A chain of private colleges is taking the federal Department of Education to court over the recent denial of nonprofit status for Utah's Stevens-Henager College and its sister schools.
A complaint filed Monday in U.S. District Court for Utah accuses the department and U.S. Education Secretary John King of arbitrarily targeting for-profit schools for "burdensome compliance requirements" during the process of converting to a nonprofit structure.
"Such actions indicate an intentional effort to close those formerly for-profit institutions," the complaint states.
The complaint was filed by Center for Excellence in Higher Education, or CEHE, which in 2012 acquired Stevens-Henager College, California College San Diego, CollegeAmerica and Independence University.
The school chain was previously owned by the Carl Barney Living Trust, and the 2012 merger included the appointment of Barney as chairman of the CEHE board of directors.
Barney's position within CEHE, as well as ongoing debt and lease payments made to Barney as a result of the merger, were cited by the Department of Education on Aug. 11 in a decision that denied nonprofit status to the school chain.
King, in the department's announcement, implied that CEHE was attempting to skirt government oversight by converting the status of its schools.
"Don't waste your time," King said.
Stevens-Henager President Eric Juhlin — also CEO of CEHE — said Monday's lawsuit was a matter of last resort.
The schools requested a reconsideration of their status but heard no response from the U.S. Department of Education, Juhlin said.
CEHE was also given until Aug. 31 to sign new participation requirements with the department, Juhlin said, which are required for students to receive federal grants and other forms of financial aid.
"We really had no choice," Juhlin said. "We had to execute those agreements, which we did yesterday under protest."
The complaint asks for new participation agreements to be offered to CEHE, acknowledging the nonprofit operations of Stevens-Henager College and its sister campuses.
"I've got 9,000 students in school, many of whom are participating in federal aid," Juhlin said. "The last thing I'm going to do is jeopardize their ability to receive tuition assistance."
A spokesman for the U.S. Department of Education declined to comment on CEHE's complaint.
Stevens-Henager and CEHE are also facing two lawsuits, one filed by the Colorado attorney general and another by two former employees who worked as recruiters for the school.
Juhlin said the parties in the whistleblower case are scheduled to participate in nonbinding mediation in October, and a trial for the Colorado lawsuit is scheduled for May 2017.
"We believe both of those are baseless and we're aggressively defending ourselves," Juhlin said.