Westwood College Has Lessons to Learn

May 6, 2009

Westwood College’s website makes flashy promises to students of “one HUGE opportunity,” but last month, the college agreed to pay the U.S. government one huge amount. Alta Colleges, Inc., the parent company of seventeen Westwood College campuses, agreed to pay seven million dollars for violations of the False Claims Act, better known as the Whistleblowers Act, in connection with a laundry list of recruiting and reporting infringements. But, for a school that raked in over 250 million dollars last year, is this drop-in-the-bucket enough to finally point the school in the right direction?

The Whistle Blowers

On April 7, the United States of America, on behalf of the Department of Education, filed an amended complaint detailing dozens of ways in which the school defrauded potential students and the federal government. The complaint was brought as a result of government intervention in a suit by nine former employees who decided to blow the whistle on the school’s dirty practices.

Based on the employees’ information, the U.S. government alleged that Alta Colleges knowingly violated at least fourteen provisions of the Texas Educational and Administrative Codes. Among the host of allegations, the government asserted that the school’s recruiters were forced to use practices “designed to mislead prospective students and to misrepresent material facts to them.”

There was no limit to the lies the recruiters would tell students to sign them up. Recruiters would promise students that credits could transfer to another school, when there was no known accredited school in Texas that would accept Alta’s credits. They would promise that more than 90% of past graduates had jobs in their field with Alta’s help, even if the student was signing up for a program that didn’t have any past graduates. The real average for employment is just over 50%, and less than a third had any help from Alta.

Alta was so brazen to even make false claims directly to the federal government, the complaint alleged. The school made blatant lies about graduation rates, employment rates and quality of education for certification. In one instance, the government said, the school pretended that a student was working for a real estate buying company, when he was really a baggage handler for an airline.

Ultimately, the government concluded, “Alta Colleges misled the United States into believing that it was eligible to participate in the (federal loan program).” The government requested that Alta be forced to pay back every dime of federal funds given to the three Westwood campuses in Texas.

Denial of Wrongdoing

A mere eight days later, Alta Colleges cut a deal with the government and the case was dismissed.

Even though the school agreed to pay back seven million dollars to the government, Alta Colleges CEO, George Burnett, maintains the school did nothing wrong. “We believe that we have always acted lawfully and ethically,” he said in an internal statement. The school maintains that the settlement wasn’t because they were wrong, but just because they wanted to avoid the cost of litigation.

Burnett never offered an explanation for the lies told to students and to the government.

The Apple Doesn’t Fall Far From the Tree

We’ve heard those kinds of denials from a Burnett company before.

Burnett joined Alta Colleges in August 2006 after a long career in the telecommunications industry. For the final six years of his telecom career, Burnett rapidly jumped from company to company with buy-outs and takeovers. But the catalyst for the rapid movements seemed to stem from his tenure with Qwest Communications.

In 2004, Qwest settled a $250 million suit with the SEC based in part on misreporting of company expenses from June 1999 to March 2002. Burnett was a senior officer with the company from 2000 to 2002.

When the case settled, a spokesperson for Qwest’s CEO, Joe Nacchio, claimed that he “never did anything improper or illegal.” If this sounds familiar to Burnett’s current mantra at Alta Colleges, it should come as no surprise. Burnett’s career was largely built by Nacchio, and he followed Nacchio from AT&T to Qwest, before moving on to Dex Media when Qwest began to unravel. A former Dex executive claimed that Burnett was “really close to Joe” and that the men bonded even more when they shared private flights from Denver to New Jersey.

On February 25, 2009, Joe Nacchio began a six-year federal prison sentence for nineteen counts of insider training.

Lesson Learned?

The allegations in the recent Alta settlement pre-date Burnett’s tenure there. But, his flat denial of responsibility seems to be a stamp-of-approval on the practices in question.

When Burnett started at Alta, one reporter stated that, “Westwood College would be a great business school if the new chief executive of its parent company could teach what he knows.” Now it’s time for the roles to reverse.

Alta Colleges has the opportunity to take this settlement as a sign to change its practices. But to do that, the school will have to take a cue from its students and learn a lesson.

So far, Alta Colleges gets a failing grade.