OIG: Office of Inspector General
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Investigation Report




American Commercial Colleges, Inc. and Its President Plead Guilty to Federal Charges

Responsible for Theft of Nearly $1 Million

LUBBOCK, Texas — The president of American Commercial Colleges, Inc. (ACC), Doyle Brent Sheets, appeared this morning in federal court in Lubbock, Texas, before U.S. District Judge Sam R. Cummings, and pleaded guilty personally, and on behalf of ACC, to federal charges. U.S. Attorney Sarah R. Saldaña of the Northern District of Texas made the announcement this afternoon.

Sheets, 58, of Lubbock, Texas, pleaded guilty to an Information charging one count of misprision of a felony. He faces a maximum statutory penalty of three years in federal prison and a $250,000 fine. Authorized by corporate resolution, Sheets pleaded guilty to one count of theft of government funds and aiding and abetting, on behalf of ACC. ACC faces a maximum statutory penalty of five years’ probation, a $500,000 fine, or up to twice the gross gain or loss resulting from the offense. Judge Cummings ordered presentence investigation reports with sentencing dates to be set following the completion of those reports.

According to Sheets’ plea agreement with the government, ACC stole government funds by converting Federal Student Aid (FSA) program funds, and thus caused a loss to the government of approximately $972,794. Sheets admitted that he knew about the theft but did not report it, and he agreed that he would be personally, individually, jointly and severally liable for the total loss amount.

According to ACC’s plea agreement with the government, ACC is excluded, directly and indirectly from participating in any FSA programs. This voluntary exclusion is also a voluntary debarment, and ACC will not contest any actions taken to execute the debarment. ACC agrees that it will not have any ownership or interest in, or serve as an officer, director or any legal entity acting as a post-secondary educational institution participating in any FSA program.

Two others associated with ACC have also been charged, in Informations filed on May 19, 2014, with federal offenses. Michael James Otto, 61, of Lubbock, who served as the Chief Operating Officer and Campus Director for ACC’s Lubbock campus, is charged with one count of misprision of a felony. Bruce Alan Reed, 64, of San Angelo, Texas, who served as the Campus Director for ACC’s San Angelo campus is charged with the same offense.

ACC is a proprietary institution with corporate office in Lubbock. At one time, ACC operated five campuses in Texas — Lubbock, Abilene, Odessa, San Angelo and Wichita Falls — and one in Shreveport, Louisiana. ACC admitted that it knowingly converted FSA program funds from its students solely for its benefit to represent falsely to the U.S. Department of Education that it was in compliance with the requirement that a proprietary institution may not derive more than 90% of its revenue from the FSA program to remain eligible to participate in the FSA program. The remaining 10% of revenue must come from other sources. This is known as the 90/10 Rule, and if an institution did not satisfy it, it would lose its eligibility to participate in the FSA programs.

In 2007, 2008 and 2009, ACC failed to meet the requirements of the 90/10 Rule, however, as early as 2003, ACC had devised a scheme to represent falsely to the Department of Education that it had met the requirements. From 2007-2009, ACC had students obtain private loans from a private bank in San Angelo, Texas, with whom ACC had made arrangements, of approximately $953,897. ACC recorded the loan funds received from the private bank as “good cash,” thus falsely representing to the Department of Education that ACC complied with the 90/10 Rule. By obtaining the loans from the private bank and delaying the students’ FSA program funds, ACC lowered their total FSA program funds revenue for the 90/10 Rule. ACC repaid and intended to repay those loans with approximately $972,794 of FSA program funds to give the appearance of complying with the 90/10 Rule. The private short-term loans were obtained entirely to benefit ACC so that it could falsely represent its compliance. To further the scheme, ACC employees advised students that the school would close if they did not satisfy the 90/10 Rule, and this would jeopardize the students’ education at ACC.

The investigation is being conducted by the United States Department of Education, Office of Inspector General. Assistant U.S. Attorney Paulina Jacobo is in charge of the prosecution.

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Last Modified: 05/23/2014