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A Utah-based chain of private career colleges failed to receive nonprofit designations from the U.S. Department of Education, the department announced Thursday.
In a strongly worded statement, Education Secretary John King dismissed the request by the Center for Excellence in Higher Education (CEHE), which operates Stevens-Henager College, CollegeAmerica, California College San Diego and the online Independence University.
"This should send a clear message to anyone who thinks converting to nonprofit status is a way to avoid oversight while hanging onto the financial benefits," King said. "Don't waste your time."
The department's announcement emphasizes that the rejection of nonprofit status is unlikely to affect the 12,000 student who enroll at CEHE schools.
As for-profit colleges, CEHE campuses may not collect more than 90 percent of their revenue in the form of federal student aid and are subject to other regulations for profit-generating institutions of higher education.
Stevens-Henager President Eric Juhlin also CEO of CEHE described the Department of Education's denial as "arbitrary, capricious and unlawful." He also criticized the announcement as an "ambush press release."
"This decision, containing lie upon lie, is an example of a federal agency operating outside the law to advance a political bias," he said.
Stevens-Henager operates campuses in Orem, Murray, West Haven, St. George, Logan and a satellite campus in Layton. Other CEHE campuses are located throughout the Intermountain West and California.
On the Stevens-Henager website, an "About Us" tab identifies the school as a nonprofit institution, including in a quote attributed to Juhlin.
"Our mission as a nonprofit is to provide the highest quality, career-focused education that we can," the quote states.
Identical quotes are featured on the websites for CollegeAmerica, California College San Diego and Independence University.
Asked about the school websites, Juhlin said the nonprofit language will not be changed, citing the 501(c)(3) status of CEHE, the parent company that operates the four school chains.
In a prepared statement, Ted Mitchell, the U.S. undersecretary of education, said that schools wishing to identify as nonprofit must benefit the public rather than individuals.
"If the primary beneficiary of the conversion is the owner of the for-profit school, that doesn't meet the bar," Mitchell said. "It's not even close."
According to the U.S. Department of Education, CEHE first applied for nonprofit status in fall 2012 after acquiring school chains owned by Carl Barney through the Carl Barney Living Trust. Barney then became board chairman of the restructured CEHE.
While CEHE is identified as a nonprofit organization by the IRS, tuition revenue from Stevens-Henager and its sister schools continues to flow to Barney in the form of debt from the sale of the school chains as well as rent payments for the college campuses, many of which are located in buildings owned by Barney, according to the department's denial.
Juhlin said he objected to the 44-month delay in receiving a decision from the Department of Education, saying that CEHE made several failed attempts to meet with department representatives.
"CEHE will fight this politicized attempt to smear our good colleges and our amazing students," he said.
Stevens-Henager College was established in Ogden in 1891 and is accredited by the Accrediting Commission of Career Schools and Colleges.
A lawsuit against the school is pending in federal court, alleging that Stevens-Henager received federal funding it was not entitled to, offered illegal bonuses to campus recruiters and employed unqualified faculty.
The lawsuit was filed in 2013 by two whistleblowers who previously worked as recruiters for CEHE.
A lawsuit was also filed against CEHE by the Colorado attorney general in 2015, accusing the schools of misrepresenting the benefits of degree programs.