In the Matter of ACADEMIA ARECIBENA de BELLEZA,
Docket No. 94-167-ST
Student Financial Assistance Proceeding
James D. Gette, Esq., of the Office of the General Counsel, U.S. Department of Education, Washington, D.C., for the Office of Student Financial Assistance Programs.
Before: Judge Ernest C. Canellos
Academia Arecibena de Belleza (Academia) of Arecibo, Puerto Rico, is a proprietary institution of higher education eligible to participate in the Pell Grant Program, the Supplemental Education Opportunity Grant Program, and the College Work Study Program, authorized under Title IV of the Higher Education Act of 1965, as amended (Title IV). These programs are administered by the Office of Student Financial Assistance Programs (SFAP), United States Department of Education (ED).
After reviewing the financial statements of Academia, SFAP official's determined that, based on Academia's tenuous financial condition (the ratio of current assets to current liabilities was less than 1 to 1) the school was required to submit a $61,000 letter of credit as a condition of continued participation in the Title IV programs. Upon Academia's failure to submit the letter of credit, SFAP determined that Academia was not financially responsible and, as a result, decided to initiate termination action. In the course of preparing the termination action, SFAP discovered that Academia had failed to timely file its bi-annual audits as required by 34 C.F.R. § 668.23. In addition, a program review to examine the administration of Title IV programs was conducted at Academia by reviewers from ED's Regional Office in New York, New York. Based upon their review of student files and other pertinent information, the reviewers concluded in a program review report dated February 28, 1994, that Academia, among other violations, failed to make timely required refunds to students.
As a result of all these factors, on September 19, 1994, SFAP
issued a notice of intent to terminate Academia's participation
in the Title IV programs. A fine of $159,500 was also proposed.
Academia filed a timely appeal and requested a hearing. The case
was assigned to me and a briefing schedule was established.
Academia's president subsequently informed me that Academia was
closing effective December 31, 1994. He argued that SFAP's
proposed fine should not be approved because: Academia has filed
past due audits; it was in the process of completing the
currently due audit; it is paying an informal fine of $7,000
imposed in the program review, and it is paying the past due
refunds. On April 25, 1995, I advised the parties that since
they both agreed that an evidentiary hearing in this matter was
not necessary, I would take the case under advisement and issue a
decision based on the parties' submissions in the record.
The procedures for initiating the termination of eligibility of
an institution to participate in the Title IV, HEA programs are
set forth in Subpart G, 34 C.F.R. § 668.81 et seq. During any
such proceeding, ED has the burden of proof. See, 34 C.F.R. §
668.88(c)(2). The Secretary may terminate or limit the
eligibility of an institution to participate in any or all Title
IV, HEA programs, if the institution violates any provision of
Title IV or any regulation or agreement implementing it. In
addition, if a hearing official determines that an institution
has failed to timely submit its required compliance audits, the
hearing official must find that the termination is warranted. See
34 C.F.R. § 668.90(a)(3)(iv).
Academia withdrew its right to a hearing to dispute the issue of the termination of its eligibility. As a consequence of Academia's concessions, and the evidence in the record, I find that SFAP has met its burden of proving that the termination of Academia's eligibility to participate in the Title IV programs is warranted.
In addition to the proposed termination of eligibility, SFAP
seeks a fine of $159,500. It is clear that SFAP has the burden
of persuasion in this regard. 34 C.F.R. § 668.88(c)(2). No
doubt, Academia erred in not meeting its obligations to properly
administer the Title IV programs, however I recognize that the
mitigating factors enumerated above are present. In addition, I
find no evidence of fraud. Since I have contemporaneously
ordered the most serious sanction available, loss of eligibility
to participate in the Title IV Programs, I find that no fine is
appropriate. See generally, In re Fischer Technical Institute,
Docket No. 92-141-ST, U.S. Dept. of Educ. (March 16, 1995), and
the cases cited therein.
On the basis of the foregoing it is hereby ORDERED that the
eligibility of Academia Arecibena de Belleza to participate in
the student financial assistance programs under Title IV of the
Higher Education Act of 1965, as amended, be terminated.
Judge Ernest C. Canellos
Issued: June 5, 1995
A copy of the attached decision was sent to the following:
Academia Arecibena De Belleza
P.O. Box 1186
Arecibo, PR 00613
James D. Gette, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110