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The End of Barney’s Second Career?

Carl Barney’s first career was managing several Scientology missions – you know, L. Ron Hubbard and squeeze the cans – swindling the gullible and ignorant. [1]  His second career was managing several for-profit colleges, taking advantage of the poorly overseen federal student loan program. He couldn’t lose. Help any more or less warm body get a guaranteed loan to pay for his trade schools’ shabby degree programs, then whether or not the person defaults he gets to keep the money.

In this way, over the course of twenty years or so, he amassed a fortune, hundreds of millions of dollars. Lucrative as running Scientology missions had been, the new career was vastly more so. For all its faults, Scientology was never plugged into the federal handout machine.

The beginning of what may be the end of Barney’s second career can be traced back to late 2012, when he converted his for-profit colleges to non-profits to avoid more stringent financial oversight of the guaranteed loans. The umbrella foundation for the newly designated non-profits was the Center for Excellence in Higher Education. (For a time Yaron Brook of the Ayn Rand Institute and Mr. Brook’s associate C. Bradley Thompson of Clemson University were on CEHE’s board of directors.) If Barney had remained for-profit, per new legislation, no more than 90% of his schools’ revenue could have come from federally guaranteed loans. Apparently 90% wasn’t enough for him. He avoided the restriction – or tried to – by converting to non-profit. (He denies this was why he converted, saying the timing was purely coincidental. He says nothing about how the conversion accords with his earlier praise of for-profit schools compared with non-profit ones.)

Highlights of subsequent events:

2013 February 11:  The conversion from for-profit to non-profit draws the attention of investigative journalist and lawyer David Halperin. He begins writing about Barney and his schools, revealing that the schools continue to be run as if they were for-profit. In the first article he points to the high student loan default rates and quotes a letter from one employee describing the lack of integrity in recruiting: “Our admission representatives are required to enroll anyone and everyone. All entrance and diagnostic testing has been eliminated … Toothless and homeless people are not marketable and will never pay back student loans. We still enroll them. ... Our director said, ‘Get 40 people and I don’t care what you say or do to get them.’  [2]

2013 September 27: Two former employees file a whistleblower lawsuit against CEHE, claiming that it paid commissions to recruiters for signing up new students, in violation of CEHE’s agreement for participating in the federally guaranteed loan program. (For what it’s worth, [3]  the following year the U.S. Justice Department ratifies the whistleblower’s claims and joins the lawsuit.) The case has not yet gone to trial. [4]

2014 December 1:  The Colorado attorney general (a Republican) files a lawsuit against CEHE, Carl Barney (chairman), and Eric Juhlin (CEO). The complaint claims that Barney’s CollegeAmerica misled students about the selectivity of the school, the transferability of credits, the jobs they could obtain and the salaries they could earn, systematically fleecing students and taxpayers. [5]

2015 March 2:  The New York Times publishes an article about the for-profit to non-profit conversion, saying that Barney would acquire a lot of money as a result. Barney denies it. [6]

2016 August 11:  The Education Department rejects CEHE’s application to be treated as a non-profit. Then-Secretary John King writes: “This should send a clear message to anyone who thinks converting to non-profit status is a way to avoid oversight while hanging onto the financial benefits: Don’t waste your time.” [7]

2016 August 30:  CEHE files a lawsuit against the Department of Education accusing it of pursuing a political agenda.

2017 mid-October:  The trial regarding the Colorado lawsuit begins in Denver District Court.

2018 December:  Then-Education Secretary Betsy DeVos, whose top aide once served as a paid consultant to CEHE, reverses the decision of 2016 August 11 (see above). [8]

2018 December 19:  CEHE withdraws its lawsuit of 2016 August 30 (see above).

2019 April 12:  The federal Consumer Financial Protection Bureau, which tries to prevent abuses of private student loans, begins investigating CEHE. [9]

2019 May 2:  The Accrediting Commission of Career Schools and Colleges (ACCSC) places CEHE on probation.

2020 August 21:  The Denver District Court (see 2014 December 1 & 2017 mid-October above) finds that CEHE, CollegeAmerica, Stevens-Henager, Carl Barney, and Eric Juhlin violated the Colorado Consumer Protection Act, fining them $3 million and issuing an injunction against further infractions. [10]  (Barney et al are appealing the decision.) Not long afterwards Barney tries to prevent public access to the trial transcript. [11]

2021 April 22:  By this time all of Barney’s brick and mortar schools are closed or in the process of closing, with only the entirely online school Independence University still functioning normally. Now the Accrediting Commission of Career Schools and Colleges (ACCSC) terminates Independence University’s accreditation. [12]

2021 April 23:  The Department of Education suspends CEHE from participating in contracts or other programs of the federal government, including Title IV guaranteed loans, Pell and GI grants.  From the notice of suspension addressed to Eric Juhlin, Barney’s right-hand man:  “... you were well aware of, and complicit in, the fraudulent practices upon which the court based its findings. Your suspension from participation in federal procurement is necessary both to avoid the erosion of public confidence in the integrity of governmental programs and to protect federal funds from misuse.” [12 again]

The notice of suspension contains a summary of the complaints against Barney and his schools. By this time Barney has stepped down as chairman of CEHE though still on the board of directors, calling himself chairman emeritus, and Juhlin is now chairman. Both Barney and Juhlin may have received the same letter; I only have a copy of one to Juhlin:

November 2020:  CEHE produces a video titled “Town Hall with Your Host Eric Juhlin” and sent it to all CEHE employees. In it Juhlin denounces the recent Colorado decision against CEHE and the people who are attacking CEHE. This stands out:

“There are certainly individuals out there who are violently opposed to career education, to private enterprises operating colleges and universities. And any opportunity they can to seize upon something where they can criticize, they can try to advance their ideological agenda, they’re going to take advantage of that.”

In other words “they hate us for being good.”  No, Barney – for this is Barney’s work – at least in this quarter we despise you for (1) pretending you are an “entrepreneur” and champion of the free market while your are almost entirely dependent – willingly and eagerly dependent – on cash from the state, and (2) getting rich cheating students and the state, the latter after the state’s theft from the taxpayer.

2021:  Juhlin is suspended from his CEO position. Because of the fraud verdict and subsequent DOE ruling (see 2020 August 21 and 2021 April 23 above) neither he nor Barney can administer the use of federal funds which existing students are using.

2021 July 1:  Paul Gardner, interim CEO, sends a memo to employees in the Admissions Department saying “we will be unable to enroll new students for some time” and that CEHE must make staff reductions.

2021 July 19:  The appeal hearing is held for ACCSC’s termination of accredidation (see 2021 April 22 above). They have 60 days to make a decision.

2021 July 20:  Paul Gardner writes employees that the U.S. government has not sent CEHE “any cash” since early May and that most staff will be terminated in 60 days. He tells employees not to advise students to withdraw at this point.  Two days later David Halperin tweets:  “Where in the world is Carl Barney? His office is telling various people that he is traveling, out of the county, away for a long time.”

It looks like Barney’s second career is coming to an ignoble end, but not to worry. He has a third career in the making as the power behind the wanna-be successor to the moribund Ayn Rand Institute, Craig Biddle’s the Objective Standard Institute. [13]

1  At first Barney was evasive about his Scientology career, then when it was fully exposed he became self-righteously unrepentant. See  Barney’s Big Lie  and other articles on this website.

2  “If a For-Profit College Becomes a Non-Profit, Is That Good? Not Necessarily”
by David Halperin, Republic Report  11 February 2013

3  It isn’t worth much considering the DOJ’s long history of corruption. See the work of Rodney Stich, the presidential term of Donald Trump, or just the last election, better described as a coup. However it must be said, it’s an ill wind that blows nobody good: at least the faux president got rid of Betsy DeVos.

4  “Katie Brooks, Nannette Wride, and the United States  vs.  Carl Barney et al”

5  Though filed on 1 December 2014 the decision was sealed (not public). It was unsealed 17 February 2015.
“Colorado vs. Carl Barney et al”

6  “Some Owners of Private Colleges Turn a Tidy Profit by Going Nonprofit”
by Patricia Cohen, The New York Times  2 March 2015
(Barney’s case is near the end of the article. The subject is also mentioned in the reference cited in footnote 8.)

7  “Education Department Denies Request for Chain of For-Profit Colleges to Convert to Non-Profit Status” 
U.S Department of Education, 11 August 2016

8  The existence of CEHE’s December 2018 agreement with the Trump administration wasn’t made public until April 2020.
“How a For-Profit Tycoon Turned His Colleges Into Nonprofits”
by Dan Bauman and Michael Vasquez, The Chronicle of Higher Education  April 12, 2020
(To read all the text without subscribing, right-click the beginning text, click “select all,” and copy-paste to your word processor.)

9  “CFPB Launches Investigation Against College Chain Owner” 
The College Post  2 October 2019

10  “Colorado Court Slaps Carl Barney Colleges With $3 Million Fraud Verdict”
by David Halperin, Republic Report  21 August 2020
(Contains a link to the court decision and order.)

11  “Independence University Operator Seeks to Conceal Record of Trial it Lost”
by David Halperin, Republic Report  5 March 2021

12  “Citing Performance Failures, Accreditor Dumps Independence University”
by David Halperin, Republic Report  23 April 2021

13  See  The Center of Mass Shifts Further.