a result, the US Department of Education demanded that all Title IV monies received by CLC be returned to the federal government. This amounted to approximately $185 million dollars. That action put CLC into bankruptcy. CLC’s stock went from $40 to zero from 1998 to 2001. Several other up and coming for-profit schools watched, concerned about their own recruiting practices, as many of them were already using incentive compensation schemes.

After CLC the 12 other public companies began to recruit former CLC employees making the problem much worse with few consequences for breaking the laws around recruiting. The book covers 2001-2008 and then covers 2009 to 2010 as the main body. In the main body are several interviews with former employees at several for-profit schools. I provided the government with some of the interview material. By 2012 several of the companies in the group were trading under $5.