Students at nation's largest Christian college allege they were duped into enrolling through racketeering scheme

By Jillian Berman

Grand Canyon University was recently fined by the government over similar allegations. It's pushing back.

They signed up to earn their graduate degrees with promises they could complete school quickly and affordably. But they wound up mired in extra courses and on the hook for thousands of dollars more than they were told.

Those are some of the allegations in a class-action lawsuit filed against Grand Canyon Education (LOPE), a publicly-traded company that once owned Grand Canyon University. Now, the two entities are tied through an agreement where the nonprofit university pays the for-profit company a percentage of its revenue in exchange for services, among other links, according to the suit.

The case echoes some of the allegations the Department of Education made against Grand Canyon University last year, when it leveled a record $37.7 million fine against the school. Grand Canyon has pushed back against the government, saying the Biden administration is targeting the Christian school because of "ideological" differences.

Grand Canyon, based in Arizona, typically enrolls more than 100,000 students a year, including more than 90,000 who study online. During the 2022-'23 school year, Grand Canyon took in about $1 billion in federal student aid, according to the suit.

In the case filed Wednesday, attorneys from the National Student Legal Defense Network and DiCello Levitt, are seeking relief for at least 7,000 class members. They're also using a novel legal strategy, accusing the company of violating the Racketeer Influenced and Corrupt Organizations Act, or RICO - a law initially designed to target organized crime - in its efforts to lure students.

"The important thing for us is making sure that these students are able to recoup the money that was wrongfully taken from them as a result of Grand Canyon's conduct," said Adam Levitt, a partner at DiCello Levitt and one of the attorneys representing the students. "Any time an educational institution views its students as revenue units rather than students, all sorts of mischief occurs. That's exactly what happened here."

Bob Romantic, a spokesperson for Grand Canyon University, wrote in a statement that the lawsuit's allegations are "completely without merit" and "are focused on practices that are prevalent in higher education." He called it an "almost verbatim regurgitation" of the claims made by the Department of Education and said the suit "is part of a continued and coordinated effort to expand on the Department of Education's false accusations and unwarranted actions designed to bring harm to the university."

"We believe this class action lawsuit will be summarily dismissed," Romantic wrote.

Doctoral students say program took longer, cost more than expected

The allegations in the case center on the school's doctoral program. The suit alleges that Grand Canyon misled students about the cost of the program and the time it would take them to complete their degrees.

Tanner Smith, one of the named plaintiffs, alleges in the suit that after requesting information in 2018 from Grand Canyon about one of its doctoral programs, he received an email from a Grand Canyon representative saying he could expect to graduate in May 2021. The communication said he would need to complete 60 credits and that his education would cost $39,000.

In reality, Smith alleges he paid an extra $8,436 beyond the $39,000 tuition he was initially quoted and didn't graduate until September 2022.

That's because, the complaint alleges, Smith was bogged down in what the school called continuation courses, or classes where students work on their dissertation. As Smith neared the end of his 60 credits of required coursework, the school told him he would need to enroll in continuation courses to complete his degree, according to the suit.

Those courses are "especially profitable," for Grand Canyon, the suit alleges, because the university students don't receive instruction from the school's faculty while enrolled, even though they pay the same amount for the first four continuation courses as they would for traditional classes. As such, the courses have allowed Grand Canyon to "reap significant tuition revenue from doctoral students while incurring lower instructional and operating cost," the suit claims.

The other named plaintiff in the case, Quimin Wang, also alleges that completing her doctoral degree has taken longer and cost more money than what she was initially told by Grand Canyon representatives. So far, she's already paid $8,700 more than she expected and still hasn't completed the program, according to the suit.

The suit alleges that even as Grand Canyon representatives shared these timelines and cost estimates with prospective doctoral students, executives knew that most doctoral students didn't complete their degree without taking at least three additional continuation courses.

Conversion from for-profit to non-profit at center of the case

The claim that Grand Canyon's approach to enrolling doctoral students violated RICO is centered around the structure of the school.

For years, Grand Canyon was a for-profit college owned by Grand Canyon Education. But in 2018, the school converted to a nonprofit in a controversial transaction. At that time, Grand Canyon Education sold its school assets to a nonprofit entity to create a separate Grand Canyon University. But the school remained closely linked to its former parent company.

Through an agreement, Grand Canyon Education provides Grand Canyon University with services like technology, enrollment and marketing, according to the suit. In exchange, Grand Canyon University pays Grand Canyon Education 60% of its adjusted gross revenue, according to the suit. In addition, Brian Mueller, the chief executive of Grand Canyon Education, is also the president of Grand Canyon University.

In the complaint, the former students allege that Grand Canyon Education used its control over the university to carry out illegal behavior and earn millions of dollars in profits annually through the scheme.

"In reality and I think as we'll see in discovery in this case, Grand Canyon Enterprise dominates and controls the university and uses the university as a vehicle for carrying out its fraud," Levitt said.

The suit claims that the for-profit company, Grand Canyon Education, used sales representatives, who said they were counselors at Grand Canyon University, to talk to prospective students about enrolling. The for-profit entity assigned these representatives specific quotas of students, according to the suit.

At the same time, the number of doctoral degree programs at the school expanded, according to the suit, going from 16 in 2018 to more than 35 in 2022.

As part of its efforts to convince students to enroll in these programs, the representatives presented students with timelines to completion and cost estimates that Grand Canyon executives knew were unrealistic, the suit claims.

"Looking at the pattern of conduct that we allege in the complaint, it's a classic bait and switch," Levitt said. "They said 'if you want to get what we promised you it's going to cost you a lot more money.' That kind of approach, it's no way to do business."

-Jillian Berman

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06-13-24 1103ET

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