News Publications

"The Academy of Art University in San Francisco has settled a 12-year-old federal fraud lawsuit with four former recruiters whose case had threatened to cripple the huge for-profit school if it had lost in court.

The amount of the settlement was not immediately disclosed. Announced Thursday in the U.S. District Court in Oakland, the settlement is the final chapter in a lawsuit the Academy of Art tried to get thrown out for more than a decade, even asking the U.S. Supreme Court to weigh in in 2019. The court declined.

At the heart of the 2009 lawsuit was whether the private school used illegal tactics to attract students and cheat the federal government out of millions of dollars in financial aid. Nearly 10,000 students from 108 countries are enrolled in the Academy of Art."

"Dec. 21, 2009: Four Academy of Art University recruiters — Scott Rose, Mary Aquino, Mitchell Nelson and Lucy Stearns — sue their employer in U.S. District Court in Oakland under the federal “False Claims Act” that covers allegations of government fraud.

The four allege that the school fraudulently collects millions of dollars a year from the U.S. Department of Education through federal student loans. They say the school raises or lowers their salaries by as much as $30,000 and dangles bonus trips to Hawaii based solely on the number of students they enroll, in violation of the federal ban on “incentive compensation” meant to stop schools from enrolling unqualified students who won’t repay the loans. The recruiters also allege the school falsely claims to the government that it complies with the law."

"The FTC has issued a Notice that it has determined that certain acts or practices in the education marketplace are deceptive or unfair and, thus, are unlawful under Section 5 of the Federal Trade Commission Act."

https://www.ftc.gov/enforcement/notices-penalty-offenses/penalty-offenses-concerning-education

"Today he’s bankrupt. He owes $431,607 in student loans and hasn’t gotten a job. His mother co-signed one student loan for his undergraduate studies in 2004 and remains on the hook for four subsequent loans. They barely speak now."

"The for-profit Academy of Art University in San Francisco calls itself a launching pad for careers at top-paying companies, from Apple to Google to Adidas. About 13,000 students are enrolled in San Francisco and around the world, according to the school’s accreditor, WASC Senior College and University Commission. They are full and part-timers, undergraduates and graduate students. About 40% study entirely online.

But the numbers the company reports to the U.S. Department of Education about its results for a subset of its students — undergraduates who took out federal loans — tell a bleaker story:

28%: Students who graduated within eight years.

44%: Full-time students who graduated within eight years

$44,226: Average annual cost, including campus housing, for 2018-19.

$19,100 to $46,500: Median salaries one year after graduation, depending on field of study. Lowest: “drama/theater arts and stagecraft.” Highest: “computer software and media applications.”

$27,875 to $47,188: Median debt levels after graduation, depending on field of study."

It is a law that accredited universities are to report a summary of their student graduate rates and placements. The Academy of Art Univeristy has been able to withhold that data for years. However, for what is available the Bureau for Private Postsecondary Education (BPPE) has reported student graduate rates and how many students actually got a job in their field. The numbers are shocking.

"The signs are hard to miss in downtown San Francisco: two stylized A's inside a red circle, symbolizing the Academy of Art University. The for-profit school occupies more than 40 buildings throughout the city and has made its family owners very rich.

Where does the Academy of Art’s money come from? About $100 million per year arrives as tuition and fees financed by federal student loans. The full scope of the borrowing was revealed May 21, when, for the first time, the Department of Education released information about how much debt students are taking on to earn degrees from various academic programs at American colleges and universities.

The data shows one sector in particular with outsize debt: graduate school. And while the Academy of Art fosters unusually high burdens, many public universities and nonprofit schools have also gotten into the debt-fueled graduate school business.

In releasing the college loan data, Education Secretary Betsy DeVos described it as part of President Trump’s executive order to address the student debt crisis. Access to the loan amounts, she said, will allow students to make informed decisions about choosing colleges. 

At the same time, the department is preparing to uproot the Obama administration’s approach to the debt crisis, by repealing regulations that cut college programs out of the federal financial aid system if students don’t earn enough money to pay their loans back."

It is a law that accredited universities are to report a summary of their student graduate rates and placements. The Academy of Art Univeristy has been able to withhold that data for years. However, for what is available the Bureau for Private Postsecondary Education (BPPE) has reported student graduate rates and how many students actually got a job in their field. The numbers are shocking.

"Evidence exists that the huge for-profit art school — one of San Francisco’s biggest property owners — may have used illegal tactics to enroll students from 2006 to 2010 by offering employees “tremendous bonuses” based on the number of people they recruited to the school, the Ninth Circuit Court of Appeal in San Francisco said Friday."

"The purpose of the Special Visit was to follow up on steps being taken by AAU in response to the Formal Notice of Concern issued in the July 7, 2014 Commission Action Letter following the institution’s spring 2014 Accreditation Visit. A Formal Notice of Concern is issued when Commission finds that an institution “in danger of being found out of compliance with one or more Standards if current trends continue.”

"The Commission acknowledges the great progress made in each of the areas of commendation and recommendation but agrees with the team’s concern that many of these had taken place so recently and near to the time of the visit that it was not possible to determine the level of sustainability and impact required to remove the Formal Notice of Concern."

"SAN FRANCISCO (Dec. 19, 2016)—City Attorney Dennis Herrera today announced that he had reached terms for a proposed settlement valued to San Francisco taxpayers at more than $60 million in the lawsuit his office brought against Academy of Art University.

The agreement includes $20 million in cash, including penalties and a major contribution to a program that helps low income tenants who are at risk for evictions.  The figure is the largest monetary award the city has reached in a code enforcement case."

"After years of finger-pointing, San Francisco City Attorney Dennis Herrera says “enough is enough” and is filing suit against the Academy of Art University, saying the nation’s largest for-profit art school and one of the city’s biggest landlords has illegally converted 22 buildings in amassing a real estate empire.

Citing “deliberate noncompliance ... repeated missed deadlines and recurrent unfulfilled promises,” Herrera said it is time for the university to fall into line with city planning laws.

“In particular, defendants must return the many housing units they unlawfully displaced to San Francisco’s affordable housing stock,” the city attorney said in the suit he plans to file Friday in San Francisco Superior Court."