In the Matter of Docket No. 93-96-DA
The Proposed Debarment of
This DECISION is issued by the United States Department of
Education (Department) pursuant to 34 C.F.R. § 85.314. I have
jurisdiction to act in this matter by virtue of a Delegation of
Authority from the Secretary to me to act as the Department's
Designated Deciding Debarment and Suspension Official. The
regulations, 34 C.F.R. Part 85, and the Nonprocurement Debarment
and Suspension Procedures mailed to Mr. Crance with the notice of
proposed debarment govern this action.
On April 8, 1993, Mr. Richard Crance, an owner of Dudley Hall
Career Institute (Institute) of Worcester, Massachussets, from 1989
until 1992, was issued a "Notice of Proposed Governmentwide
Debarment from Federal Nonprocurement Transactions" pursuant to 34
C.F.R. § 85.312. The notice informed Mr. Crance that the proposed
debarment was based upon the adverse findings of an October 1991
program review conducted jointly by the Massachusetts Higher
Education Assistance Corporation (MEHAC) and Region I of the
Department. Mr. Crance was also given notice of his right to
submit information and argument in opposition to the proposed
On December 16, 1993, pursuant to Mr. Crance's request, I held a
hearing on this matter in Washington, D.C. At such hearing, Mr.
Crance appeared pro se, while the Department's Notice Official was
represented by Jennifer L. Woodward, Esq., of the Office of the
General Counsel. At the hearing, evidence was introduced and both
Mr. Crance and Ms. Woodward presented oral argument. The hearing
was recorded by a court reporter and a transcript was made.
As stated earlier, the Department's action is based primarily on
the joint Department and MEHAC findings. Those findings, include:
1) repeated failures to make required tuition refunds of guaranteed
student loans (GSL), pursuant to 34 C.F.R. § 682.607(c)(1); 2)
failure to implement adequate procedures to evaluate satisfactory
progress, in violation of 34 C.F.R. § 668.7(c); and 3) failure to
adhere to the fiduciary standards required in administering the
student financial assistance programs authorized under Title IV of
the Higher Education Act of 1965, as amended, 20 U.S.C. § 1070 et
seq. (Title IV). The evidence presented at the hearing established
the violations enumerated above. The Department argues that the
violations are serious and have continued over a long period of
time. Mr. Crance participated first directly, then passively with
respect to them and, therefore, should be debarred.
During his presentation, Mr. Crance did not dispute any of the facts but argued that he relinquished all financial control or management of the Institute upon its sale to an outside investor on April 12, 1989. Subsequent to that transfer, Mr. Crance maintains that although he retained the title of president, his role was "little more than an on-site manager" until he moved to New Jersey in September 1990, at which time he severed all contacts with the Institute. Also, Mr. Crance maintained that he ceased reviewing the Institute's financial statements at that time. With regard to certain refund checks which had been voided, Mr. Crance maintained that he had no knowledge that such voiding transpired. In sum, Mr. Crance argued that he was not personally responsible for the wrongdoing at Dudley Hall.
On cross-examination, Mr. Crance verified that he was majority owner of the Institute after April 12, 1989; sole owner from 1981 to 1989; represented the Institute in its 1989 program review as to what refunds were paid; and was signatory to the 1987 program participation agreement, in which he promised to act as a fiduciary with respect to funds made available under Title IV. Regardless of the finite time period into which one may wish to examine, the Department contends that Mr. Crance was in some position of authority - whether it be sole owner, majority owner, or president - when the Institute continued to be cited for failure to pay refunds. Further, after each such citation, Mr. Crance was the one who issued letters noting that the particular problems had been remedied and that new safeguards had been implemented to prevent recurrence.
Mr. Crance was co-owner and hands-on manager of the Institute,
exercising control over the school's operations. It is abundantly
clear that the violations at issue were significant and resulted
in the loss of program funds. Consequently, I find that the
Department has established, by a preponderance of the evidence,
that he is subject to debarment under 34 C.F.R. § 85.305 (b) and
(d). Moreover, based on the presentations of the parties and
evidence submitted, I find that Mr. Crance participated directly in
the violations cited. He was the signatory to the Institute's
program participation agreement and, over the years at issue,
maintained varying degrees of responsibility. Also, during the
history of the Institute, Mr. Crance knew of the repeated
violations that were occurring and which continued to recur despite
"corrective measures." Therefore, he was in a position to know, or
should have known, that practices resulting in violations were
The policy of the Federal Government is to conduct business only with responsible persons. 34 C.F.R. § 85.115. In order to support the governmentwide debarment from federal nonprocurement transactions of an individual, some degree of personal culpability must be shown. It is not sufficient to merely establish a violation of program regulations which could lead to termination of an institutions eligibility is not sufficient.
My review of the facts and circumstances in this case reveals the
seriousness of the violations and the degree of personal wrongdoing
by Mr. Crance has been established. Moreover, I note as
significant that the failure to pay refunds in the federal student
financial assistance programs can now lead to criminal penalties.
20 U.S.C. § 1097(a). Such failings clearly and adversely affect
Mr. Crance's present responsibility to participate in federal
programs. See generally, Sellers v. Kemp, 749 F.Supp. 1001
I note that the other management players (Dr. Simmons and Mr.
Riendeau) at the Institute were also subject to debarment
proceedings. Although their respective failings are different as
to degree, they all owed a similar degree of responsibility to the
Department regarding the use and management of federal monies.
With regard to the period of debarment, however, I note that Mr.
Crance's culpability is somewhat diminished for two reasons.
First, whether or not they proved effective, Mr. Crance
demonstrated that ameliorative actions were taken by the school
following audits and program reviews during his tenure. Second,
I note that the gravest misdoings arose and flourished after his
physical departure. While these factors do not provide a defense,
it must be stressed that debarment is not a punitive measure.
Therefore, I find that there are no disputes as to material facts and the Department has met its burden of proof and persuasion that the debarment of Mr. Crance is warranted. Under the provisions of 34 C.F.R. § 85.320, however, the period of debarment is to be commensurate with the seriousness of the cause(s) of debarment, generally not to exceed three years. Based upon the mitigating circumstances here, I have determined that the period of debarment shall be two years.
I order that Richard Crance be DEBARRED from initiating,
conducting, or otherwise participating in any covered transaction
under the nonprocurement programs and activities of any Federal
agency, and is ineligible to receive Federal financial and
nonfinancial assistance or benefits from any Federal agency under
nonprocurement programs and activities. He may not act as a
principal, as defined in 34 C.F.R. § 85.105(p), on behalf of any
person in connection with a covered transaction. This debarment is
effective for all covered transactions unless an agency head or
authorized designee grants an exception for a particular
transaction in accordance with 34 C.F.R. § 85.215.
ERNEST C. CANELLOS,
Deciding Debarment and
Dated: April 19, 1994