IN THE MATTER OF
Docket No. 94-20-SP
COLORADO CAREER ACADEMY,
Respondent. Assistance Proceeding
Appearances: John P. Gamlin, Esq., John P. DiFalco & Associates, of Fort Collins,
Colorado, for the Respondent.
Denise Morelli, Esq., Office of the General Counsel, U.S. Department of
Education, for the Office of Student Financial Assistance Programs.
Before: Thomas W. Reilly, Administrative Law Judge
The Colorado Career Academy of Lakewood, Colorado, has two campusses: the main campus
Lakewood, Colorado (Colorado School of Dog Grooming), and the branch campus in Aurora,
( Aurora School of Dog Grooming and Canine Trainers). Both schools are owned by Dr. Vaios
Athanasiou and Madeleine Athanasiou.
The Respondent, Colorado Careeer Academy (CCA or school), timely filed two appeals (January
and May 26, 1994) which have been consolidated in this proceeding. The first contested a Final
Review Determination (FPRD) issued November 17, 1993, and the second contested a Final
Determination (FAD) issued March 12, 1993. See
The FPRD was issued by the Institutional Review Branch (IRB) of Student Financial Assistance
(SFAP), Office of Postsecondary Education (OPE), U.S. Department of Education (ED). The
issued by SFAP's Audit Resolution Branch (ARB).
The FPRD covered award years 1988-1989 and 1989-1990. The FAD covered award years
and 1990-1991. Both the FPRD and the FAD described violations of requirements of Title IV of
Education Act of 1965, as amended (Title IV), 20 U.S.C. §1070 et seq. B
ased upon two Findings still in issue between the parties, SFAP has assessed liabilities of
$58,849.97 for the violations alleged in the
FPRD, and $20,537.12 under two Findings in issue in the FAD.
CCA's appeal was filed pursuant to 34 C.F.R. 668.113, and the appeal is governed by 34 C.F.R.
Subpart H. CCA has the burden of proving that the Title IV expenditures made and disallowed
proper and complied with program requirements. 34 C.F.R. 668.116(d).
Generally, the violations alleged in the FPRD and FAD relate to the school failing to administer and
document valid "ability-to-benefit" (ATB) tests to students requiring such tests before admission,
fully reconcile certain Title IV expenditures, and failing to maintain required financial aid
student files. There has been negotiation between the school and SFAP, and submission of
documentation resulted in reduction of some of the liabilities originally demanded in the FPRD
The positions of the parties are set forth in their briefs and in the chain of correspondence
appendices and exhibits.See footnote 2
In most of the relevant documents and exhibits, the Respondent school is referred to as the
"Colorado School of Dog Grooming," which is descriptive of the nature of the training the
FINAL PROGRAM REVIEW DETERMINATION
The FPRD issued November 17, 1993, was based upon an IRB December 1990 review of CCA's
administration of Title IV programs for award years 1988-1989 and 1989-1990. The program
issued February 14, 1991, set forth Title IV violations found by the reviewer (ED-1). Only
FPRD Findings 1
and 4 remain in issue in this appeal, the others having been resolved between the parties.
Preliminarily, I must resolve a dispute between the parties (more accurately between the
as to whether an already-agreed-to negotiated settlement existed wherein SFAP orally agreed to drop all proposed liability and fines relating to Finding 1 and then reneged on it (by refusing to sign the settlement document drafted by Respondent's counsel), or whether this was only a part of settlement negotiations that broke down, in which case Respondent's counsel should be foreclosed from even addressing it in this proceeding. (See Respondent's Opening Brief, at 5; ED Brief, at 14-15.) Judging by Respondent's own comments in his brief (at 5), SFAP counsel notified him that upon further review, the Chief, IRB, and his staff had misinterpreted the appropriate regulation and that, therefore, the imposed liabilities for Finding 1 must go forward. From this I conclude that after negotiating with opposing counsel, ED's attorney contacted her client and reviewed the pertinent regulations with him, and then the client decided that he could not agree to what was esssentially a proposed settlement. This being the case, it is the client's final decision that controls, not the attorney's, i.e., attorneys may propose settlements in the course of negotiating with each other, but it is the client's prerogative to decide to accept or reject the details of any proposed settlement or the entire settlement itself. I see no obligation upon an attorney for either side to attempt to compel his client to go through with a proposed settlement, no matter how carefully worked out between the attorneys themselves. This is even more important where the client is a government agency which must act in strict accordance with controlling regulations having the force and effect of law. At the same time, I see no ethical lapse here by Respondent's counsel attempting to document his sincerely held belief that the Department of Education, as it appeared to him, was guilty of a "refusal to live-up to its oral contract." However, I find that there was in fact no contract here, only a proposed settlement that broke down (in part).
In Finding 1, the reviewer found that the school used an institutionally-developed test to
prospective students who had no high school diploma or a GED would have the ability to benefit
training provided. SFAP also found that this test was not approved by the school's accrediting
Accordingly, SFAP found that the test did not meet Title IV ATB test requirements and,
who had been admitted solely on the basis of that test were ineligible for the Title IV funds they
CCA argues that their ATB test should have been accepted and cannot be the basis for assessing
monetary liability because the test met the regulatory criteria for "industry-developed" tests,
developed by the school's owner who is a recognized expert in the field of veterinary science. It
noted that ATB tests were not required to be "nationally recognized" until October 1989
Summaries, Resp. A & B, Appeal Request), and that Respondent began administering that
November 1990 (Resp. Brief, at 3; ED Brief, at 2, note 2). Respondent argues that the ATB test
requirements are described in the disjunctive, i.e., that the test must be "nationally-recognized"
or "standardized" or "industry-developed", and not all three or even two out of three.
Admission criteria under the ability-to-benefit standard are described in Title IV. In order to
qualify for Title
IV assistance, a student who does not have a high school diploma or its equivalent (General
Diploma or "GED"), must pass a valid ATB test. 20 U.S.C. §1091(d). Section 1091
states that such
... be administered a nationally recognized, standardized or industry
test, subject to criteria developed by the appropriate accrediting association,
measuring the applicant's aptitude to complete successfully the program to
which the applicant has applied; ....
--- 20 U.S.C. §1091(d)(3)(A)
In publishing the final regulations containing the ATB criteria, the Department of Education
The test must be a "nationally recognized, standardized, or
test." The test must also meet the criteria of the nationally recognized accred-
iting agency or association that accredits the institution or its eligible programs.
--- 52 Fed. Reg. 45,713 (1987).
The Department's regulations reiterate those ATB requirements. 34 C.F.R. 668.7. But the
continued to use a test created by the school's owner, and did so after the above ATB
into effect. The school clearly admits that "(p)rior to the enactment of the Omnibus Budget
Act of 1990, Public Law 101-508, the Academy utilized ATB tests prepared by the Institution in
with other ATB tests and based on the needs of its students." (CCA letter appealing FPRD, at 4,
Resp.J.) But the school argues that its ATB test did meet the criteria because it was
"standardized" in that
at least 16% of candidates taking the test were rejected, it was "nationally recognized" in that "it
recognized by a nationally-recognized accrediting agency", and it was "industry-developed" in
that it was
developed under the supervision of a leader in the animal care industry (the school's owner,
Vaios Athanasiou). (Resp. Reply Brief, at 4-5; Resp. Opening Brief, at 13-19.) Simply put,
the relevant documents, I cannot agree that Respondent's own internal aptitude test qualifies
under any of
the three ATB test criteria. This is also apparent from an examination of the test itself. (See
CCA argued that its test was nationally-recognized because it was approved by its accrediting
National Association of Trade and Technical Schools (NATTS). However, although NATTS
guidance to its members concerning ATB tests, it expressly disavowed any endorsement of a
(See Resp. Y.) There is also no convincing credible evidence that there was an established
for the test (to support the school's argument that its test was "standardized"). None of the
publications document this assertion.
The Respondent makes a facially-attractive argument (Opening Brief, at 15-16) that since of the ten lowest scoring applicants in a group of thirty-one students, half of them graduated, and this matches or exceeds the success of our nation's universities and community colleges, ergo this is proof that the internally-devised aptitude/admission test must have some validity and effectiveness, and the further fact that all thirty-one students later passed the ED-accepted ATB test showed that the school's original test successfully forecast
actual ability to benefit. There is some logic to this, but I decline to rest upon a results-oriented
See footnote 3
analysis to re-write regulations (and a statute) that establish clearcut, specific criteria for
ATB tests. There is no
evidence that the school's internal aptitude test was ever ever subjected to any kind of formal
process, as that term is used among testers generally, so its ad hoc apparent success with a small,
limited sampling is not sufficient to exempt the school from regulatory criteria for ATB tests. It
cannot be said that
this internally-developed test is in any way "standardized", "nationally-recognized" or
The school's owner, Dr. Athanasiou, the test creator, is in an industry, but he does not constitute
or represent the entire industry so as to transform his creations into something
The Respondent also attacks SFAP's citation of the Pan American School See footnote 4
opinion, asserting that that case is inapposite because there the school "placed all of its
eggs in one basket" and never did argue that
the school's own institutionally-developed "Pan American Test" was a valid
standardized, or industry-developed ATB test; but rather relied on the other test used, the
which was accepted as a nationally-recognized, standardized test. But a reading of that opinion
leads to the conclusion that Pan American chose to rely on the Michigan Test precisely because
it was aware that its
own internally-developed test would not pass muster under the required ATB criteria. In that
American lost on the ATB test issue only because evidence showed that the school did not use
the Michigan Test as an admission test, but only as a placement test for use after a student had
been admitted (using the internal Pan American Test for admission purposes).
In the instant case, since the students in issue were admitted without a high school diploma or
were not given a valid ATB test during the relevant award years, it follows that they were
ineligible for the
Title IV assistance they received. (See 20 U.S.C. §§1088(b), 1091(d), 1141(a); 34
C.F.R. 668.7; ED-1, ED-2, ED-3.) I conclude that SFAP's assessment of liabilities for
students admitted under the school's
internally-developed ATB test was warranted in accordance with Finding 1 of the FPRD, except
amount has been further reduced by a recent adjustment based on documents from Respondent's
verifying the identity of "Student #18" (source of the hitherto "illegible signature" referred
to in ED's Brief, at
4, n.4). The liability related to that student ([student name]) was $2816.98 See footnote 5
, which, when deducted from the assessed $50,628.97, leaves a balance remaining of
$47,811.99 under Finding 1.
With regard to Finding 4 of the FPRD, the school violated Title IV requirements by failing to properly account for certain Pell Grant funds disbursed during the subject award years, and as required by the regulations. (34 C.F.R. 690.81(a)(2).) The school had been directed to submit documentation for $22,595 in Pell Grant funds. The school did submit additional documentation, but there was still a gap between the $75,257 in Pell Grant funds withdrawn by the school in this period and the school's payment ledgers which showed disbursements of only $67,036 to students. Accordingly, there is a balance of $8221 in improperly withdrawn funds from the school's Federal Pell Account, which must be repaid to the Department.
The liability assessed under Finding 1 ($47,811.99), when added to the liability established
under Finding 4
($8221), comes to a total outstanding liability of $56,032.99 under this FPRD.
FINAL AUDIT DETERMINATION
The FAD issued by ARB on March 12, 1993 (ED-6), was based upon an independent auditor's
received by the Inspector General on March 31, 1992 (ED-5). For the relevant award years
and 1990-1991), the auditor found that the school failed to maintain required Title IV
documentation for all
students receiving financial aid (Finding 6), and failed to maintain evidence that a
test had been administered to five students requiring such test (Finding 8). Only Findings 6 and
8 remain in
issue, the others having been resolved by the parties after the audit.
Finding 6 of the FAD was originally the basis for the Department assessing liabilities totalling
several specific violations relating to failure to obtain or maintain certain required financial aid
tation. However, a subsequent review by the auditor disclosed that the school had obtained some
required documentation. A still outstanding liability of $15,125 remains, based upon the school's
notify lenders of enrollment changes for five students. (ED-9, at 1; ED-10, at 3.) Respondent
(Reply Brief, at 13-14) that failing to inform a lender of a student's change in status does not
render the loan
unenforceable nor make the borrower ineligible for the loan. However, the reliability of loan
mentation and required notifications to lenders is important to the integrity of the system and
collection and lender confidence, and cannot be dispensed with simply because in some
no harm was done.
In Finding 8, ED originally assessed liability predicated upon documentation being missing that
had taken required "Federally-approved" ATB tests. The auditor's subsequent review disclosed,
that the school was missing such documentation for only one student. Accordingly, liability
was reduced to
$5412 for Finding 6. (See exhibits ED-6, at 14; ED-10, at 4; ED-9.) Respondent's argument
Brief, at 27) is well-taken that the "Federally-approved" requirement did not become effective
until after the enrollment period in issue in Finding 8 of the FAD (and this is conceded by SFAP
counsel, Brief, at 12) ;
however, the school is left in a position of having its "ATB" test still failing to comply with the
earlier ATB test
criteria for Title IV funds already discussed under Finding 1 of the FPRD above.
The total remaining assessed liabilities for Finding 6 and Finding 8 is $20,537.
FINDINGS AND CONCLUSIONS
After reviewing the briefs and documents of record, I find and conclude that SFAP has produced
evidence to establish that the charged violations of Title IV did occur and that the remaining
liabilities discussed above under both the FPRD and the FAD were fair, reasonable and justified,
the Respondent, Colorado Career Academy, failed to carry its burden of proving that the
questioned and disallowed were proper and complied with program and regulatory
In summary, the combined total assessed liabilities affirmed here under the FPRD ($56,032.99)
FAD ($20,537) come to a grand total of $76,569.99.
The Respondent, Colorado Career Academy, is ordered to repay to the United States Department
Education the sum of $76,569.99.
Thomas W. Reilly
Administrative Law Judge
Issued: June 1, 1995,
S E R V I C E
A copy of the attached DECISION was sent to the following parties by CERTIFIED MAIL,
RECEIPT REQUESTED, on June 1, 1995:
John P. Gamlin, Esq. Denise Morelli, Esq.
John P. DiFalco & Associates, P.C. Office of the General Counsel
1136 Stuart Street, Suite 4102 U.S. Department of Education
Fort Collins, Colorado 80525-1194. Rm. 5215 -- FB-10B
600 Independence Ave., S.W.
Washington, D.C. 20202-2110.