Emails Show DeVos Aides Pulled Strings for Failing For-Profit Colleges

WASHINGTON — Dream Center Education Holdings, a subsidiary of a Los Angeles-based megachurch, had no experience in higher education when it petitioned the federal Education Department to let it take over a troubled chain of for-profit trade schools.

But the organization’s chairman, Randall K. Barton, told the education secretary, Betsy DeVos, that the foundation wanted to “help people live better lives.”

The purchase was blessed despite Dream Center’s lack of experience and questionable finances by an administration favorable to for-profit education. But barely a year later, the company tumbled into insolvency, dozens of its colleges closed abruptly and thousands of students were left with no degree after paying tens of thousands of dollars in tuition.

Making matters worse, the college is accused of enrolling new students and taking their taxpayer-supported financial aid dollars even after some of its campuses had lost their accreditation, which rendered their credits worthless.

Company emails, documents and recordings show that part of why Dream Center kept going is that it thought the Education Department, which under Ms. DeVos has rolled back regulations on for-profit education, would try to keep it from failing. Mr. Barton emailed other Dream Center executives that the department’s head of higher education policy — Diane Auer Jones, a former executive and lobbyist for for-profit colleges — had pulled strings to help the company’s schools in their effort to regain a seal of approval from an accreditor, despite their perilous positions.

In another instance, Dream Center’s chief operating officer told faculty at an endangered campus that Ms. Jones was changing departmental regulations to help the schools obtain accreditation retroactively.

Although the Trump administration did eventually cut off federal aid to the chain of colleges and precipitate their collapse, Democrats say the department failed to respond to warning signs.

Representative Robert C. Scott, a Virginia Democrat who is the chairman of the House Education Committee, unveiled a trove of documents, including internal communication between executives from Dream Center, in a letter to Ms. DeVos this month. He said the documents suggest that Ms. Jones misled Congress about her efforts to help shield Dream Center from its misdeeds.

“The actions of Dream Center and the Department of Education’s execution of its responsibility to protect students raise grave concerns,” Mr. Scott wrote.

Instead of requiring Dream Center to take action, “the department informed Dream Center executives that it would work to retroactively accredit the institutions during the periods they had lied to students — rewriting history to erase Dream Center’s deceptive marketing practices,” Mr. Scott wrote.

The Education Department has maintained it did nothing wrong.

“This story is based entirely on a wrongful premise,” the department wrote in a statement. “The full and complete timeline shows Dream Center did not receive any unique benefits from policy decisions made by the department. We simply worked to try and get as many students into a new program as possible. While we did not achieve a perfect outcome, our actions helped thousands of students land on their feet.”

In a response letter to Mr. Scott on Monday, the department’s acting general counsel, Reed D. Rubinstein, submitted documentation that he said contradicted the committee’s “unfair suggestions” that the department tailored its policies to assist Dream Center and was not forthcoming with Congress. “The Department categorically rejects these allegations,” he wrote.

“Dream Center’s management received no special treatment,” he said.

President Trump has moved to deregulate any number of industries, from mining and offshore oil exploration to chemicals and internet providers. But Ms. DeVos’s efforts to get the government off the backs of for-profit colleges have come under particular scrutiny, in part because of the spectacular implosions of for-profit college chains only a few years ago, in part because people who once worked in the sector have led the DeVos deregulatory push.

Dream Center’s collapse was the first of the new deregulatory era. Yet Education Department officials insisted, repeatedly, that its demise had nothing to do with the administration’s policies or efforts. Ms. Jones told Congress that she did not even know of Dream Center’s accreditation problems at the time the company said she was working to get it out of its jam. She also told lawmakers the policy change extending retroactive accreditation had “nothing to do with the Dream Center.”

Those assurances are now being questioned.

“The documents further suggest that department officials were not forthcoming to Congress and the public about the information they had about Dream Center’s status and practices,” Mr. Scott wrote. He is requesting emails, text messages and interviews with several department officials, including Ms. Jones.

The letter and documents “raise questions about whether the department took steps to allow Dream Center to mislead students,” Mr. Scott said.

[Read the documents.]

From the start, the Education Department overlooked red flags when, in late 2017, Dream Center took control of more than 100 campuses with 50,000 students from a for-profit higher-education company, Education Management Corporation. Around that time, Dream Center’s accreditor, the Higher Learning Commission, notified the organization that it was about to change two of its schools’ accreditation status. Two Education Department officials, including the agency’s director of accreditation, were copied on the letter.

In January 2018, the accreditor published a notification on its website stating that the two Dream Center schools were not accredited by the Higher Learning Commission. It ordered Dream Center to tell students that their courses and degrees “may not be accepted in transfer to other colleges and universities or recognized by prospective employers.”

Yet for five months, Dream Center kept advertising, “We remain accredited.”

By July 2018, Dream Center was running out of cash and knew its accreditation problems could worsen its financial strain. Emails from that month obtained by the House Education Committee indicate that Dream Center officials believed that the Education Department was maneuvering to help it stave off catastrophe.

In written responses to questions from Congress, the Education Department said Ms. Jones was first made aware that the two Dream Center institutions were not accredited on July 10, 2018. She was unaware of the public notice that the Higher Learning Commission had issued nearly six months earlier, according to the agency. She was notified a week later that the institutions were misrepresenting their accreditation status and ordered them the next day to stop, the department said.

Ms. Jones was asked during a House Oversight Committee hearing this spring whether a policy she had issued later that month that allowed accreditations to be granted retroactively was aimed at helping Dream Center. “Absolutely not. It had nothing to do with the Dream Center,” she answered.

But in company emails, Dream Center executives indicated the Education Department tipped them off on July 3, 2018, that a new retroactive accreditation policy was coming, a week before Ms. Jones said she even knew Dream Center had a problem.

“We just got off the phone with DOE,” Mr. Barton wrote. “It appears HLC is in sync with retro” accreditation.

He said Ms. Jones — whom he directly cited by name — had worked with accreditors, and “they will all agree to one plan with department blessing.”

Mr. Barton did not respond to requests for comment on his emails.

On July 11, Dream Center’s chief operating officer told faculty in a meeting on an Illinois campus that the department would allow the schools’ accreditor to grant retroactive accreditation. He said department officials “changed their regulation to open the door to letting it happen,” according to a recording of the meeting obtained by the committee. He referred to a conversation with Ms. Jones the week prior where “she said everybody was going to be accommodating.”

Weeks later, on July 25, Ms. Jones finalized the plan allowing retroactive accreditation, which was a major win for Dream Center. While the schools were already slated for closure, retroactive accreditation would have shielded the company from legal action for making misleading statements about its accreditation status.

Ms. Jones said she had begun to revise that guidance months earlier to allay longstanding concerns about the department’s policy stemming from a dispute involving an accreditor of a nursing program. The retroactive policy would have also allowed students to more easily transfer their credits if they were earned at an accredited institution.

In response to Mr. Scott’s accusations, Ms. Jones said, in a written statement to The New York Times, “The retroactive accreditation policy — which had been under discussion long before I arrived at the department — decided not whether Dream Center would live or die, but whether or not students could transfer their credits for the hard work they had completed.”

In August, after it became public that the two schools would close, Dream Center’s head of regulatory and government affairs wrote an email to other Dream Center officials reminding them that communication should be kept confidential because “Diane is really working behind the scenes to help guide us and keep the accreditors aligned.”

Ms. Jones did not directly address the July 3 and July 11 communication from Dream Center officials, but acknowledged that she had worked with accreditors. She called the Dream Center accreditation issue a “messy and complex situation” and said the accreditor had sent mixed messages about the status of Dream Center’s schools.

Ms. Jones had acknowledged to Congress that she had concerns about the organization’s capacity to manage its closures, and was in regular communication with a group of accreditors to devise a plan to allow Dream Center students to complete their degrees, known as a “teach-out,” after their campuses closed.

“My goal was to get as many of the more than 8,000 students to new institutions where they could complete their programs,” she said. “I stand firm in my decision to work collaboratively with accreditors to hold Dream Center accountable. That Dream Center executives characterize this as being about them is disingenuous but not surprising. They were trying to make it appear they had control of the mess they had made.”

A group of students, represented by the National Student Legal Defense Network, filed a lawsuit last year, saying Dream Center issued “false and misleading” statements about its accreditation status, which broke state laws and caused “substantial harm” to more than 1,000 students.

Mr. Scott also pointed to emails documenting the steps the Education Department took to help Dream Center get hold of some much-needed cash to prop up its failing campuses.

In an October 2018 email, Dream Center officials were preparing to request funding from an escrow account managed by the department.

The funds were intended to offset taxpayer liabilities if some of the chain’s schools closed or failed. Dream Center wanted to use part of the money to pay for expenses associated with closing campuses and helping current students complete their degrees. The department had in August agreed to release up to $50 million; Dream Center wanted more.

Dennis Cariello, a Dream Center lawyer, sent an email to company executives before a meeting with A. Wayne Johnson, who headed the department’s office of financial aid. At the meeting, Mr. Cariello planned to deliver a “list of the asks” that amounted to $75 million.

Mr. Cariello communicated that Mr. Johnson “asked that I review the draw requests — there are a few we can’t have in there — bonuses and future rental payments were issues for him.”

Mr. Cariello declined to comment on the exchange. The department had released a total of $40 million from the escrow account to Dream Center by the end of last year, according to records it sent in response to questions from Congress.

Education Department officials have maintained that they worked tirelessly to mitigate the fallout of the Dream Center collapse. The department restricted the schools’ cash flow from federal student loans after Dream Center went into receivership in January, barely a month before it cut off federal student loan funds to Argosy University. That final move was considered the death knell for the company.

But until then, Dream Center executives had reason to believe they had friends at the Education Department. In January 2018, just as Dream Center’s schools lost their accreditation, Ronald L. Holt, a regulatory lawyer on the Dream Center team, sent a presentation to Dream Center executives on the state of higher education a year into the Trump administration.

It included a song he wrote titled, “You’ve Got a Friend in Trump,” to the tune of Randy Newman’s “You’ve Got a Friend in Me,” used in the movie “Toy Story.”

We’ve got a friend in Trump

He’s lifting us out of our slump

We were down — and life was rough

Too many regs, were way too tough

After so many years

We’d just had enough, but

Now, we’ve got a friend in Trump.