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Borrowing Trouble

"Whistle-blower" lawsuit alleges student loan fraud and retaliation by former Art Institute employee

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When Joi N. Stirrup went to her company's corporate office to ask for help, the college registrar thought she was doing the right thing, after all her employee handbook was clear - take your concern to your manager and if that doesn't remedy the situation take your concern to corporate.

On Aug. 29, Stirrup, represented by Tucson attorney Jerry S. Smith, filed a lawsuit against her former employer The Art Institute of Tucson, owned by Education Management. In the complaint, Stirrup alleges that the private college was inflating student numbers and attendance in order to keep receiving student loan funds even after the student dropped out or decided not to attend.

"I had been talking to my manager and explained what was taking place is against policy and it's also against the law," said Stirrup, sitting in her attorney's downtown Tucson office.

As registrar, Stirrup said she's the college's compliance officer and her job is to make sure the college is following policies and procedures, as well as certify attendance and make sure students are on track with credits, as well as reporting to federal and state agencies.

When she went to her manager with her initial concerns, she was told that the students had to be kept on the rolls "at the discretion of the campus director," she recalled. "I couldn't understand why he would allow it."

That's when she went to the corporate level. Education Management, a Pennsylvania company, that also operates other for-profit colleges - Argosy University, Brown Mackie College, South University and the Arts Institutes International - with more than 100 campus in the U.S. and Canada.

Stirrup has a bachelor's degree from the University of Hawaii and went on to get her master's degree from an Argosy campus in Hawaii. She started working for Education Management in 2008 at Argosy in Hawaii. Stirrup said her husband, who was in the U.S. Navy, didn't think he was going to be asked to reenlist, so when a job promotion within the corporation came up, the couple decided she should accept and she moved to Tucson and started her new job as registrar of The Art Institute of Tucson in September 2011.

In the beginning, she said, there were little things that she didn't think much about because she just figured it was part of being at a new campus and different managers who might have different practices. But that changed when she discovered the campus was allegedly inflating student numbers and not reporting cancellations to federal and state lenders.

According to the complaint, Stirrup suspected that the company was allegedly not documenting or reporting cancellations of newly enrolled students to keep tuition payments from lenders such as Pell grants, Veterans Affairs benefits and benefits paid by the Arizona Department of Economic Security-Division of Employment and Rehabilitation Services, among others.

If a student "timely exercised their right of cancellation," the complaint states that the college and its corporate office are not allowed to keep or receive the tuition. Colleges are required to keep attendance records and part of Stirrup's job is to report to the U.S. Department of Education and other lenders when a student is no longer attending school "after the Monday of the second week of class(es)."

When cancellations aren't reported, students remain liable for their tuition loans and grants, she said. Stirrup also alleges in the complaint that the college inflated schedules and class loads in order to collect even more tuition.

It was in late February of this year that Stirrup learned that two newly enrolled students had canceled their enrollment - and were provided Pell grants and federal loans to attend. The students, according to the complaint, were reported as withdrawn - which allows the college to keep the tuition funds.

In the end, she said going to the corporate level with her concerns didn't help. Her contact in corporate allegedly asked if she was talking to an attorney, which concerned her, and then she was told by someone else that she broke the policy even if it was what she was told to do in her trainings and as outlined in the employee handbook.

"I understood when nothing happened at the campus level, but when I contacted corporate I had full faith that something was going to happen," she said.

What happened for the next three months is what's described in the complaint as retaliation - her duties and workload was allegedly increased, making it difficult for her to get work done; she wasn't provided the necessary support staff; she was prevented from attending meetings she previously attended to perform her duties and receive student information; a fellow employee reportedly told her that campus director William Van Zwol III said Stirrup had "thrown him under the bus," and that other employees were instructed to not communicate to her in writing; and finally, because of her title as registrar, Stirrup was concerned she could be subject to civil or criminal charges for what was taking place.

Stirrup said because of all this, she resigned in May.

The Tucson Weekly contacted attorney Joseph A. Kroeger for comment. Kroeger, according to a press release sent out by Stirrup's attorney, lists him as legal counsel for The Art Institute of Tucson. Kroeger said he could not comment on the lawsuit and he also could not comment if he was representing the college. The Weekly called and emailed Beth Henke, senior litigation counsel for Education Management, for comment and heard back from Devra Pransky, The Art Institutes' senior director of communications.

By email, Pransky wrote, "The Art Institute of Tucson's comment is that we believe the suit is meritless and we intend to protect our interests in the appropriate forum."

Pransky also confirmed the rumor that campus director Zwol was no longer affiliated with the college. "The campus president's departure was a personal decision," she wrote.

Phoenix attorney Roger McKee who is working on the lawsuit with Stirrup's attorney, told the Weekly that they are contacting agencies affiliated with the college and providing a copy of the lawsuit - the association that accredits Education Management schools, the Accrediting Council for Independent Colleges and Schools; the U.S. Department of Education, which administers student financial aid, student loans and Pell grants; the U.S. Department of Veterans Affairs; the Arizona Department of Economic Security-Division of Employment and Rehabilitation Services; and the Arizona Board of Private Postsecondary Education, which licenses The Art Institute of Tucson in order to operate a college in the state.

According to Smith, his client is a whistle-blower for pointing out the violations of federal student loan laws, and because of the lawsuit, may very well have difficultly gaining employment. But, he points out, this isn't the first time whistle-blowers and former employees have filed complaints against the company for the same reason as Stirrup's. In 2012, it was reported that the U.S. Justice Department sued Education Management alleging financial aid fraud.

It was almost six months before Stirrup filed her lawsuit after she resigned. She said it was difficult deciding if she wanted to be identified as a whistle-blower and how that could affect her future.

"I think I really needed to think about the repercussions in filing a lawsuit. I am still new to Tucson and didn't want to damage any opportunities in the future," she said.

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