May 23, 2017 by Philip Lewenstein

MSB/Globe Served Constituents Well But Failed to Acknowledge Mistakes

When a college decides to close, the decision significantly affects the students, faculty, staff, and the communities it serves. At the end of December 2016, after several years of expanding, the Minnesota School of Business/Globe University discontinued most of its operation. The two for-profit schools are part of a family business owned and operated by Terry and Kathryn Myhre. The Myhre family bought Globe (founded in 1885) in 1972 and the Minnesota School of Business (founded in 1877) in 1988. For this blog post, the schools will be referred to as one entity—MSB/Globe.

How did a reputable college, a legitimate part of Minnesota’s overall higher-education system, collapse? Could its fate have been prevented?

Although the Minnesota School of Business is 140 years old, most of the institution’s growth occurred after 2000 and continued until about 2011. By the mid-2000s, MSB/Globe was serving thousands of students on more than 20 campuses in Minnesota, Wisconsin, South Dakota, Utah, and online. MSB/Globe granted certificates, two-and four-year degrees, and some masters and doctorates in a variety of subjects including business, health care, veterinary medicine, massage therapy, and technology.

Despite its growth and success in the mid-2000s, MSB/Globe soon faced significant enrollment declines and several major legal challenges and setbacks. The institution lost a whistle-blower case, was sued by Minnesota’s attorney general, lost its eligibility for federal financial aid, and saw its national accrediting agency shut down.

I view the situation from two perspectives. First, for 31 years I worked for the Minnesota Office of Higher Education, the agency that licenses, registers, and approves postsecondary institutions. Second, I worked for 10 years as an adjunct instructor, primarily at MSB/Globe, but also at two other for-profit schools.

When I started teaching classes as an adjunct instructor at MSB campuses in fall 2006, classes were small. But when the recession arrived and took hold, expansion began as many students started or returned to school to gain education and a credential that would enhance their employment prospects. Accordingly, I was assigned more sections and larger classes.

MSB/Globe was a good fit for many students and helped meet workforce needs with its career programs. The college engaged in its local communities, and its curriculum integrated community service. For the most part, the institution was run professionally. MSB/Globe hired qualified, dedicated faculty (mostly adjuncts). Administrators did a good job developing curricula and providing (and requiring) many professional faculty development opportunities. Technology was incorporated into the curriculum.

The Myhres promoted their We Care mission, a slogan expressing care for students, faculty, and staff. Most of my students were motivated, recognizing the value of higher education for future employment opportunities. The campuses enrolled many poorly prepared students, as well as some excellent students, but worked with them through foundation, or remedial, courses in writing and math. I also observed that many students, wanting to focus on career fields, transferred to MSB/Globe from other public and private colleges.

Nationally, however, for-profit schools drew negative media coverage with charges of misleading recruitment, high tuition prices, high student debt, and poor-paying jobs for graduates.

Concerns with the for-profit sector were highlighted in in a congressional investigation ended in 2012 that found exorbitant tuition prices, aggressive recruiting, abysmal student outcomes, regulator evasion, and manipulation were rampant. A U.S. Senate committee’s investigation included three Minnesota schools: Capella University, Walden University, and Rasmussen College. MSB/Globe was not included, but MPR News reported that, according to former employees and students, MSB/Globe was engaged in similar practices.

Nevertheless, a May 2013 Minnesota Office of Higher Education report, For-Profit Postsecondary Institutions: A Review of Selected Institutions in Minnesota for Undergraduates, noted that, according to information provided by institutions, for-profit colleges in Minnesota complied with Minnesota Statutes regarding recruitment practices.

The report found that recent graduates of Minnesota for-profit institutions were employed in Minnesota one year after graduation at similar rates compared with students from Minnesota State Colleges and Universities’ two-year institutions. Graduates from both state colleges and for-profit institutions were employed in Minnesota at higher rates than graduates from public universities and private not-for-profit colleges who were more likely to seek employment out of state or enroll in graduate school.

Cumulative debt for Minnesota for-profit students was higher, on average, when compared with students from public and private not-for-profit institutions, according to the report. Students who attended for-profit institutions in Minnesota defaulted at lower rates on their student loans than students attending public two-year institutions.

In her February 20, 2017, article (“For-Profit Schools, an Obama Target, See New Day Under Trump”), Patricia Cohen of The New York Times pointed out that under the Obama administration the U.S. Department of Education discouraged students from attending for-profit colleges with higher prices than community colleges. She noted that while some career colleges delivered as promised, “too many burdened veterans, minorities, and low-income strivers with unmanageable tuition debt without equipping them with jobs and skills that would enable them to pay it off.”

Thus, the U.S. Department of Education moved aggressively to end abusive practices ranging from deceptive advertising to fraud, which had cost students and taxpayers billions of dollars, Cohen wrote. The department developed gainful-employment regulations to increase accountability because the Obama administration found many for-profit schools were not providing graduates with a reasonable return on investment.

In recent years, many for-profit schools have closed. Most noteworthy, two large for-profit chains collapsed—Corinthian Colleges in 2015 and ITT Technical Institute in 2016—leaving thousands of students stranded without degrees and in debt.  Overall, enrollment in for-profit institutions declined from 2.4 million in 2010 to 1.6 million in 2015. Cohen added that shortly before President Donald Trump took office, the Department of Education identified 800 failing programs by applying its new “gainful-employment” rule, which links vocational schools’ access to federal funds with their record on job placement and earnings. Ninety-eight percent of the programs were at for-profit colleges. Now, the career college sector hopes the Trump administration will scale back regulations developed by the Obama administration.

As the recession receded, enrollments began to plummet at MSB/Globe campuses. I was assigned fewer sections, and many classes had only a handful of students. New marketing strategies were tried with limited success. And then legal issues surfaced, generating much negative media coverage. A series of compounding setbacks led MSB/Globe to shut down much of its operation.

A former campus dean sued the college for wrongful termination, saying the schools engaged in misleading practices. She alleged her firing in 2011 was for exposing unethical practices in presenting inaccurate statistics for job placement rates and job salaries. This whistle-blower lawsuit cost MSB/Globe $1 million in payments to the dean and lawyers, according to news reports.

In October 2013, students filed a class action lawsuit claiming the school misled prospective students about its accreditation and post-graduation prospects. In 2014, Lori Swanson, Minnesota’s attorney general, filed suit against MSB/Globe, saying the college had misrepresented job opportunities available to students after graduation.

In September 2016, a Hennepin County judge, James Moore of Minnesota’s Fourth Judicial District, ruled that MSB/Globe had committed fraudulent marketing and recruiting for its criminal-justice program. Because of the fraud finding, the Minnesota Office of Higher Education revoked the registration of MSB/Globe to operate in Minnesota and directed the school to cease enrollment of new students. The college, however, was allowed to appeal and operate until fall 2017.

In January 2017, a district judge ruled that students who attended MSB/Globe’s criminal- justice programs could get some money back, or restitution. MSB/Globe was told to set up a system so that roughly 1,200 students enrolled in the criminal- justice program since 2009 could ask to be reimbursed for tuition, fees, and other expenses.

MSB/Globe’s problems were not limited to Minnesota courts. In December 2016, the U.S. Department of Education denied the MSB/Globe application for recertification to participate in federal student aid programs. Private, for-profit schools get most of their revenue from students receiving federal financial aid. MSB/Globe students in Minnesota received more than $25 million in federal student aid during the 2014-2015 award year—a figure that was much higher during years of larger enrollments.

The U.S. Department of Education conveyed its decision to deny recertification in a stern 14- page letter to Jeffrey Myhre, president of MSB/Globe; the letter was highly critical of the college. The department reviewed materials presented at the district court trial and based its decision on MSB/Globe being judicially determined to have committed fraud involving federal Title IV funds.

The department established that Globe substantially misrepresented to students and prospective students the ability of graduates of the criminal- justice program to become police officers and probation officers in Minnesota. The letter notes that despite the inability of Globe graduates to use the Globe credential to become Minnesota police officers, Globe substantially misrepresented that its programs prepared students for such careers. Globe advertisements and web pages contained false and misleading information that would lead a prospective student to reasonably believe that the criminal justice program provided a necessary credential for a career as a Minnesota police officer.

Military veterans also were induced to enroll by false promises of being able to become police officers, the department said. These student-veterans did not learn that their Globe degrees would not allow them to become police officers until after they had exhausted all or much of their GI Bill benefits.

Furthermore, the department asserted that MSB/Globe made substantial misrepresentations regarding the ability of graduates of associate programs to become probation officers in Minnesota. These substantial misrepresentations, upon which students relied when choosing to enroll at Globe, the department said, are “incompatible with Globe’s fiduciary duty to the Department of Education and demonstrate the institution’s lack of administrative capability.”

Going beyond the district court ruling, the department asserted that Globe also breached its fiduciary duty and demonstrated a lack of administrative capability to the department by substantially misrepresenting to students and prospective students the ability to transfer MSB/Globe credits.

The department said that as early as 2007 and through at least 2014, MSB/Globe made many misrepresentations to prospective students about the ability of students to transfer credits earned at Globe to other institutions. The individuals to whom Globe misrepresented transfer information “could reasonably have been expected to rely, or did in fact reasonably rely, on these misrepresentations to their detriment.”

U. S. under secretary of education Ted Mitchell said that, “Globe and MSB preyed upon potential public servants—targeting those with a sincere desire to help their communities. These institutions misrepresented their programs, potentially misleading students, and abused taxpayer funds, and so violated federal law, which is why we removed them from the federal student aid program. This is a sober reminder that not all institutions deliver on their advertised promises.”

In another blow to MSB/Globe, the U.S. Department of Education determined that the Accrediting Council for Independent Colleges and Schools (ACICS) could no longer serve as a federally recognized accrediting agency. MSB/Globe relied on its accreditation by ACICS to meet a key requirement for federal student-aid eligibility. The decision to shut down ACICS, the largest accrediting agency of private-sector colleges, was based on the recommendation of a federal advisory committee that criticized ACICS’s oversight of educational institutions.

MSB/Globe avoided another setback on the issue of its institutional loans and whether they are usurious. In another lawsuit, the state of Minnesota argued that institutional loans by MSB/Globe with interest rates as high as 18 percent are usurious and the school engaged in unlicensed lending in violation of Minnesota’s Regulated Loan Act. The district court granted summary judgment favoring the MSB/Globe and dismissed the state’s claim. An appellate court affirmed dismissal of the claim because school loans are open-ended credit plans under Minnesota Statutes. The schools may charge up to 18 percent. And because the rate is permitted by law, the Minnesota Regulated Loan Act does not require the schools to be licensed by the Department of Commerce.

For now, MSB/Globe is awaiting an administrative hearing date on its appeal of the Minnesota Office of Higher Education’s September 2016 revocation order. The order is not effective until the appeal process ends; then, the college will have conditional approval to operate for a year. A few Minnesota campuses remain open to help students obtain transcripts, to answer questions, and to facilitate meetings with institutions that may be willing to accept credits from MSB/Globe. Some classes are being offered for students who do not need federal financial aid and could complete their programs in winter or spring. Throughout the last half of 2016, many students were scrambling to figure out their options and financial responsibilities.

MSB/Globe has served its constituents well for many years. But the school’s response to recent problems raises questions about its credibility and judgment as well as the effectiveness of its crisis management. Rather than acknowledge responsibility, MSB/Globe has chosen to dispute charges against it, preferring to blame the attorney general, the Department of Education, and the news media. Saying that it is “fighting injustices,” MSB/Globe refers to “destructive actions’ taken by Attorney General Swanson and the Obama administration. The college says that decisions focused one program “have eliminated options and tarnished the degrees of thousands.”

On its website, the college says it wants to be clear that findings of the district court case showed no widespread systemic fraud and no issues with the education provided. “We want you all to know the facts and to know that we are fighting not to have our schools closed,” the website says. In response to the judge’s order for restitution, MSB/Globe stated that only four percent of students attended the criminal-justice program that closed in 2014.” MSB/Globe asserted throughout that it had tried to work with the attorney general but that she was unwilling, and her goal was to put the schools out of business.

The college claims an alumni group of about 100,000 graduates for the past 140 years who earned their degrees from MSB/Globe.

Nevertheless, the district court judge ruled that MSB/Globe had committed fraudulent marketing and recruiting in the criminal- justice program. Further, the U.S. Department of Education’s decision to not recertify MSB/Globe for federal aid was a strong indictment of the college. These decisions by the court and the government cannot be ignored. They highlight serious failures by MSB/Globe.

If the college had forthrightly acknowledged its mistakes, proactively settled its disputes, and corrected shortcomings in its operations, it would have stayed true to its We Care mission and better served its students, faculty, staff, and communities.