With creditor actions mounting, Barton invoked the risk of "cascading shutdowns" that could trigger loss of accreditation and access to Title IV funding. Within two months, the organization discovered that "actual revenues" fell short of EDMC's projections prior to the acquisition, he explained in court filings. He put the colleges' revenue shortfalls in the context of broader declines in student enrollment and tuition revenue at career education schools.
The organization hit other obstacles during the year, though they weren't detailed in Barton's account. Four Art Institutes temporarily lost their accreditation while accreditors reviewed the ownership change. DCEH was required to notify students but, according to allegations in a class-action lawsuit filed in Illinois , instead misled them into believing the schools were still accredited.
Facing an "enormous problem," DCEH's board and management, along with advisors and consultants, identified for closure more than 30 campuses that accounted for the operating losses, Barton said. Looking to refocus on a smaller footprint and cost structure, DCEH started talking with Studio Enterprise Manager, an affiliate of Colbeck Capital, to provide technology, management and support services like enrollment, marketing, and career and student services.
Other media outlets have connected the firm to Studio Enterprise , and educational services company focused on creative fields. Days after entering agreements with Studio in December, the Education Department determined that the organization's remaining viable campuses — a number that was cut from 12 to nine — would be transferred to a separate nonprofit EPF , Barton said.
Receivership is meant to protect DCEH's remaining assets, including from creditor claims, likely so they can either be sold off or shut down in a way that is both orderly and protects students. DCEH indicated in court papers that it was in talks with a potential buyer of its Argosy University assets, naming the possible suitor as Eastern Gateway Community College, a public college in Ohio that is considering using Argosy's facilities to retrain workers laid off by a General Motors plant in the state.
On Friday, upon entering receivership, Barton told staff the day marked "a major milestone in the significant work to provide education that is relevant, accessible, purposeful, and affordable," according to an email obtained by Education Dive. Barton also said receivership would give the organization "the opportunity to work with new financial partners who will be assisting with restructuring the vast amount of debt and overhead we inherited" from EDMC.
But he provided no additional details on what form the restructuring could take or what it meant for the schools that went into receivership rather than were transferred to EPF.
One of the schools in receivership, the Art Institute of Seattle, is barred by state regulators from enrolling new students after it canceled and then failed to post a new surety bond, a financial instrument meant to protect student tuition in the case of campus closures and other events. Staff and faculty at multiple Art Institute locations have told Education Dive they know of staff layoffs in support roles at their campus.
This article has been updated with new information about the relationship between Colbeck Capital Management and Education Principle Foundation and of possible staff layoffs. A previous version of this article misstated when Education Management Corp.
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