Globe U and Minn. School of Business must close, state says after fraud ruling

The state of Minnesota took steps toward closing Woodbury-based Globe University and the Minnesota School of Business on Thursday after a judge ruled that the for-profit schools committed fraud in marketing and recruiting for their now-shuttered criminal justice program.

In revoking the schools' authorization to operate, the state's Office of Higher Education said they won't close immediately. The office will try to minimize disruption by evaluating what it called "teach-out" plans and other options for the approximately 1,700 Minnesota students enrolled on state campuses.

The state's action was set up by a 133-page rebuke by Hennepin County District Judge James Moore, who ordered Globe and the Minnesota School of Business to stop the fraudulent practices.

Moore also ordered unspecified civil penalties against the schools, which operate as separate corporate entities but are owned by the Myhre family and share the same management team.

Students affected by the practices are likely to be allowed to file for restitution.

As a result of the court ruling, Higher Education Commissioner Larry Pogemiller ordered the schools' authorization revoked late Thursday afternoon.

State law prohibits a private school from operating if it has been found to have committed fraud.

If the schools don't win an injunction to stop the move, they could have a year to allow enrolled students to complete their degrees, or the state could work with students and other schools to accommodate transfers, a Higher Education department spokeswoman said.

On Thursday night, Jeanne Hermann, the schools' chief operating officer, said they were not aware of the state's action until asked to comment by the Star Tribune.

"We find it hard to believe the Office of Higher Education would make a statement to the media before directly communicating with the schools, especially because the action … seems premature and likely to harm thousands of Minnesota citizens," she said in a prepared statement.

Earlier, Globe and the Minnesota School of Business pointed to other portions of the judge's ruling as a vindication of their practices.

In 2014, Minnesota Attorney General Lori Swanson filed suit against the schools, alleging that they used high-pressure sales tactics to recruit students into programs that did not deliver on the promise of jobs.

The suit claimed that many students, including a large number of veterans using G.I. Bill benefits, enrolled in the schools' criminal justice program only to discover later that their degree failed to meet the requirements to become police and probation officers in Minnesota.

In Moore's ruling earlier Thursday, he said that the schools' recruitment and marketing policies "ignored or obscured the requirement and served as a trap for the unwary."

He ruled that the schools violated the Consumer Fraud Act and the Deceptive Trade Practices Act by advertising that their programs provided the necessary training and study for students to become certified in Minnesota. The judge characterized the schools' claims as "false and misleading."

In a part of the ruling more favorable to the schools, Moore said Swanson's office failed to prove that school representatives systematically misrepresented students' ability to transfer credits, showed widespread deception in the admissions process or inflated job placement rates.

"The court found that Globe University and Minnesota School of Business are currently operating in full compliance with state law," the schools said in a statement posted on the internet. "While the court made some findings related to our now-ceased criminal justice program, the court has ordered the Attorney General's Office to provide additional information to complete its ruling on the matter."

Swanson said the ruling is particularly gratifying because many of the affected students wanted to serve the public.

"We would like to see these students get restitution to the extent that they were misled about what their degrees would do for them, especially since so many of them wanted to give back to their communities," she said.

The suit affects students from 2009 to 2014. While the schools no longer accept applicants for their criminal justice program in Minnesota, Swanson said there is nothing to stop them from re-establishing the program.

Moore ordered Swanson's office to file a brief on the proposed injunction and possible civil penalties later this month.

Globe will be given until early October to respond.

Offering 30 degrees, the schools have 19 campuses across Minnesota, Wisconsin and the Dakotas, with about 3,000 students and more than 600 employees.

The ruling and subsequent action by the state come as the for-profit education industry faces increasing scrutiny. Earlier this week, ITT Tech announced it was closing all of its campuses nationwide, including two in Minnesota.

Moore said he would not address the larger issue in his ruling.

"Arguments going to the broader questions of the value of the industry itself are better suited for the political arena," he wrote.

Mark Brunswick • 612-673-4434