"It is reprehensible that a company would target United States veterans with the hope of profiting from their hard-earned educational benefits," said Missouri Attorney General Chris Koster in a June statement announcing the settlement.

Federal data shows that for-profits are increasingly targeting veterans. In 2009 they took in almost as much military money as public colleges — though they were educating just one-third of veteran students.

"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petreaus, an official with the Consumer Financial Protection Bureau and wife of General David Petreaus. "The top ten recipients of GI bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military — quite successfully, frankly."

Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”
Courtesy Barmak Nassirian
Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”
According to Suzannne Lawrence, who worked as a recruiter at Argosy University’s online division, the pressure to recruit students prompted all sorts of illicit shenanigans, including falsifying documents.
Courtesy Suzanne Lawrence
According to Suzannne Lawrence, who worked as a recruiter at Argosy University’s online division, the pressure to recruit students prompted all sorts of illicit shenanigans, including falsifying documents.

The idea is to prey on people's hopes and desires, offering that yellow-brick road to the American dream: an education and a better job. Workers are trained to identify emotional weaknesses and exploit them. That's undoubtedly what made Suzanne Lawrence an attractive hire at EDMC. She had a master's in psychology when she went to work for Argosy's online division in Pittsburgh.

"It was really funny because they used a lot of the same skills I was trained to use in grad school as therapeutic skills — like empathy and reflective listening — on the sales floor," Lawrence says. "It was evil and slimy. Your big job was to create trust, make them think you were their friend. The main goal in your first conversation was to find something they called 'the confirmed need,' which was the hot button you were going to push if that person tried to back out on you. Like, 'My dad wasn't really proud of me,' and that's what you write down. You keep that on your file so when you call them and they say, 'I don't want to go,' you say, 'What about your dad? Don't you care about what he thinks anymore?'"

Lawrence worked with more than 2,000 others in a sea of cubicles and an auto-dialer making 500 calls a day. The leads were generally so stale most calls were no answers, hang-ups or people screaming "Stop fucking calling me!" Dry-erase scoreboards kept track of everyone's application numbers, horse-race style. Those who sold were loved. Those who didn't were berated, cajoled and threatened, says Lawrence. Managers monitored calls and circled the cubicle bays encouraging workers to "always be closing."

The harsh, boiler-room atmosphere prompted her to make references to Glengarry Glen Ross. No one got it. They were too preoccupied with keeping their jobs.

The pressure prompted all sorts of illicit shenanigans, including falsifying documents, says Lawrence. Salespeople were coached to evade questions about cost and repeat the lie that "99 percent of our students don't pay anything out-of-pocket to go to school."

She was even instructed to sell online courses to people who didn't own computers. "Tell them to go to the library," her managers would say.


It's All About the Benjamins

The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.

Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for the school's parent company, the Apollo Group. Enrollment surged to more than 300,000.

Unfortunately, he accomplished this the old-fashioned way — by cheating. Since 1992 it's been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway until two recruiters blew the whistle, initiating a suit that would ultimately cost the school $88.3 million in settlements and fines.

Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance. Founder John Sperling put a polite spin on the exit, saying only that Nelson was "preoccupied" with stock price to the detriment of the school's long-term health.

Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private-equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine Governor John McKernan Jr. — the husband of U.S. Senator Olympia Snowe — was named chairman of the board. Over the next five years, the company's revenue would nearly triple to $2.8 billion.

Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.

Gregory Cappelli, his replacement at the University of Phoenix, received $25 million last year. CEO Robert Silberman of Strayer Education raked in an astounding $41.9 million in 2009. Yet even this pales next to Jonathan Grayer, the former CEO of Kaplan University, who walked away with a $76 million severance package — courtesy of Kaplan's parent company, the Washington Post.

By comparison, Harvard president Drew Faust collected a meager $875,331 in 2010.

Nelson's bad-boy practices have caught up with him. Last year the U.S. Department of Justice and attorneys general from five states charged EDMC with fraud for paying recruiters based on the money they generated. Six more states have joined the suit.

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