Financial aid threat may be too much for MBTI this time
Financial aid threat may be too much for MBTI this time
By RICK ROMELL AND NAHAL TOOSI of the Journal Sentinel staff
Tuesday, May 7, 2002
Listen to former students or listen to the federal government — the story coming out of MBTI Business Training Institute doesn’t sound good.
Students say instructors didn’t show up for classroom duties. The government says the school didn’t live up to its legal duties.
Students say they didn’t get their money’s worth after paying thousands in tuition. The government says it wasn’t getting its money back from MBTI, with the overdue bills at one point hitting $670,000.
A review of hundreds of pages of documents filed with state regulators shows numerous past woes at MBTI — three straight years of substantial financial losses, threatened suspension of accreditation, a short-lived state move to halt enrollments and the resignations, under fire, of two school presidents in three years.
But time and again, MBTI got more chances to fix its problems, and the school kept going.
Now, MBTI faces its toughest challenge — one that could force it to close its doors after more than 40 years. The U.S. Department of Education wants to cut off MBTI from the federal student aid programs that are its financial lifeblood.
Accusing MBTI of “severe breaches” of its fiduciary duty and “blatant disregard” for loan program requirements, the department says MBTI has been chronically late in repaying federal loans and grants for students who had withdrawn from school, used aid money for students who were ineligible to receive it, and submitted false certifications about funds.
The department said it intended to slap MBTI with a $588,000 fine, and on April 18 federal agents raided the for-profit career school at 606 W. Wisconsin Ave. that caters largely to low-income students.
The majority of MBTI students — perhaps 80% — use such federal financial aid, estimated David Dies, executive secretary of the Wisconsin Educational Approval Board. Without federal aid eligibility, “My guess is it would be very difficult for the school to continue doing what they’re doing,” Dies said.
MBTI’s owners — Japanese businessman Masukazu Fukuda and partners Seiji Suzuki and Jere M. Ervin, who have owned the school since 1990 – – are appealing the federal actions. A hearing is expected.
Paul J. Campbell, a Chicago attorney representing MBTI, blamed the school’s woes on recently departed President Donald J. Brun — who less than three years ago was viewed by state regulators as the man to clean up an earlier mess. Campbell said MBTI’s owners have paid 80% to 90% of the overdue loan refunds and want to finish the job.
Efforts to reach Suzuki and Ervin through Campbell were not successful. Brun did not return phone calls seeking comment.
On Friday, MBTI announced that it had named Merlyn W. Cooper interim president. The school’s owners said hiring Cooper, described as a veteran of directing and restructuring trade schools, was a critical step.
“The doors will remain open, and MBTI will continue to provide education,” Campbell said.
That could be. MBTI has wrestled its way out of difficulties before. But if the owners’ appeal to the Education Department fails, the school may have no future.
Some students say MBTI didn’t do much in the first place.
“I never would go back there,” said Anne Schwartz, 22. “I never would refer anybody there.”
She learned about MBTI from one of its posters downtown and enrolled in the microcomputer hardware technology program. But Schwartz, who graduated in June 2000, said the school’s staff was disorganized, and books arrived late. In one set of courses, she said, an instructor who taught the first two tracks was a student in other tracks.
Her feelings aren’t universal. Shelia Koch, who studied several years ago to become a travel specialist, gave MBTI high marks and said that she, like others, got placed in her chosen field.
“I have to say at that time it was wonderful,” said Koch, 28. “It was a great program. . . . At the time I went there, there was a 100 percent placement rate.”
Among students who griped, the complaints were consistent: Teachers sometimes didn’t show up, didn’t teach a full session or had to teach multiple classes at once. Textbooks didn’t arrive on time or weren’t used. Placement officials didn’t help.
“All they did was push people through school if you were paying your bills,” said James Smith, 31, who studied microcomputer hardware technology and graduated in January. The course cost more than $12,000, Smith said.
“I never missed a day,” he said. “I took all the tests. I had high honors. I had people who were next to me who would not come into school every day, miss tests, and still end up with high honors.”
Several students are considering filing a class-action lawsuit.
Change in leadership
MBTI’s problems appeared to crest in August 1999 after the Educational Approval Board found several problems during an unannounced visit.
In a letter to the school’s owners, Linda Heidtman, a senior education specialist with the board, said:
High turnover had left some faculty teaching multiple subjects concurrently, or teaching subjects they weren’t qualified to teach. Placement services were being performed “in no more than a perfunctory manner.” Classes in the administrative assistant program were being taught out of sequence, with beginning students frequently placed in more advanced classes.
Three days after the visit, school President Sandra Suzuki — wife of one of the owners — resigned. That helped prompt Heidtman to lift a short-lived directive ordering MBTI to suspend new enrollments in the administrative assistant program — an order the school said would have forced it to close.
Up stepped Brun. The head of a California-based training and consulting firm called The Winning Foundation, he’d begun working for MBTI in 1997. Brun was viewed as a master recruiter who could get new students in the door, one teacher said.
In fact, the teacher said, Brun had been running the school, even though Suzuki held the title of president, and the problems that led to her departure were largely of Brun’s making.
But the state liked what it saw. As MBTI’s new president, Brun quickly laid out a plan to add teachers, improve the placement office and deliver administrative assistant courses sequentially.
By late September 1999, Heidtman concluded that the school had corrected its deficiencies. After an unannounced visit in February 2000, she noted “many signs of improvement.”
But things looked quite different to an accreditation team that visited MBTI two weeks later.
The team represented the Accrediting Council for Independent Colleges and Schools of Washington, D.C. Without the blessing of a recognized accrediting organization, a for-profit school can’t accept students receiving federal aid.
Even before the site visit, the council was threatening to suspend MBTI’s credentials. The reason: Only 50% of graduates had found jobs in their fields the previous year, down from placement rates of about 80% for the two years before that.
The evaluation team found appropriate student-teacher ratios and effective classroom work by instructors. But the visit turned up problems:
Most students interviewed indicated they weren’t pleased with MBTI and wouldn’t recommend it to others. Teachers unanimously felt that programs needed to be updated and that the school needed more instructional materials and equipment. There was limited in-service training and professional growth activities for faculty. The library was inadequate.
New problems develop
Ultimately, MBTI addressed the concerns and kept its accreditation. But true to MBTI’s pattern of bouncing from one set of troubles to another, new difficulties cropped up.
The Educational Approval Board wanted the owners to sign a contract with Brun and a side agreement that laid down operating rules for the school.
The five-year deal paid Brun $150,000 a year, and, beginning with the second year, 30% of profits. He was to get an annual raise equal to 15% of the previous year’s profit. The side agreement gave Brun “complete and total authority” over MBTI’s operations.
When Fukuda missed a deadline to sign off on the deal, the state became frustrated.
“Unless the school is organized and operates as per the agreement we have developed, there will be no school over which to argue,” Joseph L. Davis, then executive secretary of the Educational Approval Board, wrote in October 2000 to the Japanese businessman.
Fukuda ultimately signed.
Meanwhile, the school’s financial headaches mounted.
MBTI posted a $706,000 loss for the year that ended Aug. 31, 2000, the most recent period for which the school has filed an audited financial statement with the state.
The loss came as MBTI’s administrative expenses jumped 60% and marketing costs rose by a third. The school that year, Brun’s first as president, spent nearly $1.9 million on administration and marketing — more than twice what it spent on education.
Losses were nothing new for MBTI. While the school recorded modest profits in 1998 and 1999, it had lost more than $500,000 in each of the three previous years.
MBTI’s deteriorating financial position caught the Education Department’s eye. In June 2001, the agency required the school to post a letter of credit of at least $295,000 if it wanted to keep taking financial aid students.
The school posted the letter of credit, but by late 2001 the department was calling MBTI to task again: A review of the school’s handling of student aid programs had shown a lack of both “financial responsibility” and “administrative capability.”
Four months later, on March 29, the department suspended the flow of federal aid money to MBTI and said it planned to cut it permanently.
With that, Brun quit, and a few days later, federal agents armed with a search warrant descended on MBTI’s offices.
MBTI IN BRIEF
— MBTI Business Training Institute began in 1959 as the Manpower Business Training Center, part of what is now Glendale-based Manpower Inc. J. Michael Bartels bought the school in 1976, then sold it in 1990 to International Educational Institutions Inc.
— The for-profit career school offers courses that usually last less than one year in areas such as paralegal work, medical assistance and microcomputer hardware technology. The courses normally cost between $10,000 and $14,000, according to students.
— The school is currently serving fewer than 200 students and has about 25 staff members, according to the Wisconsin Educational Approval Board.
— MBTI is under the purview of the board. The board oversees more than 120 schools in the state, including for-profits. It has a staff of five and a $430,000 annual budget.
— MBTI administers federal grant and loan dollars on behalf of its students, most of whom receive such aid. The federal government is threatening to cut off the school from federal student aid programs.
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