A California court last week fined Zovio, the former parent company of a large for-profit college, $22.4 million in civil penalties for misleading students, including about the cost and career outcomes of the institution's programs.
The case centered on actions Zovio took when it owned Ashford University, an online college that enrolled more than 80,000 students at its peak. In late 2020, the company sold the institution to the University of Arizona, which rebranded it as University of Arizona Global Campus and enlisted Zovio to provide marketing, recruitment and other services to the college.
Zovio changed its name from Bridgepoint Education in 2019 during its shift from a for-profit college owner to an education services provider.
Ashford's sale, however, did not end a lawsuit California's attorney general filed against the university and its parent company in 2017. In a 49-page opinion awarding civil penalties, San Diego Superior Court Judge Eddie Sturgeon cited evidence estimating that Zovio made 1.2 million misleading calls to prospective students from March 2009 to April 2020.
Even though admissions counselors received formal training, Sturgeon wrote, "the pressure to enroll created an environment in which misrepresentations were tolerated and even encouraged."
The $22.4 million fine will likely deal a heavy blow to Zovio, which had about $32 million in cash and cash equivalents at the end of September, according to filings with the Securities and Exchange Commission. It could also further harm the firm's reputation after it paid $7.3 million in 2014 to settle allegations that Ashford misled students in Iowa.
What it means for the University of Arizona Global Campus
The ruling specifies that Zovio, and not the University of Arizona Global Campus, will be on the hook for the civil penalties. Still, the decision's aftershocks could reach the University of Arizona.
When the flagship acquired Ashford University, it kept the school as a separate institution with its own governing board. However, the University of Arizona announced earlier this year that it is taking steps to more closely coordinate the online college's operations with its own.
The initial news rankled some faculty members, who voiced concerns about the reputational damage the flagship could face if the California lawsuit resulted in a ruling finding Ashford students were misled. During meetings with the faculty earlier this year, University of Arizona leaders suggested that Zovio might not continue as the online college's services provider even though they have a 15-year contract together.
University of Arizona spokesperson Pam Scott said in an email the implications of the court's decision on the institution's relationship and contract with Zovio are not yet known. University officials believe the online college's leadership is "imposing sound oversight" over the company and "taking appropriate remedial steps" under their services agreement when necessary, Scott said.
A spokesperson for Zovio did not immediately answer emailed questions Tuesday.
Past misrepresentations detailed
The California judge's ruling details ways Zovio fostered an environment where admissions counselors felt pressured to misrepresent Ashford's programs. Managers expected them to call hundreds of prospective students each day and threatened those who didn't meet enrollment targets with being fired, according to the ruling. The company also created lists of the lowest performers and fired the bottom 10% of admissions counselors partly based on their enrollment numbers.
Given this culture, admissions counselors misled students about topics that were critical to their decision-making. Zovio employees routinely led students to believe that Ashford programs would lead to careers that required licensure, such as teaching and nursing, even though the state had not approved Ashford's programs for entry into these fields.
Admissions counselors also misled students about how much financial aid they would receive and the costs it would cover. At least two students testified they were promised they would receive enough financial aid to cover their full cost of attendance but were forced to withdraw before graduating when they discovered this wasn't the case.
Employees also often made statements that could lead students to believe Ashford programs took four years to complete, even though they took five. And they promised students that certain previously earned college credits would transfer into Ashford even though they didn't.
Documents revealed that company executives were aware of this culture. Former Ashford President Richard Pattenaude, for instance, received emails warning that the admissions employees were subject to an environment where fear was abundant and enrollment figures were prioritized over all else, but he did not recall taking steps to address those concerns.
The company also enlisted the firm Norton Norris, which offers admissions training and consulting, to conduct a review of the admissions department. In a 2014 report, Norton Norris said the admissions team had engaged in systematic deception, rating every call as "untruthful or unethical" or "incomplete or potentially misleading." Zovio ended its relationship with the company, according to the ruling.
The judge did not find substantial evidence that the misrepresentations continued past 2017, writing that there is no basis to grant an injunction that California's attorney general requested against Zovio.
One expert who testified during the trial identified only four deceptive calls in 2020. And the state of California did not present evidence about Zovio's current practices, including how it trains admissions counselors and monitors them.