Attorney General Ellison’s office notches big victory for defrauded MSB/Globe students
Minnesota Supreme Court allows AG’s office to obtain tuition refunds for more than 1,300 low-income students of MSB/Globe criminal-justice program — more than $33 million in restitution now possible
Court also affirms AG’s authority to seek restitution for all Minnesotans harmed by fraud
November 6, 2019 (SAINT PAUL) — The office of Minnesota Attorney General Keith Ellison won a big victory today when the Minnesota Supreme Court ruled that the Attorney General’s Office can pursue tuition refunds for students fraudulently enrolled in the Minnesota School of Business (MSB) and Globe University’s (Globe) so-called “criminal-justice” program.
Had the Supreme Court ruled against the Attorney General today, only the 15 students who testified in court against MSB and Globe would have been eligible for tuition refunds, for a total of $375,000. Because of the Attorney General’s win today, all former students of MSB and Globe’s criminal-justice program since 2009 — 1,336 of them — will be eligible to make a claim for refunds totaling $33.7 million.
During the four-week trial in the case, the Attorney General’s Office proved that MSB and Globe targeted students from low-income families with materials that fraudulently claimed that their so-called “criminal-justice” program would qualify them for jobs as police and probation officers, when that was not the case. The trial court stated that “the pervasiveness of [MSB and Globe’s] false and deceptive practices” was proven through “testimony of several former employees…, as well as testimony of [MSB and Globe’s] managers, …solicitations and mass advertising, and …internal training materials.”
In addition, the Supreme Court broadly affirmed the Attorney General’s legal authority to pursue restitution and compensation for all Minnesotans harmed by “a pattern and practice of fraudulent conduct.”
“Minnesotans of all backgrounds just want to be able to afford their lives. Today’s ruling affirms my office’s authority to get money back for Minnesotans when they’re harmed by fraud — in this case, low-income students who were falsely told that they could become Minnesota police or probation officers by enrolling in a program that cost upwards of $70,000,” Attorney General Ellison said. “These students were convinced to take out costly student loans, expend hard-earned GI Bill benefits, and spend their savings to attend a fraudulent program because the schools misrepresented to them that it was a way to make a better life for them and their families, when the schools knew it wasn’t. Instead, they were left with a degree they can’t use or credits they can’t transfer — and tens of thousands of dollars in debt. I’m pleased the Supreme Court strongly reaffirmed that my office can restore those losses to victims.”
Writing for the Supreme Court’s 5-2 majority, Justice Paul Thissen wrote:
The Attorney General seeks equitable restitution on behalf of all the Schools’ criminal justice students; not money damages for each individual student. Equitable restitution, unlike money damages, is intended to force a wrongdoer to divest money improperly gained at the expense of another party. It is aimed as much (or more) at preventing the wrongdoer from profiting from its misdeeds as it is to make the injured party whole. (p. 23)
The Attorney General seeks to divest the Schools of gains that they reaped as a result of their violations of the MCFA [Minnesota Consumer Fraud Act] and then (rather than holding those proceeds for the State) distribute the proceeds to injured consumers—a power we interpret as within the Attorney General’s parens patriae authority and granted to the Attorney General in Minn. Stat. § 8.31. (p. 24)
In 2014, the Minnesota Attorney General’s Office brought an enforcement action against MSB and Globe after an investigation uncovered rampant fraudulent and illegal practices used to enroll students and obtain tens of thousands of dollars in federal financial aid. Many students who enrolled at the for-profit colleges reported that they found themselves saddled with tens of thousands of dollars in debt without the ability to get jobs in their chosen fields. MSB and Globe maintained campuses in Blaine, Brooklyn Center, Elk River, Lakeville, Minneapolis, Moorhead, Plymouth, Richfield, Rochester, Shakopee, and Woodbury.
In 2016, a Hennepin County District Court found that MSB and Globe engaged in consumer fraud and deceptive trade practices by misrepresenting the job opportunities available to their criminal justice graduates. The District Court then issued an order awarding an injunction, penalties, and restitution to victimized students. The court fashioned a process for criminal-justice students enrolled in the program since 2009 who were misled about their ability to become a Minnesota police officer or probation officer to obtain refunds of tuition, fees, and student loan interest paid or accrued. The Minnesota Supreme Court today rejected the schools’ appeal and attempt to prevent students from receiving restitution and upheld the lower court’s order.
Resources for affected students
If you believe you are a criminal-justice student who is eligible to submit a claim for restitution, have questions about the restitution process on appeal, or have any other questions about the Attorney General’s lawsuit, you can contact the Attorney General’s Office at (651) 296-3353 (Metro area) or (800) 657-3787 (Greater Minnesota). If you believe you are potentially eligible for restitution and your contact information has recently changed, please contact the Attorney General’s Office immediately.
Borrower’s Defense to Repayment of Federal Student Loans.
Federal law provides that students may apply to the U.S. Department of Education for “borrower defense” to repayment on their federal student loans. Students may be eligible to submit a borrower-defense claim if their school committed fraud against them, misrepresented its services to them, or otherwise violated state law. Students interested in determining if they are eligible to submit a borrower-defense claim should visit the U.S. Department of Education’s website for more information. Students can also call the U.S. Department of Education’s borrower defense hotline (855) 279-6207 or send an email to: firstname.lastname@example.org.
Defense to Repayment of Private Student Loans.
A federal regulation called the “Holder Rule” allows consumers to (in some cases) assert defenses to a creditor’s collection of money based on the seller’s false representations. The Federal Trade Commission has stated that private student loans fall within the scope of the Holder Rule. Accordingly, you may be able to cancel existing debt from your private student loans if your school fraudulently induced you to enroll and had some relationship with the private lender that issued your loans. You may wish to consult our flyer, The Holder Rule: When You Take Out a Loan and the Product is Defective or Fraudulent for more information. Our Office cannot give you legal advice or tell you whether the Holder Rule may apply to your situation. As a result, you may wish to consult an attorney about whether the Holder Rule may apply to your situation and how to assert it. You may wish to consult our publication, Hiring an Attorney, for guidance in looking for an attorney.
Discharge of Federal Student Loans Due to the Closure of MSB and Globe.
Students affected by closure may wish to apply for “closed school discharge” related to loans they took out to attend MSB and Globe. Under federal law, enrolled students at schools that close and students who have withdrawn within 120 days of a school’s closure may be eligible to receive a 100% discharge of their federal student loans from the U.S. Department of Education.
Please note, however, that students are generally not eligible for this discharge if they: (1) withdrew more than 120 days before a school’s closure; (2) they are completing their program through a teach-out agreement with the closed school, or are transferring the credits they earned at the closed school to a comparable program at another institution; or (3) have completed all the coursework for their program. After a request and advocacy by the Attorney General’s Office, the U.S. Secretary of Education expanded the group of MSB and Globe students eligible for closed-school discharge to include anyone who attended and withdrew on September 8, 2016 and after (the date the district court issued its findings of fraud in the Attorney General’s case). If you have questions about the process for closed school discharge, you should consult the Department of Education’s website and fact sheet for MSB and Globe students.