Employees Shafted After For-Profit-College Anthem Education Closes

Employees Shafted After For-Profit-College Anthem Education Closes
Senate Democrats via Flickr cc

For 12 years, Michael Schwam worked throughout Florida for Anthem Education, a for-profit college. But this spring, he knew "something was wrong, big-time." Students on campus were telling the regional vice president there were no books available for their classes. A student complained about taking a hair-coloring class where there was no supplies to color hair. "I saw the bills piling up at the campuses I was in charge of," Schwam says. After the company missed payroll one day this spring, he quit.

Then, in August, the company laid off hundreds of employees and filed for bankruptcy. Schwam and others are saying they've lost hundreds of thousands of dollars in the company's deferred compensation program, and now, 21 former Anthem employees have filed a class-action proceeding alleging they were improperly let go. It's an embarrassment for the state and city, which in 2013 had lured Anthem Education's headquarters to Fort Lauderdale with $350,000 in promised tax breaks -- a deal Rick Scott crowed about at the time in a news release.

Private, for-profit colleges have come under fire in recent years. Typically, they register low-income students regardless of their readiness for college or their financial stability. The schools walk these students through the application process for easy-to-get federal loans. That loan money ends up in school coffers in the form of high-priced tuition. The students, however, end up saddled with loan repayments and frequently drop out of school or find their credits useless. Congress named Anthem Education in a 2012 investigation of for-profit colleges, finding that the company engaged in "misleading recruiting tactics"and that an education there cost "more than triple" that of a comparable degree from an accredited state college. The school also operated as Florida Career College.

There was "no admissions testing, nothing," says Schwam. "Just sign up and pay and fill out his affidavit that you have a high school diploma and you're in."

The congressional report was overlooked when, in 2013, city and state officials, eager to create jobs, lured Anthem to locate its corporate headquarters in Fort Lauderdale with the promised tax breaks.

But this year, Schwam says, Anthem "ran into huge financial difficulties related to the reconciliation of Title I money... Let's say a student comes in and signs up for five credits, but the kid drops out after taking ten credits. The school is supposed to refund back the cost of those five credits" to the federal government.

Multiple sources explain that when they saw trouble coming, the Wall Street bankers in charge of Anthem spun off 14 of its 45 campuses under another company. "[They] sold the profitable schools to [themselves] at a cheap price and then bankrupted the rest of the schools, leaving all these students." says Schwam. Though Florida students were spared disruption in their studies, campuses in other states abruptly shut down and sent students scrambling.

Bankruptcy filings showed that Anthem has only $1 million to $10 million in assets but owes $50 million to $100 million to thousands of creditors.

Given those numbers, Schwam says, he doubts he has much chance of recovering the $346,000 that he had in a deferred compensation plan. "It's like Enron," he says. Another high-level exec said he lost $200,000 in the plan and might try to recover that money by filing as a creditor in the bankruptcy case.

Additionally, 21 former employees from the Fort Lauderdale headquarters and the Lauderdale Lakes campus say the company failed to give them 60 days' notice that their jobs would be terminated, as required by federal law for companies with more than 100 employees. They are asking for wages and vacation pay in a class-action proceeding filed through the bankruptcy court.

The city and state dodged a bullet, however. The grant that lured Anthem had been awarded through the Qualified Targeted Industry Program -- which disburses 80 percent of award money from the state and 20 percent from the city. "Funds are not paid until after the job is created and is in place for an entire year," according to Fort Lauderdale spokesperson Matt Little. "The city has not paid out any dollars for this incentive program for this company." The state reportedly hasn't made the payout either.

Email Deirdra.Funcheon@BrowardPalmBeach.com

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