Woes at Bridgepoint, United States University

State and federal regulators, legislators, and accreditors finally seem to be getting wiser to the for-profit universities. San Diego’s publicly held Bridgepoint Education — target of investigators but darling of the local business establishment — is in even more hot water. Privately owned United States University in Chula Vista is struggling to get itself off its accreditor’s probation.

Rancho Santa Fe’s Michael Clifford, who has a portfolio of for-profit schools — several of which are experiencing deep troubles — was a cofounder of Bridgepoint’s predecessor company. An investment group including Clifford wants to dump its stake in United States University, but the school has to undergo a change-in-ownership examination by the Western Association of Schools and Colleges, which put the institution on probation last year.

Bridgepoint’s attendance last year was down 22 percent from the previous year, and profits plunged 67 percent, as originally reported. On May 12, the company announced it would not be able to file its first quarter 2014 report with the Securities and Exchange Commission — an eyebrow-raiser. Preliminarily, there would have been a loss in the first quarter, said Bridgepoint, which also lost money in the last quarter of 2013.

On May 30, Bridgepoint discovered “material weaknesses in internal control over financial reporting” and, worse, said it did not know how long it would take to fix the problem. Ergo, investors won’t know what to believe for an indefinite time.

Several state attorneys general continue to investigate Bridgepoint. It recently settled with Iowa for $7.25 million. The state had charged that Bridgepoint pressured students to enroll and then misled them. The United States Department of Education and the Consumer Financial Protection Bureau are looking into the inordinately high debts and low achievement levels of for-profit school grads. For-profit colleges account for 11 percent of students and 48 percent of loan defaults.

As financial analyst Matt Brice points out, Bridgepoint insiders have dumped $9.5 million worth of shares since September of last year. “Lots of selling, no buying,” says Brice. Wall Street’s Warburg Pincus, which owns more than 60 percent of Bridgepoint, wants to dump shares.

Then there are the woes of United States University. Investor Clifford bought it in 2009 when it was named InterAmerican College. Last year, the school paid a $686,720 fine to the federal government when its former financial aid director was caught falsifying records to permit ineligible students to get Pell Grants. The former official pleaded guilty to criminal financial aid fraud.

In April of last year, the Western Association of Schools and Colleges sent a special team to look at the school. The following July, the association put the institution on probation for two years. The accreditation team raised “questions regarding the sustainability of the institution and its continued accreditation,” stated the association. The university’s answers about academic programs, finances, integrity, and governance provided “little analysis or data to justify some projections…and some information was dated, inconsistent and/or incomplete,” wrote the accreditor’s president. The university, which offers programs in business, health sciences, nursing, and education, is “far from being able to evaluate program quality based on good evidence.”

The university, said the accreditor, “has not undertaken analyses to look at the reasons for low enrollments and student attrition in some programs. There is an insufficient number of faculty, especially full-time faculty, to anchor and support the large number of programs being offered. [United States University] will need to either reduce the number of programs or increase the number of faculty.” It also has to come up with measurements for monitoring academic quality.

As a result of the accreditor’s sharp criticism, the university has made some program cuts and now boasts on its website of its “low student-faculty ratio.” However, it will be up to the association to decide next year whether that boast is for real.

The university’s board of trustees “met only a few times a year for two hours or less; had no formal committee structure; [and] kept insufficient records and minutes,” said the accreditor’s president. The university “has experienced serious financial problems in the past, including net operating losses.… It is not clear that the leadership of [United States University] has sufficient awareness of the urgency and significance of the issues raised in the team report.”

The university will remain on probation until June of next year, when it will be reassessed for compliance with the accreditor’s standards.

Last month, it had another visitation from the accreditor. Fresh capital has flowed into the university from Linden Education Partners, a Chicago fund that has financial positions in for-profit universities. Clifford is no longer seen around campus. The founder and chief executive of Linden is Oksana Mindyuk Malysheva, who has been on the United States University board since 2012. She is also on the board of several other small schools, including the University of Business and International Studies of Geneva, Switzerland.

“Change of ownership is considered a structural change,” says Mary Ellen Petrisko, president of the accreditor’s Senior College and University Commission. The desired switch of control to Linden is “under review,” she says. Some faculty members believe that the Swiss university wants to establish an American beachhead at United States University for business students. Petrisko says that if the university wants “to have a relationship with an international or nonaccredited institution, that will be one of the things we will look at.” The accreditor recently said the university’s change-of-ownership proposal was “well written and clear.”

“Financial and ownership status issues remain confidential,” says Steven Stargardter, provost, who had served as interim president while Timothy Cole, president, recovered from a health problem. Cole came back June 6.

Faculty members feel that United States University is in over its head. It has a campus in Orange County that once had students but no longer does. Students were told to go online last year; the facility now houses electronic equipment.

The nursing program is ailing. In the 2012/2013 years, 56.58 percent of its students passed the National Council Licensure Examination. Only 2 of 149 nursing programs in California did worse. Stargardter says the university has made steps to improve its students’ test results. Late last year, the California Board of Registered Nursing approved the university’s nursing bachelor’s degree.

There have been complaints against the university filed with the Equal Employment Opportunity Commission. “The university is confident that all allegations will ultimately be dismissed,” says Stargardter, who claims that, generally, “Significant progress has been made in all areas.”