Students stuck with big debt, broken dreams
DAVID WICKERT; The News Tribune
Toni Cornell of Tacoma was a teenage mother who wanted off welfare and off the graveyard shift at Jack in the Box. She borrowed $7,000, enrolled at the Business Computer Training Institute and hoped for a good-paying office job when she graduated.
When the training was over, she was back on welfare and $7,000 in debt.
Faye Kaeka of Spanaway left a job paying $11 an hour to attend BCTI, hoping to boost her pay. Six years later, shes making less than before and still owes $3,100 for the classes.
Donald Bolden of Tacoma was a part-time clerk who wanted a computer-repair job and better pay. Today, hes unemployed and owes $20,000 for his training.
Broken dreams and big debts are common among graduates of Gig Harbor-based BCTI. More than 400 former students have joined a class-action lawsuit against the school.
They say BCTI targeted poor, vulnerable people, promising high-tech training and good-paying jobs. Instead, the former students say, it delivered crushing debts and low-paying jobs with retailers, fast-food restaurants and temp agencies. The lawsuit claims the owners enriched themselves at the students expense.
School officials deny those allegations and say most BCTI graduates were happy.
Once a rising star in the for-profit education field, BCTI at its height had eight campuses in Washington and Oregon. But it closed its remaining seven campuses last year amid government investigations and student allegations. Its fall shows the abuses that can occur in an industry that gets billions from government programs but faces lax oversight.
Government records, court documents and interviews with former students and employees show:
BCTI recruited at welfare and unemployment offices, sometimes in violation of state law. It enrolled homeless people and former prisoners. Its employees falsified admissions tests that allowed students to receive financial aid.
BCTI pressured employees to meet enrollment and retention quotas and fired them when they didnt. It pressured teachers to keep unqualified students in class so the school could collect their financial aid.
BCTI charged $11,000 for basic computer courses that were available elsewhere for much less or even free. Most of its income came from government aid programs: BCTI received nearly $140 million from federal student loan and grant programs from 1997 to 2004 alone. It got another $8.3 million from Washington state college aid programs during that time. Many students also borrowed money from BCTI to attend classes at nearly 19 percent interest.
BCTIs owners, Tom Jonez and Morrie Pigott loaned themselves hundreds of thousands of dollars from a BCTI-related company. They paid themselves $3.8 million in salary over five years.
Regulators were suspicious of BCTI as far back as 1993. But despite multiple threats to sanction the school, BCTI usually evaded consequences. When it closed in March 2005, BCTI was under investigation by a private accrediting agency and by state officials in Washington and Oregon.
In the lawsuit, awaiting a trial date in Pierce County Superior Court, students accuse BCTI of breach of contract, fraud and violations of Washington states consumer-protection law.
The schools owners and their attorneys wouldnt talk to The News Tribune. They declined invitations to read and comment on these stories before publication. But in court documents and in written answers to the newspapers questions, they defend the schools practices.
They say they held BCTI recruiters to high ethical standards and never promised students would get good jobs after graduation.
They say students signed disclaimers acknowledging the school couldnt promise employment or wages.
They say many of BCTIs 28,000 graduates have gone on to successful careers.
It was the mission of the company to help those who wanted to change their lives learn how to fish, according to a statement issued by BCTIs attorney, Thomas Merrick.
Many graduates were very successful, and their lives were changed for the better, the statement said. Others were not. BCTI provided the opportunity if they were willing to do the part that only they could do.
In court documents, BCTI says the students who are complaining have many accusations but little proof. If some now find themselves unemployed or in debt, its their own fault, according to the school.
Tom Jonez and Morrie Pigott met in the late 1970s through their work with a Christian youth ministry. Pigott was a teacher who later installed computers for Jonezs education consulting business.
They became friends and business partners. In 1985 they borrowed $25,000 to buy an Everett computer school and launched the Business Computer Training Institute.
Other acquisitions followed, and BCTI eventually grew to eight campuses in Washington and Oregon, including Tacoma, Fife and Lacey.
Though BCTIs programs changed over time, the schools generally taught students to use basic computer functions like word processing, spreadsheets and e-mail. The courses prepared people for entry-level office computer work.
Later the school added a second curriculum that taught students to maintain computers, networks and Web sites.
BCTI charged $10,980 for the 30-week basic computer skills program in 2004. It charged another $11,855 for the 30-week hardware and networking program.
It was a steep price compared to some other options.
For about $5,000, students in 2004 could have spent two years earning an associates degree in computer science at Tacoma Community College.
For about $7,700, they could have spent two years at Bates Technical College to become a computer networking system technician. For $9,900, they could have paid tuition at the University of Washington for two years.
In addition, nonprofit agencies like Goodwill offer basic computer training for little or no cost to low-income people.
BCTI claimed its students got an introduction to the workplace as well as computer training.
It taught such basics as how to dress and behave professionally. It helped students prepare their résumés and write cover letters. And it offered a year of job-search assistance.
Karen Cleveland is happy with her BCTI education.
A longtime grocery truck driver and warehouse worker, Cleveland wanted to go back to school to learn how to use my brain instead of my brawn.
Cleveland, then 37, attended BCTI in 2001. She learned basic office skills. She brushed up on job-search techniques. She liked
her instructors and said she got a lot out of BCTI.
A month after she graduated, she took a job as a receptionist at a company that distributes truck parts. She made about $12.50 an hour.
Three months later she took a job at the state Department of Corrections. She later was an office assistant for several state agencies.
Cleveland said she learned enough at BCTI to get her foot in the door. The rest, she said, was up to her.
You have to be able to sell yourself, she said.
Cleveland had been injured on the job, and state worker retraining benefits helped pay her tuition. In fact, nearly all of BCTIs revenue came from public programs.
In 2004, for example, BCTIs financial statements show it received $18.1 million in federal loans and grants for college students nearly 88 percent of its cash revenue.
That same year, BCTI received $810,144 from Washington state student aid programs. And that doesnt count other public sources like worker retraining funds and veterans benefits.
As demand for computer skills grew, so did BCTI.
In 1992, BCTI ranked 101st on Inc. magazines list of the fastest-growing private companies in the country.
In an interview at the time, Pigott talked of expanding BCTI nationwide. And Jonez bragged of BCTIs ethics at a time when many for-profit schools were under scrutiny.
Were trying to run a clean ship in a polluted pond, Jonez told The News Tribune back then.
But behind its successful image, BCTI was a troubled school.
Even as it basked in the Inc. magazine ranking, BCTI ran afoul of federal financial standards, records show. Citing the schools shaky 1992 financial statements, the U.S. Department of Education threatened to cut off student aid in January 1994.
Two years later, the department again threatened to cut off federal aid
, this time because for three consecutive years more than a quarter of BCTI students receiving federal loans had defaulted.
It was a signal that BCTI students might not be getting good jobs that would allow them to repay the loans. When students defaulted on loans, taxpayers were left to cover the losses if the government couldnt collect.
BCTI convinced the department to rescind both threats to cut off federal aid. But there were other warning signs:
In the 1990s, 90 Oregon students sued BCTI, claiming the school enticed them to enroll with misleading promises of good-paying jobs after graduation. BCTI admitted no wrongdoing, but settled the lawsuits.
In 2002, a private agency threatened to revoke BCTIs accreditation
because of substandard graduation and job placement rates. Twelve BCTI programs at various campuses had graduation rates below the agencys 67 percent minimum standard. Fourteen programs had job-placement rates below the 70 percent minimum standard.
In 2004, a private investigator hired by BCTI found evidence that two employees falsified basic skills tests that allowed six high school dropouts to enroll at BCTI and collect federal aid. Later, a state Higher Education Coordinating Board investigation
found a substantial failure of the schools procedures to prevent test manipulation, and demanded repayment of $50,141.
In 2005, the Oregon Department of Education found BCTI misled students about its program
, promising information technology training but focusing more on soft skills like workplace etiquette and job interviewing.
Oregon investigators concluded BCTI enrolled students who cannot reasonably expect to succeed in and benefit from its training. And they questioned BCTI recruiting practices, which included recruiting outside welfare and unemployment offices.
Many BCTI students were poor. Hundreds were high school dropouts.
Former employees say others were homeless, former prisoners or mentally ill.
Harold Gray, a former BCTI recruiter and supervisor, said in a court statement the school targeted vulnerable people. In addition to welfare and unemployment offices, he said he recruited at the Salvation Army and the Thurston County Courthouse.
Its not illegal in Washington for schools to recruit at unemployment or welfare offices. To protect the vulnerable, the state requires private vocational school recruiters to stay at least 40 feet away from these facilities.
But in their zeal to recruit students, some BCTI employees ignored the law, according to Gray, as well as a state investigation
In 2004, Peggy Rudolph of the state Workforce Training and Education Coordinating Board watched a BCTI recruiter at work outside the door of an unemployment office in Olympia. She also found BCTI had not registered its recruiters as required by the state.
She alerted BCTI officials, who pledged to remind recruiters of the law and to register them with the state. Rudolph found no evidence of similar violations and closed her investigation.
But in an interview, Gray said such violations happened all the time. He said he told recruiters theyd be fired if they broke the law.
People still did it anyway, he said.
In a court statement and the interview, Gray said recruiters were under intense pressure to meet quotas and were fired if they didnt.
Another recruiter, Elizabeth Mercado-Bradford, also cited pressure to meet quotas.
You dont get the numbers, youre gone, she told The News Tribune. Its all about sales, buddy.
Because of that pressure, some employees reportedly lied to prospective students.
In a court statement, instructor Susan Satterla said recruiters told prospective students that BCTI offered a certified A+ computer maintenance program. The program was not certified.
Gray said a common lie was telling students a single BCTI program took 15 months to complete. In reality, there were two 30-week programs, but Gray said BCTI wanted to sign students up for both programs at once to get more money.
Another ploy, according to Gray, was saying a tour of BCTI would take just an hour. BCTI sometimes kept students up to four hours, pounding on them to get them to enroll, Gray said.
Laura Lundahl gave some of the student tours. She was a career consultant, or admissions representative, at the Tacoma campus for about three months in 2003.
She joined BCTI after earning a masters degree in nonprofit administration. On her first day, she watched a video on how to uncover and play off peoples pain, she said.
They used those words, she said. Find their pain and use that.
Lundahl said she was taught the remedy for that pain was to enroll at BCTI.
On her second day, Lundahl said, she sat in her car at lunchtime, crying. She called her mother and said she couldnt do this job. Her mom encouraged her not to give up. It couldnt be that bad.
Lundahl didnt want to lose her first job after college. So she stuck it out.
But she wasnt very good at it. She said she was fired for not meeting her quota.
Mercado-Bradford, the field recruiter, also had reservations about her job.
She remembers meeting a former student while recruiting at the Tacoma Mall. The woman told her BCTI was a scam.
You guys are ripping off honest people, the woman told her.
It wasnt the first time Mercado-Bradford had heard that. But she said the conviction in the womans eyes struck her as the others hadnt.
I literally sat down and I said (to myself), What are you doing? Mercado-Bradford said.
Other employees apparently didnt share those qualms.
The career consultants are almost guaranteeing the students are going to make it, said one former director of a BCTI Washington campus.
The guarantees were given even to prospective students who couldnt read or write English, people who we knew on day one would never make it, he said.
The director spoke on the condition of anonymity because he signed a BCTI nondisclosure agreement. He now works in a public school and doesnt want his colleagues to know about his previous employer.
BCTI instructors also saw things that troubled them.
Tim Trussler, who taught at BCTIs Southcenter campus, said teaching there was a very high-stress job.
You were part teacher, part counselor, part parole officer sometimes, he said.
Trussler wondered why some students were admitted.
There were definitely people who were not teachable, he said.
While he said students who worked hard benefited, Trussler doubts they got their moneys worth.
He thought BCTI was extremely overpriced. He said the curriculum was flawed or nonexistent. Lesson plans were incomplete or riddled with errors and misspellings.
Trussler said BCTI made unreasonable demands on instructors. Turnover was high.
They were paying $13, $14 an hour and asking them to give $30 of effort, he said, referring to the strain on instructors.
Sam Taylor, an administrator at the Fife campus, said BCTI helped some students. But he said its primary focus changed.
Its always about making a living, Taylor said. But it became painfully clear toward the end that it became, Lets make a living at all cost.
Taylor said he questioned whether some students should have been admitted. But he said his supervisors made it clear it was his job to keep students enrolled so BCTI could collect their financial aid.
He remembers one student, a man in his late 50s, who had great difficulty remembering simple tasks like how to open a word-processing document.
Taylor said the man could do it when an instructor helped him, but he couldnt do it the next day.
When he brought the student to the attention of his supervisors, the company stance back to me was: He has a high school diploma, hes here on his own.
Taylor said BCTI administrators also overturned instructors decisions on student grading and discipline.
He said he wanted to dismiss a student for plagiarism, but was told he could not. He then proposed denying the student credit on the assignment, but was told the student deserved half credit for trying.
Trying to do what? Taylor said. She went and got another students paper and put her name on it.
Several employees told similar stories to Oregon investigators.
They told of barely literate students allowed to graduate, of a push to keep students enrolled until BCTI could collect their financial aid.
Students also saw problems in the classroom, including poor instruction and disruptive teacher turnover. But several said they stuck with BCTI, hoping their education would pay off after graduation. It did not.
Donald Bolden, 47, attended BCTIs Tacoma campus beginning in 2000. He was a part-time clerk making less than $8 an hour at an information technology company. He wanted to boost his pay and get a job repairing computers.
But he said students didnt repair computers in class, and instructors didnt stick with subjects long enough for him to learn them.
After graduating from BCTI, Bolden said he didnt know enough to get a computer-repair job. He kept his clerks job until he was laid off earlier this year. Hes still unemployed.
State records show many BCTI students struggled. Only 57 percent of students graduated from the main computer program at the Tacoma campus from 2001 to 2003, the state found.
Just 62 percent of students who graduated from that program were employed. Those who got jobs reported median earnings of $13,127 a year.
By comparison, during the same period Bates Technical Colleges computer networking systems technician program had a graduation rate of 69 percent, state records show. About 80 percent of the Bates programs graduates were employed. They had median earnings of $30,922.
BCTI owners and attorneys deny the school misled students.
In court records, Jonez said students were told repeatedly that BCTI could not guarantee them jobs after graduation. He said students signed a statement to that effect before they enrolled.
Jonez said BCTI stressed employee ethics and trained its staff to ensure students got accurate information. And he said prospective students met with several BCTI employees and could ask questions and express concerns.
By the time students are done with this rigorous introductory program, it is virtually impossible for them to misunderstand the schools representations, Jonez said.
A written statement provided by BCTI attorney Merrick said any recruiting violations were not reported to management and, if they had been, would have been summarily curtailed and the personnel replaced by staff who were willing to abide by the clear ethical guidelines set out for employees.
In court records, BCTI attorneys say many students went on to successful careers some as online bankers, auditors and Web designers at such companies as Washington Mutual, Microsoft and Nintendo.
They say the students who are complaining have little evidence to support their claims. And they say some students who have had trouble getting a job cant blame BCTI. Some didnt look for work. Some turned down jobs BCTI helped them get. Others lacked experience or transportation.
FINANCES IN QUESTION
The students attorneys paint a different picture. They say BCTI took advantage of poor, desperate people.
We have a full load of clients who were on the lowest socioeconomic rung, who are particularly susceptible to a predatory scam like this, said attorney Darrell Cochran.
That scam, Cochran said, enriched Jonez and Pigott.
Company tax returns show that from 1999 to 2003, Jonez and Pigott earned a combined $3.8 million in salary. In 2001, Jonez earned $451,771, while Pigott earned $465,504.
That same year, University of Washington President Richard McCormick earned $296,400.
Court records also show Jonez and Pigott each borrowed $200,000 in the mid-1990s from one BCTI-affiliated company they owned. One of them borrowed another $25,000 in 2002.
Two former employees say Jonez and Pigott benefitted in other ways.
James Stremme, a former accountant for one BCTI-affiliated company, said in a court statement that he was asked to process business expenses that I knew were completely unjustifiable.
He said a BCTI-related company paid more than $10,000 to charter three yachts for a week. He believed the expenses were for personal use only.
In another court statement, Miles Goda, a former BCTI financial analyst, said Jonez and Pigott improperly claimed tax deductions for Hawaiian vacations and other trips on which little or no business was conducted.
Goda also said the owners created seven corporations to provide BCTI with a variety of management, marketing and other services.
He said the complicated structure allowed the owners to strip BCTI of assets and avoid taxes by transferring money among the companies. He said if one company had substantial income, the owners could reduce its earnings by reducing the amount of money it charged to affiliated companies.
Goda said the corporate structure also allowed the owners to manipulate BCTIs finances to comply with federal financial standards. He said they bolstered BCTIs assets at key times by stopping or slowing the flow of money out of the school to make its financial condition look good to the U.S. Department of Education.
He said the owners deceived the department about BCTIs true financial condition because regulators saw only part of BCTIs complex financial picture.
As a result, Jonez and Pigott were able to keep the student loan money coming in, Goda said.
In a court hearing last year, BCTI attorney Kevin Bay rejected the accusations of improper tax deductions as unsubstantiated. He said the students attorneys were making huge leaps with innocent facts like Pigotts admission that he chartered yachts.
In a written statement
to The News Tribune, BCTI attorneys said Stremmes memory is either poor or he did not have access to the information needed to draw conclusions.
The statement noted that Godas supervisor refuted his claims in court records. It said Godas allegations are in error, factually incomplete and based on his limited understanding of the companys operation.
The statement said BCTI was audited by outside certified public accountants and reviewed by government agencies.
But an analysis of BCTIs financial statements raises questions about how exhaustive those audits were.
C. Donald Smith, a certified public accountant and fraud examiner who reviewed recent BCTI audited financial statements for The News Tribune, said the schools owners apparently transferred more than $6.2 million in assets to affiliated companies without properly classifying the transactions from 1996 to 2004.
Smith said BCTIs financial statements list the transfers as current assets, meaning the affiliates were supposed to repay the money to BCTI within the fiscal year. But Smith sees no evidence the money was ever repaid.
In fact, the amount the affiliates owed to BCTI kept rising, reaching $9.4 million in 2004.
According to Smiths analysis, if the transactions with affiliates were not counted as current assets, those assets met or exceeded current liabilities only once from 1996 to 2004. That suggests BCTI was not in compliance with federal financial standards for most of that time.
If I were the auditor, I would have grave concerns, Smith said.
BCTIs statement said there was no misclassification of assets. It said Smith stands alone, and he stands against the bevy of professionals hired by BCTI who performed accurate and ethical accounting work and/or audits.
To seek another opinion, The News Tribune provided BCTIs financial statements to the state Board of Accountancy. Executive Director Richard Sweeney said the board will evaluate the statements and decide whether to open an investigation.
The students attorneys last year used the statements of Goda and Stremme to convince Superior Court Judge Thomas Larkin to freeze some of the personal assets of Jonez and Pigott.
The attorneys said BCTIs owners were trying to shelter assets from students. Within eight days of the lawsuits filing, Jonez and Pigott transferred properties valued at $2.2 million including their Gig Harbor homes to companies they owned.
In a deposition, Pigott said the transfers were done for estate-planning purposes. In freezing the owners assets, Larkin found that argument unpersuasive.
OWNERS MOVE ON
In court records, Jonez last year claimed BCTI had minimal assets. He said he and Pigott put hundreds of thousands of dollars of their own money into BCTI to try to save it.
We have few personal assets because we have invested so heavily in BCTI, Jonez said.
Since then, Jonez sold a property on Horsehead Bay Drive Northwest in Gig Harbor for more than $1.9 million, state tax records show. And Jonez and Pigott together recently sold a Tacoma property for $390,000, according to county property records.
Since BCTI closed, Jonez and Pigott have moved on.
Pigott works for a company called Microdiffusion in Fife.
Jonez is the chief operations officer of Restore International, a Gig Harbor-based charity. According to its Web site, the charity fights human rights abuses against children.
The president of Restore International, Bob Goff, and its vice president, Danny DeWalt, are law partners who served as registered agents for some of Jonez and Pigotts companies and represented them in the students lawsuit.
According to Restore Internationals Web site, Jonez and DeWalt recently traveled to Uganda, where they met with government officials to discuss rescuing girls from prostitution.
Closer to home, more than 400 former students have joined the class-action lawsuit against BCTI. They say the good jobs BCTI promised didnt materialize, but student loan debts did.
Federal records show BCTI Tacoma students borrowed an average of $5,751 through federal aid programs in the 2003-04 school year. In addition, many students borrowed money directly from BCTI, which charged 18.9 percent interest.
Faye Kaeka borrowed $11,000, but later defaulted. The federal government has garnisheed her wages and tax refunds.
Donald Bolden, who had defaulted on a previous student loan, said he owes close to $40,000.
Toni Cornell, now 21 and raising four children on her own, owes more than $8,000, including interest.
Recently she got a clerical job at Western State Hospital. She makes $11.80 an hour.
Last year she attended Clover Park Technical College, taking prerequisites for nursing classes. Though shes working full time, she plans to return to school.
She hopes to prove a young single mother can make it on her own. She feels shes making progress no thanks to BCTI.
I was trying to prove a point, Cornell said. They didnt help me prove it.