04-09-2011, 02:19 AM
Quote:Clayton College former students say tuition money is missing
Published: Saturday, April 02, 2011, 5:30 AM
By Stan Diel -- The Birmingham News
Tens of millions of dollars from advance tuition payments remain unaccounted for in the wake of the closing of Clayton College of Natural Health, according to a filing in a lawsuit over the privately-owned correspondence school's demise.
In documents filed in U.S. District Court last week, four former students claim that top college administrators paid themselves as much as $20,000 a month each from advance tuition funds that should have been reserved to pay for future courses.
"Thousands of students from around the country have collectively lost tens of millions of dollars ... the money has inexplicably disappeared," the former students allege in the suit, which seeks class-action status.
The plaintiffs claim that more than 5,000 students had paid their tuition in advance but not yet graduated when the school closed in July of last year. The school continued to enroll new students "up to and including the day" its employees were told the school would close, the filing indicates.
Dan Sparks, an attorney representing the defunct school and four former administrators named as defendants, said the allegations are without merit.
"There's no fact that supports that. It's a mere unfounded allegation," he said of the claim that "tens of millions" of dollars is missing. "It's just inaccurate. The losses about which they complain were subsumed by operational expenses."
The unaccredited Internet correspondence school, which was based in Southside, offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness. According to the filing made last week, students paid tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs.
The school had faced criticism over its academic standards, appearing on several states' "watch lists" for unaccredited schools and being called one of the nation's most prolific producers of questionable degrees by retired North Carolina psychiatrist Stephen Barrett, who maintains the website Quackwatch.com.
The closure followed the passage of a new state law requiring that degree-granting institutions in Alabama be accredited by an agency recognized by the U.S. Department of Education. College officials said at the time that the closure was a result of the recession and an accreditation application was pending.
'Disingenuous'
The four former students filed suit in November, and in February the former administrators asked the court to dismiss the suit, arguing that the students had contracts with the college, not with them individually.
In the response filed last week the students argue that the administrators' salaries were paid using advance tuition money that should have been spent on classes.
"They were personally receiving money as purported compensation that actually was advance tuition" and "converted such money as if it was their own," the filing indicates. "One or more of the ... defendants received at least $20,000 per month in compensation."
Sparks called the allegation that tuition revenue was wrongly spent on salaries "disingenuous."
"The bulk of the income of the college was advance tuition funds, as is the case with every educational institution," he said. "Under (that) logic, the president of the University of Alabama is compensated wrongly with advance tuition funds."
Named as defendants are four former members of the board of directors of Magnolia Corporate Services Inc., which was affiliated with the college. Board member Lloyd Clayton also was founder of the school and had served as president or chief executive officer, the filing indicates. Board member Jeff Goin also served as president or CEO of the school, Kay Channell served as CEO or chief operating officer, and board member William Fishburne was an attorney for both Magnolia and the college, the filing said.
The named plaintiffs in the suit are Suzanne Goldberg, Juli Madacey, Michelle Reeves and Krista Walsh, former students from Michigan, Virginia and Massachusetts.