An Indiana-based company that sells college equivalency test preparation material and was sued this year by attorneys general in Indiana and New York last week terminated employees and told them the firm is going "dormant."
The College Network, located in Indianapolis, sold many of its assets to two new and similar companies allegedly run by Gary Eyler, TCN’s CEO, according to court documents. One of TCN’s major creditors, meanwhile, is accusing the company of fraud, The Indianapolis Star first reported.
Southeast Financial Credit Union of Franklin, Tenn., alleges it's owed $12 million and that TCN and Eyler are attempting to skirt legal and financial responsibilities by restarting the same company under different names. The new firms are Career Learning & Academic Support Services (CLASS), based in Fishers, Ind., and Global Learn of Las Vegas. Global Learn’s website outlines a business model similar to that of The College Network. CLASS is servicing TCN's current customers.
TCN disputes that it owes Southeast Financial $12 million. But Southeast Financial alleges in a lawsuit that it holds $35 million in loans for approximately 10,000 TCN customers. The company's contract required TCN to reimburse it for defaults. A collection agency owned by Eyler, American Credit Exchange of Las Vegas, "has involvement when a customer defaults," a TCN executive has said, according to the Star.
"They are attempting to establish TCN as the 'fall guy' after transferring all assets out of the company and then avoid liability by creating the illusion of separateness," Southeast Financial alleges in a court filing Monday.
TCN faces a variety of allegations. Indiana and New York regulators alleged fraudulent and deceptive business practices, which the company denied. Indiana State University has alleged misuse of its name and trademarks in a pending lawsuit, although an interim agreement was signed.
James A. Knauer, an Indianapolis attorney for TCN, said the sale of its assets - a $1.25 million internet portal - was done properly, The Star reported, including a "lengthy, third-party appraisal." But when asked if Eyler was essentially selling to himself, Knauer said, "I don't know exactly who the new owners or investors are. I wouldn't tell you for a minute that Gary Eyler isn't significantly involved.”
Eyler could not be reached for comment.
Ten months before the attorneys general sued, in August 2014, allegations by TCN customers of deception and high-pressure sales strategies to lure people, often nursing students, to sign for purchases that could top $10,000.
Customers typically committed to entire programs up front, not one "module" at a time. The financing was through personal loans with payments that started immediately — not lower-interest student loans with deferred payments. TCN is not a school.
Some customers said that by the time they realized the program was of little value to them, the cancellation period had passed. Former customers reported getting calls from collection agencies. Hundreds of consumer complaints were filed in Indiana, Ohio, Texas and Florida. Since publication of its first story, The Star has received more than 100 emails and phone calls from former TCN employees and customers.
Indiana's complaint, which only named TCN and not Eyler’s collection agency, states that the company's personal loans for customers, with payments starting immediately, are at high interest rates and that relatively few people actually complete TCN's program to earn a college degree.
That lawsuit seeks the cancellation of TCN's contracts, restitution for customers and civil penalties of up to $5,000 per violation. The lawsuit cites numerous alleged violations in the contract used by the company to extend credit to customers.
"The College Network has taken advantage of honest people looking to better themselves and obtain a college degree," Zoeller said in a statement. "This deceit is unconscionable, and has left hundreds of Hoosiers in debt with nothing to show for it. People should be very wary of companies like this that claim to offer short-cuts to earning a college degree."
The New York lawsuit accused TCN and its owner of scamming more than 2,000 New York residents who wanted to become nurses by selling "ineffective" study guides and convincing them to pay for online academic advisors that cost up to $10,000.
New York Attorney General Eric Schneiderman’s office filed the lawsuit, stating that students took the required exams through the unaffiliated Excelsior College, an accredited college in Albany, N.Y.
Students were told that they could get a nursing degree in 18 months. The majority of students involved in the alleged scam failed to pass the test and the academic advisers had not expertise in the subject matter, according to the lawsuit.
TCN issued a statement in June, when the New York lawsuit was filed, accusing Schneiderman and his staff of making false claims. According to the statement, the conduct of Schneiderman's staff while investigating TCN was so egregious that TCN filed a complaint with the New York Joint Commission on Public Ethics.