Stone Academy lawyer says CT misusing restricted funds for audit

A lawyer for Stone Academy is objecting to plans by the Office of Higher Education to use a restricted student protection fund to pay for an audit intended to judge the validity of credits earned by students at the for-profit career training school, which closed mid-February.

Perry Rowthorn, the former deputy attorney general representing the family trust that owns the school that trained students to be licensed practical nurses, said use of the restricted funds is not authorized by state law and is contrary to the interests of the students.

“In addition to being unauthorized, it would be nonsensical and directly contrary to the purposes of the account to use it for an audit that will harm students by disenfranchising them of earned educational credits,” Rowthorn said.

By law, Rowthorn said, the fund’s only purpose is to provide “reimbursement to students in the event of insolvency or cessation of a school’s operation.” The student protection account is funded by quarterly fees paid by the career schools equal to four-tenths of 1% of tuition.

Timothy Larson, the executive director of the Officer of Higher Education, said his agency is using the student protection funds with the approval of the secretary of the Office of Policy and Management, which OPM confirmed. The audit, he said, is necessary for the students to continue their studies.

“Once we have the audit, we can [assess] all of these students appropriately and then get them on a path forward,” Larson said. “So I think we’ll get it done sooner than later. I don’t have a timeline.”

The contract with Clifton Larson Allen, the firm that will conduct the audit, was signed Monday.

One issue is whether students, who divided their time in class and in clinical settings, had adequate clinical hours — something that became difficult during the first years of the COVID-19 pandemic, when skilled nursing facilities limited access.

But in interviews and correspondence with lawyers representing the Office of Higher Education in the attorney general’s office, lawyers for Stone say the terms of the LPN program were authorized by OHE and the state Department of Public Health.

“OHE has not and cannot point to any requirement that attendance records be maintained for a credit hour program like Stone,” Rowthorn wrote. “Indeed, OHE has long known that Stone did not maintain institutional classroom attendance records, including when it reapproved Stone’s program in February of 2022 with awareness of Stone’s attendance policy.”

In other words, Rowthorn says, there is nothing to audit.

The fight over the audit and use of the student protection fund are elements of the messy end to Stone, one of the nonprofit and for-profit education offerings from institutions once controlled by Mark Scheinberg, the entrepreneurial founder and president of Goodwin University in East Hartford.

Scheinberg turned over control of Career Training Specialists, the limited liability corporation that does business as Stone, to a trust under a settlement with the U.S. attorney’s office in May 2022.

The U.S. Department of Education, which administers the federal grant and loan programs essential to the ability of most students to attend the for-profit schools, had alleged that Scheinberg had secretly made small payments on loans of 102 students from 2015 to 2019 to conceal a high rate of potentially disqualifying student loan defaults.

Scheinberg admitted no wrongdoing, but to resolve the allegations, he agreed to pay $1 million and withdraw from Stone and, over five years, from the nonprofit Goodwin and its recently acquired University of Bridgeport, as well as the for-profit Paier College of art.

Larson’s office played no role in the federal action, but it was assessing Stone’s operations later that year as part of the renewal of its license to operate and, in his words, “discovered that 20% of the faculty was not legitimate and that these clinical hours were bogus, for lack of a better word.”

The fall of Stone Academy and his high-profile role in its aftermath has been complicated for Larson, who describes Scheinberg as a long-time friend.

Scheinberg is admired in East Hartford for converting a polluted site on the Connecticut River into a college campus, an effort aided by federal environment protection grants.

Larson’s brother, U.S. Rep. John B. Larson, is a frequent visitor to Goodwin, where he announced his reelection candidacy in 2022 and hosted a visit by House Speaker Nancy Pelosi in 2021.

Timothy Larson previously had tried to use the restricted student protection fund to pay for a convention last year promoting for-profit schools as an alternative to college, but the Office of Policy and Management warned in a months-long exchange of emails that the use was not allowed by law. The office eventually obtained other funding.

“I wasn’t promoting anything other than these occupational schools. It was effectively their money,” said Larson, noting that industry fees fund the student protection account. “This is not taxpayer money.”

He acknowledged that it was unusual for OHE to promote the schools it regulates.

“I’m sort of straddling the fence,” he said.

Larson said his office was acting prudently in assessing Stone’s license renewal. A recent OHE survey of Stone Academy students drew 300 responses, nearly all of them negative, and his office was concerned by falling rates of students who passed the test necessary to work as a licensed practical nurse.

Rowthorn said the so-called illegitimate staffers played a limited role in accompanying students to clinical sites, and he suggested that Larson had overreacted to what he conceded were Stone’s struggles during the pandemic.

“We do not dispute that Stone’s exam passage rates declined in recent years,” Rowthorn wrote in one letter to the attorney general’s office. “We believe this reflects the unusual strains inflicted by the pandemic both on the institution but, more importantly, its student body, many of whom were severely, even disproportionately, challenged by economic and other COVID-related pressures. In any event, DPH’s regulations provide a process for placing a program on conditional approval status and ultimately revoking approval if, after two years, unacceptable exam passage rates or other perceived program failures are not remedied.”

Another Stone lawyer, Thomas J. Murphy, wrote to the attorney general’s office on Feb. 27 that Stone officials suspected that OHE was behind the U.S. Department of Education cutting off access to federal aid until a review of whether federal regulatory requirements were met for each Stone student.

While that might be disputed, Rowthorn said, Larson abruptly ended talks with Stone about an orderly closure following previous protocols for failed schools, such as a “teach out” to finish courses or assist students in completing courses elsewhere.

“We didn’t close the school,” Larson said. “And they agreed to this audit, and we have a signed document by Joe Bierbaum.”

Bierbaum, who is married to Scheinberg’s stepdaughter, manages the trust that operates Stone.

Larson said the audit is necessary to assess who might be entitled to tuition refunds from the student protection fund and how much they might be owed.

The fund currently has a balance of about $2.3 million. Larson said OHE had no estimate of the potential liability to the fund for Stone tuition refunds.

Mark Pazniokas is a reporter for The Connecticut Mirror (https://ctmirror.org/ ). Copyright 2023 © The Connecticut Mirror.