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Of course, one could ask, if you were so successful in hanging bandits, why did you let them in in the first place.

Senator PELL. I notice in your testimony you mentioned that fact, also that you were presently under suit from, I think, five institutions.

Why is it that you get sued by institutions and other-I should have asked this of your predecessors other accrediting agencies do not get sued? What is the reason for it?

Mr. FULTON. Well, I do not know why the others have not been sued yet. Maybe everybody is trying out their theories on us.

Senator PELL. Is it because yours are for profit, whatever it is, would that be the reason? For instance, have any of the institutions that you dropped, were they among the 15 percent or 10 percent that were nonprofit?

Mr. FULTON. With threat of litigation, and for that reason I cannot reveal the name of the institution, but we are very current, I mean within a matter of 72 hours, of making arrangements that if we do certain things, they may forego damage claims, bringing suit on behalf of 200 Hispanic surname students, because of our feeling that accreditation should be withdrawn from the institution.

The school has gone through our entire process of appeals, and Mr. Hart can tell you, or fill you in on the details, if necessary. But, yes, that is a nonprofit; 501 (c) (3) institution.

Our first lawsuit, which I have not mentioned in here, we were sued by Blackwell College, here in the District of Columbia, also a nonprofit institution, for failure to grant accreditation.

The District of Columbia courts dismissed the suit, and we have heard no more about it. I hope we do not. We have enough right now with the two suits in fact, and a third suit which appears rather imminent.

The five schools in Texas sued us. That is a very serious situation. Those were among the schools who the Office of Education asked us to examine, and we sent in our teams, and we had show cause hearings, and we went through the whole-what we consider to be due process, and we withdrew accreditation, but the withdrawal of accreditation curiously enough does not always, despite what Dr. Orlans said, it does not mean that a school will lose its eligibility.

We withdrew accreditation, I believe, in May 1973 of those five schools, I believe it was publicly announced. As far as I know, program administrators of USOE continued to insure loans sometimes afterwards, possibly through the end of the year.

Senator PELL. Were they notified when accreditation was withdrawn?

Mr. FULTON. Yes. In fact, that is what provoked the lawsuit. Well, when OE finally quit insuring loans, and then of coursewait a minute the lawsuit is not predicated on those five schools, the lawsuit is predicated on the purchase of additional schools by the same individual who was the prime owner of the five schools.

Let me correct the record on that. I apologize. There was no resort to litigation on those five schools. It is the same prime ownership control, then purchased eight additional schools

Senator PELL. Are any schools owned by ITT members of your group?

Mr. FULTON. Yes, sir.

Senator PELL. How many?

Mr. HART. Approximately 13.

Senator PELL. How many schools does ITT run, or administer?
Mr. HART. I did not understand.

Senator PELL. How many schools are owned by ITT in total?

Mr. HART. All of the business schools which they own, or which are eligible for our accreditation, are members of our association. I do not know how many other schools they own and operate.

Mr. HART. Could I go back to a question you asked a minute ago? Why we have been sued and no one else has been sued? I think one reason for that is, we have taken many withdrawal actions in the past 2 years, and I am not sure about other accrediting agencies, but I have not seen any figures which would indicate they have taken any such severe action as we have.

Senator PELL. That is a good thought. I would like to interrupt the proceedings for a moment. I see Dr. Dickey and Dr. Kirkwood are still here.

Why do you feel you have not been sued, while this group has been sued?

Mr. DICKEY. Mr. Chairman there have been instances of suits being brought against the accrediting agencies that accredit the nonprofit area, as well. For example, the Southern Association had a suit for well over $2 million brought against it by a Florida institution, claiming the association had called it a diploma mill.

There have been other institutions where accrediting agencies have been sued. So I am not certain that there is this opportunity to develop any sort of line between the nonprofit and the proprietary sector on this basis.

Senator PELL. I appreciate that. Maybe this is an occupational hazard of accrediting agencies, and maybe we ought to try to write into the law some kind of exemption from class action suits.

I do not know if that is legal. I am not a lawyer, but it might be helpful.

Mr. FULTON. For the record, I believe San Francisco State also was subject to a suit involving social workers accrediting agency. The claim was that San Francisco State graduates could not get as good jobs because they were graduates of an accredited institution which had been denied accreditation.

Senator PELL. I think if we did write something in the law, it would be to tighten the accrediting process. As I think it through, I can see all kinds of legal complications.

Mr. FULTON. We have made the suggestion if you want to retain accreditation as an element of eligibility, that possibly there should be some buffer which would establish another council of wise men, maybe with governmental immunity, that a school or group of students could turn to if the institution has been denied accreditation in a final decision, or if the institution has had its accreditation withdrawn, you could go to one more forum that might have governmental immunity and get another decision.

I believe this is forum shopping, and the minute you do this, you lay yourself open to criticism of undue delay. But it is funny. The same people who despised Mussolini by saying he made the trains run on time, are the same ones now who cry out for immediate action, and let us do it right away.

There is a need for balance here.

Our recommendation is that if you want to keep accreditation, I think it is going to have to have a buffer if it is to survive. We do not have the resources to finance and pioneer jurisprudence in this

area.

Senator PELL. Is it your view then that there should be some legislation in this field. I believe the less legislation the better, as a matter of general governmental policy, but is it your thought that there should be legislation to prevent the abuses that have occurred, and to help with this tightening up process?

Mr. FULTON. No, sir. On the problem of abuses, I think there is sufficient legislation right now. Of course, speed laws do not prevent speeders, but I think there is ample recognition of the role of the States as an independent concurrent element, and particularly in the guaranteed student loan program where the language dealing with the authority from the State under section 435 (c) (2) is specifically different when it was enacted 9 years ago from the comparable language on an institution of higher education.

Why that has not been implemented in the administration of the law, that is something I know nothing about.

Similarly, with regard to abuses and getting schools out of the program, again for the guaranteed student loan program, there has been authority to limit, suspend, and terminate since 1972 under section 438 (a).

Why it has not been implemented, I do not know. I think there is enough legislation now. It is always a question of it being utilized. Now, with regard to protecting the accrediting agencies, I think legislation is necessary there if you want to continue to use them.

Senator PELL. I would like to ask the same question, if I could, to Dr. Kirkwood, and Dr. Dickey: do you think some kind of legislation can be enacted in connection with this accreditation or eligibility problem-do you think it would be of help in tightening up, and also in lowering the default rates which are too high, and that this would be of help, either one of you?

Mr. KIRKWOOD. Sir, I think it would be of help, because as it stands right now, the accrediting agencies are under constant threat that if they do not enter into an accrediting relationship with an institution, that they will be taken to court.

Two of the regional accrediting commissions are under threat of lawsuits at this moment for that very reason. They refused heretofore to enter into a working relationship with institutions, institutions unwilling to accept their reasons, and are threatening to take them to court to do so.

I think a protection would be vital, as Mr. Fulton has pointed out. I think this would help considerably in tightening the accrediting process, but I do want to emphasize that the thrust of accreditation is not in an exclusive direction. Rather, it is an inclusive direction. We are much more concerned in working with institutions, to strengthen and improve their educational quality, than we are in setting such rigid standards that we exclude institutions from the accrediting community.

But we prefer to do it on a voluntary basis, rather than under threat or compulsion to lawsuits. I think some protection would be desirable.

Senator PELL. Would you be kind enough to submit to the subcommittee your thoughts with regard to the ideal legislation? Either get a legal firm to draw it up, or the outline of the ideas.

I would also ask if the Association of Independent Colleges and Schools would do the same, and I will also ask the National Association of Trade and Technical Schools and the American Home Study Council, when they come up, if they will do the same.

I am not saying we will even have any. But I would like to see your specific ideas.

Mr. FULTON. I think you are quite correct in asking for specific ideas.

As you earlier noted, people want specific answers from you. I looked at the Newman report, and I think it is well intentioned.

Frankly, I know some of the people on the task force, it is well intentioned, begging the question, because they have not given you any specific answers. They just said, well, we should have a national procedure for determining eligibility.

Well, give me the procedure, because that is where the buck stops. Just like this committee has to make certain hard decisions, Congress has to make certain hard decisions, and it is: get in or get out. And accrediting agencies have to do the same thing.

Just to say we should have some procedures, give me the procedures and certainly I think that our accrediting agencies, as long as Congress wants us to be an element in eligibility, we will do our best to respond-but the point we have reached, I do not know if we can afford it financially.

[The information referred to and subsequently supplied follows:]

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ASSOCIATION of

INDEPENDENT COLLEGES and SCHOOLS

(Formerly United Business Schools Association)

1730 M STREET, N.W.

WASHINGTON, D. C. 20036

202/659-2460

February 3, 1975

The Honorable Claiborne Pell, U.S.S.

Room 325

Old Senate Office Building

Washington, D.C. 20510

Dear Senator Pell:

In response to your request I enclose a suggested draft of a proposal which in my opinion could afford accrediting agencies some relief from the ever present threat of litigation whenever accreditation is a necessary element of eligibility.

I would suggest that it be added as a new subsection (c) of
Sec. 438 Eligibility of Institutions of Part B of Title IV of the
Higher Education Act. Then I would further suggest that all of Sec.
438 be relocated and renumbered to either Part F of Title IV as
three new subsections in Subpart 1, possibly as new subsections
497 (d), (e), and (f), or to Title XII as three new subsections
(m), (n), and (o) to Sec. 1201. In the former case, the entire
thrust of all of Sec. 438 would then be applicable to all programs
of student financial aid. In the latter, the alternative to accredi-
tation would be available in programs of institutional aid also.

In any event, I would be happy to respond to any invitation from you to elaborate through testimony to attempt to justify this proposal.

Respectfully submitted,

Rechard C. Fulton

Richard A. Fulton

Executive Director and

General Counsel

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Enclosure

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