A Shuttered For-Profit Re-emerges

The Obama administration shut down Globe U, but an affiliated university bought four of its Wisconsin campuses with the backing of the Trump administration and a state regulator with a tough reputation on for-profits.

August 9, 2017
 

The Obama administration delivered the death blow to Globe University and the Minnesota School of Business last December.

A Minnesota court had ruled that the two for-profits, which share a common owner in the family of Terry Myhre, had engaged in consumer fraud and deceptive trade practices by misrepresenting job opportunities for graduates of a criminal justice program. So the feds blocked federal aid payments to the two institutions amid the climax of a broader crackdown on for-profits by the U.S. Department of Education.

The two for-profits then began winding down operations at their 19 locations in Minnesota, South Dakota and Wisconsin, which enrolled roughly 1,700 students at the time, according to the department.

That hasn’t stopped Lori Swanson, Minnesota’s attorney general, from continuing her legal pursuit of Globe and the Minnesota School of Business. Last month the state’s Supreme Court ruled, in response to Swanson's lawsuit, that the two institutions had issued illegal high-interest loans. Her office now is seeking loan discharges for 6,000 former students as well as restitution and refunds for previously repaid loans.

Yet while Myhre family-owned colleges’ long run in Minnesota may be over, a new version of the former Globe is back in business in Wisconsin, thanks in part to the Trump administration.

Broadview University is part of a Myhre-owned network of relatively small for-profits. The university, which had been running the teach-out of Globe’s Wisconsin campuses, recently got approval from the department to buy four of those locations. It will continue to run them and is enrolling new students in career-education programs.

The Minnesota attorney general’s allegations about the two defunct for-profits are unfounded, said Jeanne Herrmann, Broadview’s CEO.

“Whatever one may think of the motivations of the litigation in Minnesota, that state-specific allegation had and continues to have nothing to do with the school’s campuses outside of Minnesota,” she said in a written statement. “This is why Broadview petitioned the U.S. Department of Education to re-examine its overbroad penalty against the school. The school made the case that the campuses operating in Wisconsin should not be lumped in with those at issue in Minnesota.”

The Trump administration apparently bought that argument, reversing a December decision by the Obama administration that blocked Broadview’s bid to buy the Globe campuses, due in part to concerns about the common ownership structure.

Even so, the Myhre family’s victory in Wisconsin is more complex than a typical for-profit fracas, where the debate lines up neatly along the partisan divide in Washington.

Key support for Broadview’s acquisition came from the Wisconsin Educational Approval Board, which has long been one of the most tenacious state regulators of for-profits. The agency’s reputation has helped it earn the ire of Scott Walker, Wisconsin’s Republican governor, who is on the verge of diluting the board’s power after previous failed attempts.

The five-employee agency is based in Madison. It’s currently in limbo, according to David Dies, the EAB’s executive secretary, as the Legislature appears likely to approve Walker’s proposal to nix the agency’s independent board of overseers and to move it under the oversight of another state agency. Walker previously has tried to shut down the EAB completely.

“There isn’t a good home for us,” Dies said.

‘Limited Set of Circumstances’

The Wisconsin regulator was surprised by the Obama administration’s decision to shut down Globe. Dies said the Minnesota court’s ruling was too narrow to warrant the department’s kill shot.

A district court last September found that Globe and the Minnesota School of Business fraudulently marketed their criminal justice program to prospective students who said they wanted to become police officers in the state, despite the fact that those degrees failed to satisfy the state’s licensing requirements. (The program was not regionally accredited and had not been approved by the state agency that sets training standards for police officers.)

Likewise, the two institutions marketed an associate degree in criminal justice to aspiring probation officers despite Minnesota’s requirement that probation officers hold at least a bachelor’s degree.

Shortly after the court made its ruling, the Minnesota Office of Higher Education revoked the two for-profits’ authorization to operate in the state.

Dies said his agency made a different determination, in part because aspiring law enforcement officers face different requirements in Wisconsin. All candidates must complete the police academy before being able to serve in the state, which meant the marketing wasn’t fraudulent.

“We were talking about a limited set of circumstances here,” which, Dies said, the agency found that Globe had subsequently remediated, in part by dropping the program. “We really didn’t have any cause or reason to respond similarly” to the ban by regulators in Minnesota, he said.

The issue also went beyond legal considerations. Dies said Globe, which had been operating in Minnesota and neighboring states for more than a century, long played a vital role in educating students in Wisconsin.

For example, he said, roughly half of the students enrolled at Globe before the sanctions hit were studying to become veterinary technicians. Globe had been a primary trainer of vet techs for clinics located north of Madison, particularly in rural areas. The university also trained medical assistants, who are in high demand in the state and in most places around the country.

The EAB’s job is to consider what’s in the best interests of students and the state in making regulatory decisions, Dies said. And Broadview’s acquisition of Globe’s campuses and programs solved a problem.

The department’s decision to yank Globe’s federal aid eligibility “created a big mess,” Dies said.

“There are implications for our actions,” he said. “Consumer protection is also about protecting the schools. It cuts both ways.”

Changed Political Climate

Globe’s return in Wisconsin under an affiliate’s name was personally satisfying for Steve Gunderson.

As CEO and president of Career Education Colleges and Universities, Gunderson runs the for-profit sector’s primary trade group. And as a Republican former congressman who represented a rural district in western Wisconsin, Gunderson knows Globe and its owners well.

“It was clearly the best example of the ideological vendetta of the last six to eight years,” said Gunderson, who wrote an opinion piece for an Eau Claire, Wis., newspaper about the Obama administration’s role in Globe’s closure. “This is a good school that got caught up in the politics of the day.”

Those politics have changed, however.

The Trump administration has begun rolling back regulations aimed at for-profits. The Education Department recently hit pause on the gainful-employment and borrower-defense rules. (Some nonprofit colleges, particularly historically black colleges and universities, publicly opposed the latter.)

Likewise, the department under Trump appears to be more sympathetic to the sector in cases of individually penalized colleges. For example, it’s mulling whether to restore federal aid eligibility to the Charlotte School of Law, a for-profit institution the Obama administration punished in December after the American Bar Association placed it on probation for failing to comply with standards related to bar-passage rates.

The department wrote to the law school last month to lay out conditions for its reinstatement, a department spokeswoman said. “Discussions are ongoing at this time.”

With Globe, the Trump administration apparently decided its predecessor’s concerns about Broadview’s ownership structure were overblown. (The department did not comment on that decision.)

“They had a real hang-up over the common ownership,” Dies said of the department under Obama. “The new administration is a little more open to the idea that Broadview could acquire these locations across Wisconsin.”

Herrmann said Broadview University is a wholly owned subsidiary of Broadview Institute. The sole shareholder of the institute, she said, is also a shareholder of Globe.

“Broadview and Globe are separate legal entities having one shareholder in common,” said Herrmann. “Broadview University provided the financial resources to ensure a seamless transition for students and faculty by entering a formal teach-out agreement, and subsequently obtained approval to enroll new students at four of these teach-out locations in Wisconsin.”

Even so, Terry Myhre’s family is the common owner of Globe and Broadview. “I own and operate Globe University, Minnesota School of Business, Broadview University,” Myhre says on his LinkedIn page, noting that he has been president of the Globe Education Network since 1972.

Agency in Limbo

The return of Globe under an affiliated owner will no doubt rankle critics of for-profits.

Gunderson, however, said the department and the EAB made the right call.

“People with long records of good work deserve second chances,” he said. “These are not bad people.”

For his part, Dies agreed that Globe has played an important role in the state. “This has been part of the culture of Wisconsin for a century,” he said. Yet Gunderson and Dies don’t see eye to eye on the fate of the EAB.

The closure of for-profits in Wisconsin helped bring controversy and national attention to the EAB.

In 2012, four campuses of national for-profit chains went belly-up in the Milwaukee area, including ones owned by Corinthian Colleges, Career Education Corporation, Kaplan and the University of Phoenix.

The wave of closures was an early sign of the trouble to come in the industry, particularly at publicly traded for-profits. Corinthian apologized for what it acknowledged were unacceptably low job-placement rates at its Everest College campus in Milwaukee, which shut down after only two years. The doomed chain, which later collapsed spectacularly itself -- with a nudge from the department -- voluntary paid off the loans for all students who attended the Milwaukee campus.

After that fiasco, the EAB tried to set minimum performance standards for program graduation and job-placement rates at for-profits, a sort of state version of gainful employment. That attempt failed but established Wisconsin as a battleground state in the for-profit fights.

“We’re trying to prevent problems from happening,” said Dies.

Asked about Walker’s latest attempt to meddle with the agency, Gunderson cited the 29 for-profits that have shut down in the state since 2010.

“It becomes increasingly hard to justify a separate agency,” he said.

The EAB and its small staff still oversee more than 218 institutions, Dies said, most of them for-profits. He criticized the push to eliminate the agency’s independent advisory board, the membership of which is drawn from college presidents, lawyers and instructors, many of whom have taught at for-profits.

“There’s still a significant amount of work to be done,” he said. “You’re limiting the amount of expertise that you bring into the policy-making process.”

Broadview isn’t out of the woods, either. While Swanson seeks the discharge of illegal high-interest loans for 6,000 former students, both sides are appealing various court rulings, Herrmann said. And Broadview doesn’t have the name recognition Globe had built up in Wisconsin.

The university also is seeking a new accreditor.

Broadview, Globe and the Minnesota School of Business all were overseen by the Accrediting Council of Independent Colleges and Schools. The Obama administration decided to terminate ACICS, a national agency that mostly accredits for-profits, in part over concerns about its oversight of Corinthian and ITT Technical Institute. The Trump administration recently backed that decision, although ACICS continues to operate during the 18 months colleges were given to find a new accreditor, and its fate remains somewhat unclear.

Herrmann said Broadview is well down the path of applying to be accredited by the Accrediting Commission of Career Schools and Colleges.

And despite the continuing uncertainty, she said Broadview is pleased with the department’s decision to let it take over the four Globe campuses.

“This is important for career education in Wisconsin, given the shortage in the work force of exactly the students we educate and train,” Herrmann said. “We believe the department struck the right balance with respect to the different treatment of campuses in Minnesota and Wisconsin.”

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