Dade Medical College shutdown may have broken law

Florida's Commission for Independent Education Executive Director Sam Ferguson talks at a CIE meeting in Orlando on May 21, 2015.
Florida's Commission for Independent Education Executive Director Sam Ferguson talks at a CIE meeting in Orlando on May 21, 2015. Miami Herald Staff

Dade Medical College’s Oct. 30 closure was sudden and messy — and it also may have violated state and federal law.

Under Florida law, for-profit colleges that close must provide the state oversight agency a “teach out” plan for students to finish up their degree program at another school. The federal government also requires a teach out plan before a college shuts its doors.

In Dade Medical’s case, that didn’t happen. College owner Ernesto Perez simply closed up shop and left roughly 2,000 students in limbo.

On Thursday, a prominent for-profit college attorney called for Perez to be prosecuted for how the closure happened.

“It is a crime in the state of Florida to close a school improperly,” said Bob Harris, a Tallahassee attorney who represents multiple for-profit colleges. Harris’ public comments came during a meeting of Florida’s for-profit oversight agency, the Commission for Independent Education.

“This commission can go to the attorney general’s office, or a local state attorney’s office, provide them the documents to show that the owners of the school did not properly close the school,” Harris told CIE board members. “Those are criminal acts in the state of Florida.”

Florida law states it is a second-degree misdemeanor for “an owner, director or administrator who fails to notify the commission at least 30 days prior to the institution’s closure, or who fails to organize the orderly closure of the institution and the trainout of the students.”

The CIE, which has been criticized for lax policing of for-profit schools, did not take a vote Thursday on whether to refer the Dade Medical case to law enforcement. Instead, the agency said it would revisit the issue at its next meeting in January.

It’s amazing what you all have all should be thanked and thanked and thanked and thanked.

Nancy Bradley, CIE board member, addressing staff

“That will provide the commission staff with ample time to finish the fact-gathering stage,” said Lynn Mulherin, the CIE chairwoman. Mulherin is also a vice president of the nation’s largest for-profit college, the University of Phoenix.

A recent Miami Herald investigation, Higher-Ed Hustle, highlighted how the CIE is controlled by the same for-profit schools it is supposed to police — a majority of its board members are school executives. Throughout its 14-year history, the CIE has dismissed student complaints, including more than a dozen complaints it received from Dade Medical College students before the school collapsed.

Dade Medical owner Perez was a CIE board member himself until 2013. Perez’s criminal defense attorney, Michael Band, declined to answer questions about whether the college’s hasty closure broke the law.

“I have no clue,” Band said, before hanging up. Perez answered his cellphone, but discontinued the call after a Herald reporter identified himself.

In January, Perez is scheduled to begin serving two months of house arrest, after pleading guilty to illegally bundling more than $159,000 in campaign contributions — making them in the name of others — in order to exceed legal limits.

After Dade Medical closed, the CIE was obliged under its own rules to send a staffer to the school. Three weeks later, that still hasn’t happened.

CIE Executive Director Sam Ferguson defended his agency’s performance on Thursday.

“It has been alleged that the commission hasn’t been very responsive,” Ferguson said. “I think that if you talk to students involved, you would find that not to be true.”

Since the closure, Ferguson said, the CIE has acquired thousands of transcripts for former students, answered more than 600 emails, and created a webpage that assists students with their two main options: transferring to another school or asking the federal government for a “closed school” loan discharge.

Speaking to Ferguson and his staff, CIE board member Nancy Bradley said “it’s amazing what you all have accomplished. … You all should be thanked and thanked and thanked and thanked.”

Dade Medical’s collapse cast a shadow over the CIE’s discussion of another for-profit college, ITT Tech. ITT is a large national for-profit chain with 7,000 Florida students and 10 Florida campuses — more campuses than in any other state.

For the past six months, the CIE has allowed ITT to continue enrolling new students, despite numerous signs of trouble.

In May, the U.S. Securities and Exchange Commission sued ITT for an alleged “fraudulent scheme” that misled Wall Street investors. The company denies the charges.

In September, ITT notified Florida’s CIE that it has received a “civil investigative demand” from the Department of Justice. The U.S. Department of Education last month announced additional restrictions on ITT’s use of federal Pell grants and student loans.

Worried about a potential closure, the CIE on Thursday asked ITT to beef up its written “teach out” plan for students, and the agency is talking with ITT about posting a bond or letter of credit as a financial safety net for students to finish their education at another school. But that won’t be finalized until the CIE’s January meeting at the earliest.

On Thursday, Thomas Brouwer, ITT regulatory affairs manager, told the CIE not to worry.

“We don’t think that we’re in the same position for a catastrophic closure that Dade Medical just went through,” Brouwer said. “It’s not going to happen.”