Now-defunct Globe University files for Chapter 11, citing many millions owed

The defunct for-profit Globe University and its sister school have filed for Chapter 11 bankruptcy protection, saying they owe many millions of dollars in connection with fraud actions taken against the school by the state of Minnesota.

The petition filed in federal court Wednesday by the former Woodbury-based postsecondary institution comes two weeks after the Minnesota Supreme Court sided with former criminal justice students at Globe and its affiliated Minnesota School of Business (MSB) in ruling that anyone who attended the program can request a tuition refund.

The filing lists Globe's assets ranging from $100,000 to $500,000, with debts from $10 million to $50 million. The state's claims are the largest by far among the creditors, but the U.S. Education Department also has a claim of roughly $850,000 in connection with student loans.

Most of the potential creditors are roughly 7,100 former students, according to a follow-up court filing by Globe. Earlier estimates have been far lower.

"MSB and Globe committed pervasive fraud that left students who wanted to serve their communities as police and probation officers with nothing but worthless degrees and a mountain of debt," Minnesota Attorney General Keith Ellison said in a statement. "The schools fought for years to evade responsibility and lost. Now they're filing for bankruptcy instead of doing the right thing and paying students back for the fraud they perpetrated."

As for the future of the students' claims, Ellison said, "Right now, we don't know how or when students are going to get their money back. That will be for courts to sort out. What I do know is that my office will fight for every last dollar from MSB and Globe to make up for the harm they did."

The state estimates former students are now eligible for refunds worth as much as $33.7 million.

If a judge approves Globe's petition under the provision of Chapter 11, then the debtor would propose a plan to repay its creditors over time and possibly at lowered amounts. Some students were left unemployed and holding tens of thousands of dollars in debt.

Until they were shut down, Globe and MSB over the decades had campuses in various Twin Cities locations and also in Wisconsin and South Dakota.

And while instruction has ceased, the schools "continue to operate their businesses and manage their property" holdings in Blaine, Shakopee and Woodbury, the schools' Chief Financial Officer Kenneth McCarthy wrote in an affidavit filed with the court Thursday. The affidavit also counts a loan portfolio as an asset.

Also, McCarthy pledged in the affidavit, the schools intend to propose "a plan of reorganization … to monetize the assets either through sales or borrowings against the assets" in order to settle creditors' claims.

The state Attorney General's Office sued the schools five years ago, alleging they misled students by suggesting they would be able to work as police and probation officers. The students, among them a large number of veterans using GI Bill benefits, enrolled in the schools' criminal justice program only to later discover that their degree failed to meet requirements for becoming police and probation officers in Minnesota.

In 2017, after the campuses had closed amid the legal battle, a district court found Globe and MSB had misrepresented the program to students and ordered the schools to pay restitution. But the Minnesota Court of Appeals ruled only 15 students who had testified at the trial were eligible for such repayment.

The state Supreme Court ruled, however, that any of the students who attended the police and probation officer programs since 2009 can request reimbursement for tuition, fees and other education-related expenses, including interest.

Paul Walsh • 612-673-4482