Former Administrators of University of Antelope Valley, a For-Profit, Allege Financial Aid Fraud

Kevin Hoover uncovered problems soon after taking a job as the University of Antelope Valley’s executive financial aid director.

He arrived at the California for-profit institution in December 2022, but said in an interview that he discovered misconduct had been occurring for a few years.

Students routinely did not receive federal financial aid refunds to which they were legally entitled, Hoover said. He said multiple times the university sent students refund checks — but canceled them. Officials then falsely notified the U.S. Department of Education that they had paid students, Hoover said. This diverted the money back to the institution, which was floundering financially. Hoover departed the university in January this year.

Ultimately, the University of Antelope Valley, or UAV, collapsed. California regulators late last month ordered UAV to wind down operations after determining it was financially unsound. The university has since shut down.

Some of Hoover’s allegations — that UAV did not return students’ financial aid on time, if at all — were confirmed in an interview with another former employee, as well as an investigation by the state regulators, the California Bureau for Private Postsecondary Education, or BPPE.

However, UAV’s issues ran deeper than even alleged financial aid fraud, and were made public in news reports, prompting questions as to why regulators, particularly the institution’s accreditor, WASC Senior College and University Commission, did not intervene.

WSCUC put the university’s accreditation on probation in August 2023, but this wasn’t the most severe sanction it could impose. Now, UAV’s abrupt closure is scrambling the lives of hundreds of students who attended, some of whom still have not received federal aid they need to pay their bills.

“WSCUC is just as much in this mix as everyone else,” Hoover said.

UAV opened in 1997 as Antelope Valley Medical College, which founders Marco and Sandra Johnson viewed as a solution to a dearth of community CPR and first aid training.

The college secured WSCUC accreditation in 2016. Its former accreditation was with the Accrediting Council for Independent Colleges and Schools, notorious for endorsing largely for-profit colleges, like the failed ITT Technical Institute. ACICIS shut down in March after the Education Department determined it hadn’t met federal standards in years.

In 2022, an ed tech company in Singapore called Genius Group bought UAV from the Johnsons. It sought to broaden UAV’s mix of certificate, undergraduate and and graduate programs and transform it into a “meta university” — a virtual copy of the college in the metaverse — that would offer global higher ed instruction.

However, this strategy didn’t buoy the university’s plummeting enrollment. A little more than 500 students enrolled for fall 2022, dropping from nearly 900 in fall 2018, according to the most recently available federal data.

Students did not fare well, either. First-year retention rates had slipped, WSCUC noted in a letter to the university informing it of its probation. The university’s median student debt had also risen and undergraduate earnings were “far below both WSCUC and national averages,” the accreditor wrote.

With enrollment in free fall, UAV relied on “substantial infusions of cash” from the Genius Group, WSCUC wrote.

But Genius Group itself was financially precarious. Its American stock price has plummeted recently, trading at roughly 30 cents per share. And it had a net loss of more than $55 million in 2022, according to recent U.S. Securities and Exchange Commission filings. It expressed doubt in the SEC paperwork about its ability to stay afloat.

Hoover alleged that financial aid misconduct predated Genius Group, though he said the company had no experience running a college, which exacerbated problems.

Under federal regulations, students can collect refunds if they qualify for more financial aid than what they owe in tuition. But during Hoover’s tenure, UAV intentionally did not pay students’ credit balances, he said.

The state regulators, BPPE, reviewed UAV documents in December and found the college owed credits to 396 students, while 375 students had not received their money within two weeks, as federal regulations require.

Carmela Geronga, who worked as UAV’s associate financial aid director until February, agreed the university took pains to withhold students’ money.

Geronga said she started as a financial aid officer at the university in July 2022. She was the sole employee in the financial aid department at the time of her hiring. She quickly discovered what she called rampant mismanagement.

Geronga said she would press her colleagues, including those in accounting, to send students their credit balances — without success.

“I would have to constantly follow up for two to three months and fight tooth and nail to get their credit balances owed to them,” Geronga said.

A similar anecdote emerged in BPPE’s investigation, which found the former bursar in February was instructed to withhold students’ checks.

UAV administration also tried to weasel more money out of students, Geronga alleged. She recalled several times students were brought to her office shortly before they were set to graduate, where an official told her they wanted to take out a loan.

Geronga said she questioned this practice, but was assured the loans were above board. But UAV officials would never give students those loans, instead hoarding the funds for the institution’s coffers, she alleged. Some students would contact the university and inquire about the debt in their names, Geronga said.

She and Hoover accused the university of other forms of fraud, too. Once, an administrator told Hoover she had issued $150,000 in federal coronavirus relief to students, but then canceled the checks, redirecting the aid to the university.

“They were lying to the Education Department,” Hoover said.

Roger Hamilton, Genius Group’s CEO, said in an email the company has a whistleblower policy under which UAV staff members can report misconduct, though none had. The company takes any fraud allegations “extremely seriously,” Hamilton said.

He said Genius Group is investigating the claims with “an external auditor on a student-by-student basis,” the findings of which it will share with regulators.

“We believe this will give an accurate account on any and all outstanding student refunds that may be found to exist by our external auditor, whether during the time of the previous owners or post-acquisition,” Hamilton said, adding that the company has committed to BPPE and Education Department that it will pay for any pending student refunds.

Hoover said the staff had little interaction with Genius Group and that they were never told of such a policy.

“No one would have dared use it for fear of retribution,” Hoover said.

In an interview, WSCUC President Jamienne Studley said the accreditor was unaware of financial aid fraud allegations until learning about them through the Education Department and BPPE. This was after the accreditor’s representatives came to the campus to evaluate it in late January into early February.

The accusations did not surface during that visit, Studley said.

WSCUC is prepared “to execute whatever sanction or adverse action is appropriate” when a college violates its standards, she said. That check-in with the university aimed to assess how WSCUC might discipline the institution further.

Studley said WSCUC “moved quickly at each step of the way,” including when it put the university on probation and the campus visit early this year.

This was “a rapid pace, but completely appropriate given the gravity of the situation,” she said.

While allegations of fraud spilled into public view only recently, other indicators signaled turbulence within the university's finances and leadership.

For one, the university had not kept up with rent on campus properties that the Johnsons, the founders, still owned. Those include a hotel used in part as student housing. Hamilton told BPPE in February that he expected the company would lose a lawsuit the Jonhsons had brought and that it would be evicted. The Johnsons have also alleged Genius Group allowed the campus facilities to fall into disrepair.

That month the university also informed employees it couldn’t make payroll, according to Geronga and another administrator who asked to remain anonymous to protect from professional repercussions.

Instead, the university paid only a quarter of their salaries, and offered the rest in Genius Group shares, which employees could sell immediately if they desired.

The move befuddled employees, Geronga said. She said officials couldn’t answer her basic questions, like how many shares she would receive and their value. She quit that month.

“I couldn’t keep working day in and day out to clean up the mess,” Geronga said.

WSCUC, in putting UAV on probation last year, had also dinged the university for high leadership turnover, with positions including chief financial officer, governing board chair and vice chair going unfilled at the time. The university never informed WSCUC of the resignations or budget challenges, the accreditor wrote in its letter.

Later, in December, Tracy West, UAV’s president and chief executive, took a leave of absence with no explanation, leaving the chief financial officer as interim CEO. A Genius Group official took over as interim CFO.

Nine administrators and faculty members, including Hoover, stepped down during the first couple of months of 2024, according to BPPE.

“Due to the resignations, the institution does not have the administrative personnel who have the expertise to ensure the achievement of the institution’s mission and objectives and the operation of its educational programs,” BPPE wrote in a public report.

Also in December, the Education Department learned of UAV’s troubles and penalized it with what’s called heightened cash monitoring 2.

Typically, colleges can draw financial aid directly from the department, but the sanction required UAV to front those costs from its own budget and then seek Education Department reimbursement. Heightened cash monitoring intends to protect taxpayer dollars in the event an institution is on the precipice of failure.

Hamilton did not seem to grasp this concept, Hoover said. He said Hamilton pressured him to maintain the status quo, not understanding the university needed to source financial aid from its budget.

“It was in one ear and out the other,” Hoover said.

Hamilton in his emailed statement did not address Hoover’s accusation against him. An Education Department spokesperson said in an email last week that it “is closely monitoring the situation at the University of Antelope Valley.”

The spokesperson said the department does not comment on “institutional oversight activities” or investigations until their outcomes have been communicated to a college.

Throughout the turmoil, WSCUC seemed relatively absent, Hoover said.

In early 2022, WSCUC reaffirmed the university’s accreditation for six years — even while acknowledging some of its problems had become evident.

At the time, WSCUC issued a “formal notice of concern,” which spelled out UAV was in danger of not meeting the accreditor’s standards, including those around employing qualified faculty and administrators.

WSCUC did not act again until more than a year later, when it placed the university on probation. Studley said that the accreditor demanded in July — one month before instituting probation — that officials develop teach-out plans by October detailing how students could finish their programs.

Federal regulations also mandate colleges develop a teach-out plan once an accreditor puts them on probation.

Lax accreditor oversight speaks to the need for stronger accountability for these entities.

Accreditation ideally signifies a financially and academically stable institution, enabling it access to federal financial aid. However, accreditors often delay or neglect action.

The Education Department is trying to strengthen regulations around accreditors, proposing rules that would mandate they set benchmarks — such as minimal graduation rates — for colleges in their purview.

Accreditors have pushed back on this and other parts of the regulatory plan. Studley sat on the federal committee that was negotiating the rule over the past few months, and opposed several aspects of the proposal that would strengthen accreditor accountability.

Studley said in her interview she believes regulators should consider student outcomes when evaluating accreditation.

However, she said accreditors “will be warier” of establishing minimum standards for colleges if such an expectation was imposed. Studley also said she worried about enforcing “blunt consequences” if institutions fail to clear the benchmarks.

“I do not believe in a single bright line to tell institutional quality for students.” Studley said. “If there were one bright line, the department would be able to do this all by themselves.”

She said that UAV — and every “complicated situation” — prompts WSCUC to question what it can do better. The saga also serves as evidence that the Education Department, state regulators and WSCUC are improving in their coordination.

“There’s room for improvement,” she said. “What we can know from each other and when? To what degree should we coordinate? Oversight of financial aid is a complex issue, we need to keep working on that.”