By Steve Weinstein
By Devon Maloney
By Tessa Stuart
By Alison Flowers
By Albert Samaha
By Jesse Jarnow
By Eric Tsetsi
By Raillan Brooks
The saga of William Weld's sojourn to Kentucky to run a for-profit vocational college where students were taught mainly through online computer classes makes an even more intriguing résumé listing for the would-be leader of the Empire State than has already been reported.
The former Massachusetts governor has pressed on with his campaign to win the Republican nomination to succeed New York's George Pataki despite widespread reports (most recently and thoroughly in the Sunday New York Times, by Sam Dillon and Patrick Healy) about his ill-fated mission to Louisville, where, in January of this year, he agreed to become the $700,000-a-year chief executive officer of Decker College.
But starting in 2004, students, instructors, and recruiters began stepping forward to complain that the college, which had locations in four states, operated as little more than a cyber-age "loan mill," duping desperate, low-income job seekers into believing the online courses would make them skilled and employment-ready construction trades workers in a few months in exchange for shouldering federal student loans of more than $20,000.
The AFL-CIO's Building and Construction Trades Department added another allegation: that Decker was a key player in a national effort by non-union construction contractors to train employees on the quick and the cheap, while making money doing so, and avoiding lengthy and more costly hands-on apprenticeships.
In late September, the school had its access to federal student loans shut down after regulators cited it for abuses, including failing to remit $7 million in loans it took in from students who later dropped out. On October 5, the Kentucky Attorney General's office announced it was investigating the school for possible consumer fraud. The next day, Weld, who had already relocated to New York to begin campaigning, resigned his position as Decker's CEO. It was none too soon. On October 18, 40 agents from the FBI and other agencies descended on Decker's Louisville campus and hauled away more than 1,000 cartons of records. The school closed its doors three days later.
None of that slowed down the former federal prosecutor, the tall rusty-haired man Boston wags dubbed "Big Red" during his years as governor from 1991 to 1997. Last week, Weld launched a website (weldfornewyork.org) saying he could do for New York what he did for Massachusetts by lowering taxes and getting tough on crime. But he's facing more questions about his strange tenure at the junior college in Louisville than anything he did as the Bay State executive.
Weld's involvement with Decker began when his financial firm, Leeds Weld Equity, which sought out for-profit educational investment opportunities, decided in 2002 to buy a $30 million minority share in a company called Franklin Career Services, a nationwide chain of truck driving schools owned by a pair of brothers, Gerald and Jeffrey Woodcox, of Louisville. At the time, business at Franklin was booming. Annual profits in 2001 reached $79 million. But there too, serious questions about management practices were already being raised.
The toughest queries came from an insurance firm, Royal Indemnity, based in North Carolina, which had agreed to provide credit-risk insurance for pools of student loans made to Franklin's pupils. At its zenith, when Weld's firm bought into the company, Franklin had 33 separate schools, including sites in Mississippi, Missouri, Kansas, Louisiana, Ohio, West Virginia, and Albany, New York. Students were promised an intensive 16-day driving course at the end of which they would qualify for a Class A commercial driver's license. The cost was steep, ranging from $8,000 to $12,000. To finance the program, Franklin assisted students in obtaining loans from an outside lender. In turn, the lender purchased insurance coverage from Royal Indemnity to protect it from defaults.
In early 2002, however, Royal Indemnity abruptly ceased providing insurance. The reason, as the insurance firm later claimed in a 2004 civil racketeering lawsuit, was that student default rates were soaring above 70 percent. Franklin and its loan company, the lawsuit claimed, were running "a massive fraudulent tuition loan scheme."
The insurance company's formal complaint depicts Franklin and its owners as routinely hoodwinking vulnerable job seekers into signing up for the loans, regardless of their ability to repay them. Among those sought out to sign up and take on the loans were "criminals, drug addicts, alcoholics, and the homeless." To do so, the trucking school's recruiters allegedly "routinely submitted falsified loan applications," the insurance firm chargedeven using pre-printed answers regarding past employment and salary history on application forms.
Nor did students get much of an education, the company alleged. Royal accused Franklin of using unlicensed instructors and defective trucks. When it came time to pass the qualifying licensing test, Royal claimed that Franklin's instructors provided students with the answers to the written test.
Franklin denied any wrongdoing and the suit is still pending. But whatever its actual practices, the insurance company wasn't the only one with suspicions. In 2001, the Kansas Board of Regents ordered Franklin's local branch to cease enrollment over concerns about its curriculum. In July 2002, Ohio state officials ordered 400 graduates of a Franklin school to retake their driving test, or face cancellation of their licenses. Some grads couldn't afford to take the test again; others flunked, and were later unable to get work or repay their loans, the insurance company asserted.