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Embark, whose software helps colleges to process online applications, has owed graduate and professional schools millions of dollars and misled university officials about why it wasn’t quickly paying up, a former executive of the company is alleging amid an ongoing legal dispute.

In June 2013, Embark owed its clients $4.7 million from student application fees it collected, according to a filing in New York state court by lawyers for Raza Khan, a former chief technology officer and board member at Embark.

Even though payments were supposed to be made in a matter of months, $1.2 million of that had been owed to colleges for more than a year, according to a spreadsheet filed last month that is said to reflect the company’s bookkeeping as of late June 2013.

Khan, who left the company around the same time, alleges company officials improperly spent money owed to colleges in order to deal with Embark’s “cash flow problems.” The money was supposed to go to colleges directly and quickly, but, according to Khan, Embark officials intentionally delayed paying back colleges and “concocted” false stories to cover up the true reason for the delays.

Embark processes admissions applications for colleges across the world, including elite graduate programs. Colleges pay Embark for its services, but Embark is obligated to pay the institutions all or most of the application fees it collects. Khan’s allegations center on Embark’s failure to give colleges their share of those student application fees.

Embark got a judge to partially seal the documents, but they were available on the court’s website for several days last month.  The company’s lawyer declined repeated requests for comment on the merits of Khan’s claims.

Khan is engaged in a bitter legal fight with his former business partner and high school classmate, Vishal Garg.

In June 2013, Embark owed its clients $4.7 million, including student fees collected as far back as 2009, according to Khan’s filing.

The largest single unpaid amount is over $1 million, which Embark is said to owe to Mount Sinai School of Medicine.

Sid Dinsay, a spokesman for the medical school in New York City, declined to comment.

When colleges asked for their money, the company sometimes “concocted” reasons that its payments were delayed, according to Khan’s filing.

In a September 2011 email also contained in Khan’s filing, Blake Avalone, then director of client relations, told another Embark official to use a “canned response” to hold off a college that was asking for money dating to the beginning of that year. The response Avalone approved blamed a “credit card processor” for the delay. Khan said in his filing that this was among the “false explanations” Embark gave colleges for payment delays.

Another Embark employee in the same email thread suggests that the email “be sent from ‘Accounting’ if that helps.” In an email chat included in the court filing, the same employee also said, “if we're going to lie, the vaguer the better no.”

Avalone, now Embark’s managing director, did not respond to multiple emails seeking comment. Emails and voicemails were not returned by anyone at Embark over the past two weeks.

Several universities, including the University of Michigan and at least one graduate program at Harvard University, have threatened legal action against Embark. Officials at both those institutions said they were paid by Embark after they made those threats.

At least one other university has recently complained to Embark. The University of California at Davis hired a lawyer to help it collect money it says Embark has owed since spring 2012, according to a letter released by the university.  In mid-May of this year, the university’s lawyer demanded that Embark pay $38,589 by June 15. That didn’t happen.

“No money was received – only a promise from the [Embark] president to follow up,” a UC Davis spokeswoman said in an email last month.

Other universities are being paid back, if only gradually.

A spokesman for Thunderbird School of Global Management said last month Embark still owes it $71,000. The school ended its relationship with Embark last fall for other reasons, the spokesman said. Khan’s filings suggest the school was owed $215,000 at one point. Thunderbird could not confirm that figure.

As of last summer, Rutgers University’s business school was owed $261,000 for fees dating as far back as April 2011, according to Khan’s filing. Much of that has been paid, the university said last month.

“Since the beginning of 2014, Embark has paid $229,260 to the Rutgers Business School – Newark and New Brunswick,” a Rutgers spokesman said in an email. “The school continues to work with Embark to collect the remaining balance.”

It’s not clear exactly how precise the spreadsheet is in Khan’s filing: It says Georgia State University is owed $81,000 for fees it collecting in 2010 and 2011, though a Georgia State official said that Embark paid it $80,000 several years ago for work done in 2009 and no longer owes the university money. UC Davis, on the other hand, is asking for more money than the spreadsheet shows it is owed.

Khan first made allegations about Embark’s repayments to colleges in July 2013, when he sued his business partner Garg. But Khan provided more details about Embark’s business last month in a separate case in which Embark is suing him.

Garg and Khan founded MyRichUncle, an upstart student loan company that made its name lending directly to students before its parent company, MRU Holdings, went bankrupt in 2009. MyRichUncle was well-known in higher ed circles in the mid-2000s for its aggressive marketing that accused college financial aid officers of engaging in “kickbacks.”

Before the bankruptcy, MRU quietly bought Embark from the Princeton Review in 2007, vowing to invigorate a company that had seen its value and reach tumble during the six years Princeton Review owned it.

Khan’s filing suggests he and Garg were unable to do so. Now, Garg’s wife, Sarita James, is president of Embark. James did not respond to multiple emails over the past two weeks seeking comment.

Khan claims Garg and others at Embark “circulated false financials” to the company’s clients and delayed payments to them because of cash flow problems.

Sometimes, even after threatening legal action, a client would stick with Embark.

In February 2013, a graduate program within Harvard Law School asked Embark for $120,000 owed to it since November and December 2012.

“Despite the promise of wire transfers by Embark (supposedly made on Feb. 1 initially and then again on Feb. 20), and despite our request for actual confirmation of the transfers, we have not received anything, not even evidence that any of the wire transfers were actually made,” Harvard assistant dean Jeanne Tai wrote in a February 2013 email, which appeared in the court filing. Harvard is not a party to the litigation.

Reached last month by phone, Tai said everything had since been squared away.

“They have since made good on everything they owed and since that period of time, we haven’t had any trouble getting what they owed us,” she said.

The Harvard graduate program remains a client.

Khan’s filing said even though Embark knew that it owed money to colleges, Garg, the former head of the company, “did not intend to cause Embark to pay such amounts owed unless and until the schools complained.”

Officials at several other institutions said to be owed money declined to comment in detail or did not return calls seeking comment about their relationship with Embark.

After the MRU bankruptcy filing, Khan and Garg quickly started another company, Education Investment and Finance Corporation, or EIFC, which manages and services private student loans and mortgage-backed securities.

Now, the two men are fighting over EIFC and Khan’s time at Embark. As of April, EIFC owned 25 percent of Embark, according to a filing by lawyers for EIFC. Khan and Garg, EIFC’s co-founders, each owned half of that company.

Khan sued Garg last July and accused him of mismanaging and “looting” EIFC. A judge gave Khan day-to-day control of EIFC and ordered Garg to turn over money to be held in an escrow account. But Garg’s lawyer contends in a recent letter that Khan is the real threat to the company. In the letter, Garg expresses major concern about Khan’s management of EIFC, which Garg believes will soon need to be dissolved. 

Separately, Embark sued Khan last August – which Khan’s attorney called retaliation for Khan’s lawsuit against Garg – and accused Khan of negligence and of trying to interfere with Embark’s operations by holding onto property that belonged to Embark.

An attorney for Garg in the lawsuit filed by Khan could not be reached for comment this week.

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