Mass. ex-gov: Grudge led to Ky. college bankruptcy

AP News
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Posted: Dec 15, 2009 6:32 PM

A federal official upset about losing his job gained revenge by triggering the 2005 bankruptcy of a Kentucky college run by former Massachusetts Gov. William F. Weld, two attorneys allege.

Former White House counsel Lanny Davis, now representing Weld, says an Education Department official harbored a vendetta because Weld led a criminal probe against his former employer while serving as a federal prosecutor during the 1980s.

Davis spoke to The Associated Press as another attorney filed a lawsuit Tuesday in Kentucky. The lawsuit alleges that an Atlanta-based accreditation agency, the Council on Occupational Education Inc., unjustly withdrew its stamp of approval for Decker College in Louisville after pressure from the federal official, Ralph LoBosco.

A Decker official claims in a sworn affidavit that LoBosco once told him the demise of his prior employer, Wilfred American Education Corp., diminished the lifestyle that he and his wife enjoyed.

LoBosco, who works in an Education Department regional office in Kansas City, Mo., that supervised Decker, did not return a call seeking comment. A spokesman at the Department of Education in Washington was reviewing specifics before responding.

Decker's loss of accreditation led the Department of Education to shut off $30 million in Pell Grants and other student financial aid, forcing the school to file for bankruptcy.

That stranded 3,700 students who had been participating in its carpentry, electrical, and heating and air conditioning repair classes in Louisville, Ky.; Atlanta; Indianapolis; and Jacksonville, Fla.

Some 500 employees also lost their jobs.

The collapse not only cost Weld professionally and personally _ he had guaranteed a $3 million loan in a last-ditch move to keep Decker open _ but also politically.

The Republican sought to stage the rare feat of serving as governor of two states, but his 2006 gubernatorial campaign in New York was undercut by conservative opposition. It also was stung by simultaneous questions about his management skills following front-page stories about Decker's demise.

Critics said the school was a diploma mill that falsified attendance records and preyed on poor students who had been encouraged to seek the federal loans that fueled Decker's operations.

Weld served as a Decker board member, and as chief executive officer for its final 10 months in 2005, after his private equity firm took a stake in the school in 2002.

FBI agents raided Decker in October 2005, but the U.S. attorney's office in Kentucky closed the case this year without bringing criminal charges. Weld was never accused of wrongdoing, although he's being sued for repayment of the $3 million loan.

Weld could be relieved of that debt if Decker won its case and its creditors were given the federal grant money withheld after the decertification, but Davis said that is not his priority.

"Mr. Weld is seeking justice, first of all, and the restoration of his reputation, which was tarnished by the bankruptcy," Davis told the AP in an interview.

He said he plans to ask Congress and the Education Department's inspector general to investigate whether LoBosco had a conflict of interest or exerted unjust pressure.

The accreditation agency said it decertified Decker because it had been unaware of the extent to which the school taught its courses online, as opposed to in a classroom. But Decker's bankruptcy attorney, Robert Keats, says documents show the Council knew of the school's distance-learning program.

Keats also said the Council on Occupational Education yielded to LoBosco's pressure for two reasons: The agency itself was up for reaccreditation by the Education Department in 2005, and it was concerned about sanctions for previously accrediting Decker.

"These lies directly and proximately caused the failure of Decker College and the loss of its student body and other damages sought in this litigation," the attorney wrote in his complaint.

Two accreditation agency officials named in the complaint, executive director Gary Puckett and his top deputy, Alex Wittig, declined to comment.

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Associated Press writer Brett Barrouquere in Louisville contributed to this report.