Trade School Folds, Files Bankruptcy

Leaving thousands of students in the lurch, the six Southern California campuses of Iade American Schools closed their doors permanently Monday and filed for Bankruptcy Court protection in the face of a federal investigation of the chain’s financial practices.

The disclosure, which came three days after the FBI raided Iade’s corporate offices and seized records, stunned the primarily Latino student body. Iade, one of the largest local chains of trade schools, suspended most of its classes earlier this month, acknowledging money problems, but pledged to reopen at least five campuses.

Dennis E. McGoldrick, an attorney for the company, confirmed the decision to close the schools and seek protection from creditors under Chapter 11 of federal bankruptcy law. He said he did not know if any provisions had been made for Iade’s nearly 4,000 students to transfer to other schools. Company officials failed to return phone calls.

McGoldrick said the bankruptcy filing was prompted by liabilities of $13.5 million, including about $500,000 owed to the Internal Revenue Service and another $500,000 in back wages owed to teachers. He said the filing listed assets of $14 million but that the school is unlikely to receive the largest share of that money: U.S. Department of Education grants and loans payments, which cannot be made to a school that has shut down.

FBI officials are believed to be investigating charges that school officials collected funds for “ghost students” who were either not enrolled or never showed up after registering for classes. State officials have said they are probing whether Iade properly reimbursed the federal government for loan and grant funds when students dropped out. Iade received $10 million to $12 million in federal funds annually to help low-income students.

The chain’s six Southern California campuses range from Santa Ana to Oxnard. Iade offered 14-month courses in automotive mechanics, computer software training and English as a second language. The firm was founded a decade ago by Abraham Stofenmacher, who continued to run the company with his three sons. Calls to his home were not returned.

Monday morning, student Julio Sousa, 32, stood outside Iade’s closed Los Angeles campus on West Washington Boulevard with his notebook and backpack pressed against his body, not knowing where to turn. Sousa had dreams of becoming a mechanic. He had already paid his semester’s tuition.

“We all have dreams--all of us,” Sousa said. “We don’t want the government to support our families. Just because they (Iade’s owners) are doing this with the money, it’s not our fault.”

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Sousa and 75 others peered through windows, hoping that bolted front gates would open, as teachers and administrators had promised they would on Monday morning. But as the morning wore on and no one showed up to open the doors, Sousa rallied his classmates into a circle outside the building, urging them in Spanish to protest the closing by writing letters to education officials.

Some students then traveled a few blocks to the corporate headquarters to confront administrators and teachers, none of whom were at the office. Only two women, who said they not employees of Iade, were at the office scouring through files.

Former Iade English teacher Lourdes Galvan said she did not care about the mismanagement of funds; she only wanted to have her students and job back.

Galvan said she saw her job as helping a segment of the population that is frequently ignored: low-income Latinos seeking to bolster their job skills. She taught the first step in succeeding in Southern California: learning the language.

She said she was stunned by the decision to close the doors forever.

“We had a good thing going at Iade, we really did,” she said. “And the owners had to screw it up.”