Ex-School Owner Indicted in Loan Fraud

A New York grand jury Thursday issued a 235-count indictment against Albert A. Terranova, the former owner of a scandal-ridden nationwide chain of vocational schools, for stealing government loan money that should have been refunded when students dropped out of his program.

New York Atty. Gen. Robert Abrams said that Terranova, 52, had failed to pay as much as $4 million that should have been returned to students across the nation, who in turn are supposed to return the funds to lender banks.

Terranova operated 20 schools, with eight in California and others in New York, Illinois, Indiana, Michigan and Arizona, where Terranova has been living in an exclusive Phoenix suburb. He declared bankruptcy in 1987, shortly after a civil racketeering case was filed against him on behalf of several New York students who claimed that he had defrauded them. That case is still pending.

Adelphi Institute, Terranova’s firm, operated schools usually called Adelphi Business Colleges. They have been described as among the most egregious examples of the sort of abuses that have afflicted the vocational school industry in recent years--providing poor instruction and leaving students uneducated and in debt.

Last year, Robert Guillen of the Assn. of Independent Colleges and Schools, one of the nation’s largest school-accrediting organizations, described the problems created by Adelphi as “one of the most dire school situations we’ve seen.”

When the schools shut down in 1987, thousands of students were left with little to show for their time at Adelphi but debt. For example, an Illinois official said that he had determined that of 1,500 students Adelphi enrolled in Chicago between January, 1986, when the school opened there, and July, 1987, when it closed, only 100 graduated and school officials could provide the names of only 10 people who had gotten “bona fide job offers.”

Virtually all of Adelphi’s students were poor people, frequently young minorities, seeking to acquire skills that would qualify them for such jobs as computer operator and diesel mechanic. Typical tuition in New York, said Abrams, was $7,000 a year. Virtually all Adelphi students funded their educations through a combination of federal grants and loans.

When students dropped out of Adelphi, Terranova allegedly failed to refund student loans to lender banks as required by state and federal laws. Refunding the money, Abrams said, would have considerably reduced the student’s loan burden.

“Terranova kept student loan money when students dropped out of school and then tried to cover his tracks by filing false documents of repayment,” Abrams said. “Stealing money intended to benefit needy individuals who sought to improve their lives is a particularly reprehensible crime.”

Terranova’s activities were reported in The Times last year and he has been under investigation by federal authorities, particularly because of Adelphi’s handling of the $80 million to $120 million in federal money that it collected between 1981 and 1987.

The pending criminal case against Terranova could create problems for New York mayoral candidate Rudolph W. Guiliani, who until recently was the U.S. attorney in Manhattan. While in private law practice in the late 1970s and early 1980s, Guiliani represented Terranova in a criminal case in which he pleaded guilty to stealing federal job training money in New Jersey.

Then, just a few months later, in July, 1980, Guiliani wrote a letter of recommendation for Terranova, who was applying to New York authorities for a license to operate a vocational school. The letter failed to disclose that Terranova was on federal probation at the time.