Only two months into pursuing his dream to be a sound engineer, David Gross knew he’d made a mistake.
The single father in 2013 signed up at a for-profit college in Burbank that convinced him it was his path to a Hollywood job. But after two classes, he realized it was “definitely not what I was promised,” he said.
Gross took a leave of absence. But before he decided whether to return, the U.S. Department of Education forced the school, Video Symphony EnterTraining, to close after an investigation found altered records and thousands of dollars in missing financial aid money.
Five years later, Video Symphony, now transformed into a debt holding company, took aim at Gross. It sued him for $14,000 — the amount covering almost eight months of the program that it says Gross attended, and including federal loan amounts the government refused to give the school after the allegations of misconduct.
For the record:
11:11 AM, Jan. 22, 2020Michael Flanagan, the owner of Video Symphony, disputes that former student David Gross attended the school for two months. Flanagan said Gross attended 22 classes during an eight-month period. Additionally, Flanagan said Gross had an option to finish his degree through an arrangement with a similar for-profit college and disputes that he received federal financial aid.
More than 500 lawsuits have been filed against the school’s ex-students by Michael Flanagan, the educator-turned-debt collector who owned Video Symphony. He says students signed binding contracts and are obligated to pay.
“This is not money you were getting for free,” Flanagan said in a recent interview with the Los Angeles Times. “Demonstrate that you don’t owe the money and we will certainly revise and drop or reduce the demand, but essentially every single person here owes the money.”
Students and legal experts say the cases are more complicated. They claim Video Symphony broke its end of the deal by not providing the education it advertised, letting them believe they were receiving federal aid when they weren’t and failing to keep accurate records.
The story of Video Symphony highlights a larger problem with regulation of for-profit colleges and the aftermath when they fail, say legal experts: No level of government, from local prosecutors to federal and state education officials, has enough interest or responsibility to examine these cases.
In California, oversight of for-profit colleges and student loan debt remains convoluted and unreliable, despite years of reforms. Its patchwork nature has left each student to fight their own battle in a limited debt collection court that lacks the jurisdiction to look at the complaints collectively.
The result, said multiple legal experts familiar with the cases, is that Flanagan has won many lawsuits — collecting more than $300,000 — when students attempt to represent themselves or fail to show up at court, a common occurrence for those without legal savvy who don’t understand that not being present means losing.
Robert Muth, managing attorney of the Veterans Legal Clinic at the San Diego School of Law, has successfully represented two veterans sued by Video Symphony. He said the lack of scrutiny by authorities is “surprising.”
Attorneys at Public Counsel, a Los Angeles nonprofit legal firm that has successfully defended several Video Symphony students, have argued in court that there may be issues of fraud if the cases are viewed as a whole. Like multiple attorneys who have defended Video Symphony clients and spoke with The Times, they believe the lawsuits should be examined by state or local prosecutors, who have the ability to file civil actions on behalf of residents.
The Times found that the offices of Los Angeles County Dist. Atty. Jackie Lacey and state Atty. Gen. Xavier Becerra were contacted about Video Symphony, but so far have taken no action on behalf of the students.
Lacey’s office referred students to Public Counsel. Becerra’s office declined to comment on Video Symphony, issuing a statement that it was “deeply disturbed by the lack of accountability of for-profit colleges” in general and “focused on system-wide fixes.”
Large-scale for-profit failures such as Corinthian Colleges, ITT Tech and L.A.-based Dream Center schools have received such scrutiny from public prosecutors for similar complaints — though the financial stakes were higher.
In 2013, then-Atty. Gen. Kamala Harris filed a civil action against now-defunct Corinthian Colleges on behalf of its 27,000 California students. Investigations found the school used deceptive marketing and unfair debt collection practices. Harris won a default judgment that required Corinthian to pay more than $800 million in restitution to students. Becerra has also weighed in on high-profile failures and the resulting debt, including an ongoing civil suit against Ashford College, an online for-profit owned by a San Diego company.
Prosecutors are meant to be the last line of defense for for-profit students in California, though. Another source of frustration for those familiar with Video Symphony is the track record of a key state regulator, the California Bureau for Private Postsecondary Education, a troubled agency whose future will be debated by legislators in coming months. The agency is charged with investigation and oversight of the state’s 700 for-profit colleges, which cater largely to low-income people, veterans and students of color.
The bureau was informed by accreditors and the U.S. Department of Education of problems at Video Symphony in 2013. It inspected the school and cited it for record keeping problems that year, documents obtained by The Times show. But students say the bureau didn’t follow up as the school spiraled down to ensure they were informed about rights, including loan forgiveness.
While the bureau has little jurisdiction over closed schools, documents The Times obtained under the California Public Records Act also show the bureau knew about the lawsuits in 2016 and was concerned enough to request a list of students being sued from Flanagan. But it does not appear to have taken further action — the veteran who filed the complaint, Robert Harden, said he never heard back from the agency. The bureau declined to comment on whether it had ever investigated the school.
Michael Peck, a former Video Symphony student being sued for $16,000 he claims was awarded to him as grants and tuition discounts, said he believes the cases are “the shadiest thing ever,” but needs “someone to help the students figure out what’s going on.”
Flanagan disputed that any of the cases are unjustified. He said Gross is misrepresenting the amount of time he attended, and disputes Peck was given what amounts to half of his tuition as discounts or grants.
“This is money you have to pay back,” Flanagan said.
‘Very serious concerns’
By the time Gross stopped attending Video Symphony and Peck started, the school was already in the middle of a complex unraveling.
In 2011, Video Symphony had been placed on probation by the Accrediting Council for Continuing Education and Training, a national organization, over concerns of faulty records about how many graduates found work. The school offered training for below-the-line entertainment industry jobs like digital editing, and its hallways were lined with posters for blockbusters like “Predator” that teachers and alumni had supposedly worked on. Flanagan wrote a book on finding Hollywood jobs that was required reading, students said.
Though it regained good standing at the end of 2012, the school’s troubles intensified when the U.S. Department of Education conducted audits in 2013 that found significant problems with its financial aid process, including “submission of false certifications and altered documents,” according to a December 2014 letter from federal regulators. Another letter from federal regulators charged that Video Symphony “altered student enrollment agreements.” The government also alleged the school illegally converted loan and grant money for its own use, and attendance and transcript records were flawed.
Flanagan, who began the school as an equipment rental company and grew it into a training center, said he had no knowledge of the problems when they were occurring. He blamed a “rogue” financial aid officer. He called the government’s accusations of altered documents a “total crock” and said that the U.S. Department of Education was “corrupt” and had conducted a “witch hunt” based in part on the Obama-era clampdown on for-profits. In a letter to the college’s accrediting agency, Flanagan wrote that the Education Department pursued the school in part because it was “owned and managed by white males.”
After finding the irregularities, the Department of Education restricted Video Symphony’s access to federal money starting in July 2013 and continuing for 17 months — largely refusing to fund loans or grants the school submitted on behalf of students.
In September 2013, a Bureau for Post Secondary Education inspector found the school lacked records to substantiate data it reported to the state, according to documents obtained by The Times. Separately, it again was placed on probation by its accreditor in May 2014.
But the school was allowed to continue enrolling students and sign them up for federal aid.
The Times interviewed two dozen former students and staff of Video Symphony. Multiple students said the school did not inform them of the investigation or its ramifications — that the federal money was not being received and, according to their enrollment contracts, could ultimately be considered a different kind of debt with different repayment terms if the problems were not resolved. Others described a chaotic financial aid office that repeatedly asked them to sign documents with little explanation. Many said if they had known, they may not have enrolled or continued to attend.
Muth, the law professor, said not informing them of the consequences of the investigation was unfair to students.
“They are not thinking the school is going to be refused financial aid by the government,” Muth said. “So you are essentially setting people up.”
Without access to federal money, Video Symphony became financially unstable, according to Barbara Nitkin, a financial expert hired by Flanagan. Like many for-profit schools, Video Symphony was almost entirely dependent on financial aid money for revenue — during the period it was investigated, it had 307 students with 87% receiving federal aid, according to federal regulators, for programs that cost up to $30,000.
The school closed at the end of 2014 with short notice. In 2015, the U.S. Department of Education determined Video Symphony owed more than $11 million in penalties and loan money after the school failed to fully respond to the allegations.
Though some students said individual teachers were qualified, many said the overall quality of education plummeted in the months leading up to the closure, with instructors leaving when they weren’t paid. Other students said they were told they graduated despite not finishing classes.
Flanagan acknowledged that students were not informed of what was happening. He said he was “naive” and believed up until the month the school shuttered that he would be able to resolve the problems and receive the federal money.
“And then once that became clear that wasn’t going to happen, well, there was lots of other things to do to close down the school,” Flanagan said. “So it was just not the highest priority to communicate with students.”
About six months before the school folded, Flanagan began selling himself student debt, and made himself the de facto custodian of student records, including those the federal government had found problematic, according to federal court records. Flanagan said he had personally put up large sums of money to keep the school afloat, and legally giving himself the right to collect on outstanding student contracts and promissory notes was a way to protect that investment with one of the few assets of value remaining.
Flanagan then abandoned a corporation called Video Symphony EnterTraining and later registered a limited liability company with a similar name as a debt holding company with family members, according to state records. The formation of the new Video Symphony effectively gave him the ability to collect on the student’s enrollment contracts using the school’s name, though a forced bankruptcy has required him to turn over some money to those the old Video Symphony owes. He began filing lawsuits, some for loans students took directly from the school, others for the federal loans the school was refused.
California’s next moves
The Video Symphony cases are emblematic of a national debate over for-profit schools and student debt.
The lawsuits are playing out as the U.S. Department of Education jettisons many of the reforms put in place by the Obama administration to crack down on the for profit industry, which has drawn scrutiny in recent years. Instead, the Trump administration has tightened rules on loan forgiveness for students while loosening requirements on for-profits that receive federal funds.
Some for-profits and their supporters, similar to Video Symphony, argue schools should be given more leeway because they provide needed vocational training, and are entitled to money for services rendered despite problems. They contend that students can receive valuable education even when an institution fails to abide by regulations.
Students and advocates argue that if an institution proves problematic, it doesn’t deserve payment.
Student advocates for years have pushed the government to forgive loans of failed for-profits under a rule known as “borrower defense of repayment,” which allows loans to be wiped out if the institution broke laws. Legal decisions have applied forgiveness even to private loans. Critics of loan forgiveness, including U.S. Education Secretary Betsy DeVos, have characterized it as a giveaway of taxpayer money that is often unwarranted and open to abuse by students seeking to escape valid debt.
California legislators will weigh in with their own opinions on multiple fronts when the Legislature reconvenes in coming weeks, with the opportunity to tighten state oversight or maintain the status quo.
Last year, legislators stalled out on two proposals to address the debt collection and student loan industries. Both will return for consideration this year.
One bill would create a Borrower’s Bill of Rights for student loans that also establishes a statewide student loan advocate that could handle complaints — other states already have such centralized regulation.
A second bill would create a licensing requirement for consumer debt collectors and an office to investigate consumer debt complaints. California used to have a licensing requirement for debt collectors until the industry was deregulated years ago. Now, it is one of the few without such oversight.
“There are some real ugly players in this area,” state Sen. Bob Wieckowski (D-Fremont), author of the consumer bill, said of the debt collection industry in general. “Bad actors is probably complimentary.”
The state watchdogs could fill the present gap in oversight that has left Video Symphony students without an agency to turn to for help. Currently, state regulators refer cases to prosecutors. But those regulators only have jurisdiction over open colleges. That leaves closed colleges, and the debt they leave in their wake, largely unwatched.
Both bills will probably once again face tough opposition from business groups including the loan servicing industry and banking interests, some of whom argue for-profits and debt collection are already highly regulated.
Lawmakers will also hold hearings to determine the fate of the BPPE, charged with overseeing California’s for-profit colleges, which offer training for careers including medical assistants, computer programmers and even farriers who shoe horses. Despite a massive overhaul and new leadership in recent years, some consumer advocates and legislators contend that reforms may be more about optics than accountability. The agency has a backlog of 300 complaints it has not examined, down from more than 1,000 a few years ago.
“We’ve seen these cases of abuse and corruption and we have to be sure that this agency is able to stay on top of it,” said state Sen. Steve Glazer (D-Orinda), a critic of the BPPE.
For now, Video Symphony students are left to their own defenses, sharing advice online and meeting for unwelcome reunions in front of judges.
On a September morning at the Chatsworth branch of Los Angeles Superior Court, Peck ran into former classmate Sheri Wheeler. Wheeler is being sued for $20,000 and said she is “filled with rage” by the situation.
Now an animation director on Cartoon Network’s “Summer Camp Island,” Wheeler said she enrolled in the editing program at Video Symphony to broaden her skills, but the school closed before she graduated.
The federal government wiped out some of her loans because of the closure, and the rest of her tuition was covered by scholarships and payments she already made, she said. Flanagan said Wheeler did finish the program, and has failed to pay on outstanding loans.
Wheeler’s lawyer had the case transferred out of debt collection court to a judge who handles more complex litigation, but she said the lawsuit is taking an emotional and financial toll.
“It’s horrible,” she said. “You haven’t done anything wrong and you know you haven’t. But now the burden of proof is on you.”