Las Vegas Sun

October 14, 2019

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College chain collapses; receiver stakes claim to big payday

Dream Education Center Holdings

Taylor Glascock / The New York Times

Argosy University’s campus in Chicago is shown March 4. Mark Dottore’s filing for receivership would eat up nearly half the cash left at Dream Center Education Holdings, the chain that ran Argosy University and the Art Institutes.

When Dream Center Education Holdings imploded in March, thousands of students and employees of the large college chain were suddenly locked out of their classrooms. Some $16 million in federal financial aid that was owed to students had disappeared, while landlords, teachers and vendors faced hundreds of millions of dollars in unpaid bills.

One person, though, is primed for a big payday: the court-appointed receiver who quickly shut down the schools.

The receiver, Mark Dottore, has asked a judge to approve $2.1 million in legal fees and expenses, which would consume nearly half the cash that Dream Center had on hand as of last month. The bills he submitted for repayment included pricey hotel suites, airport spa services and a time-sheet entry for one executive of his Cleveland firm with a to-be-determined charge: “Make up something for Charlie.”

Students and creditors complain in court documents that Dottore spent freely while they suffered through the closing of more than two dozen Argosy University and Art Institute campuses in the chain. The Education Department has said it was troubled by the reimbursement requests. And the judge overseeing the case has noted that the request puts Dottore in a better position to extract money from Dream Center’s “cash-strapped” remains than nearly all the other creditors.

Dottore said the charges were reasonable and appropriate, even if his submissions contained a few errors he blamed on a new software system that his firm was still learning to use.

“We had 30 days to figure out what to do with 17,000 students,” said Dottore, who is billing at his standard rate — $400 an hour for him and up to $300 for his employees. “In my line of business, nobody is ever happy with me. We’re only put into situations that are dire.”

The dispute over Dottore’s bills is the latest fracas in the messy unwinding of Dream Center Education Holdings, a religious nonprofit that had no higher education experience when it took over the battered remains of Education Management Corp. in late 2017. Barely a year later, Dream Center also ran out of cash.

But filing for bankruptcy immediately ends a school’s eligibility for federal financial aid funds, which is a death knell for most schools. Hoping to buy some time for restructuring, Dream Center’s officials enlisted a cooperative creditor, a small marketing firm whose invoices had not been paid, to sue in January in federal court in Cleveland. The firm asked that Dottore — who had been working with Dream Center since October as a paid consultant — be named receiver. Dream Center quickly told the court that it agreed, and within a day, Judge Dan Aaron Polster approved the request.

Dottore told students that his goal was to keep their schools open at least through the end of the semester. But the Education Department cut off Dream Center’s eligibility for federal student loans in late February because Dream Center officials had withheld and misused students’ stipends — loan money the students were supposed to receive for living expenses. In early March, Dottore then shut down nearly all the schools under his control.

Court filings illustrate the stark contrast between what Dream Center’s failure meant for students and for Dottore.

Kendrick Harrison, a disabled Iraq War veteran with six children who enrolled in Argosy University’s online program, wrote that he and his family had been evicted from his four-bedroom home in Las Vegas because his $6,000 stipend never arrived. On March 24, they moved into an extended-stay motel.

Dottore’s circumstances were far different. Two days after Harrison moved into a motel, Dottore and two members of his team booked a $6,000, one-night trip to Las Vegas for negotiations with a group of suitors who were trying to buy an Art Institute campus. Invoices submitted to the court show they spent $1,800 for each plane ticket and $676 for a room at the Bellagio.

For four months of work, including a frenzied 30-day stretch when the campuses had to be emptied out, Dottore’s firm and its general counsel had requested $1.6 million in hourly fees and $41,000 in reimbursable expenses. Outside lawyers he hired billed an additional $520,000 in fees and about $7,000 in expenses.

The Education Department, which opposed the receivership, said it was reviewing its legal options. Creditors have also questioned the accuracy of Dottore’s billing. A landlord seeking overdue rent for a campus in Santa Ana, Calif., filed an objection last week calling the fee and expense request “exorbitant” and “excessive.”

The time sheets that Dottore submitted document, down to the minute, the time he and his employees said they had spent preparing court filings, answering questions from students and negotiating with potential buyers. Most entries were routine, but one stood out: a May 1 entry for Charlie Dottore, Mark Dottore’s brother and an employee of the firm. It said, “Make up something for Charlie.”

Mark Dottore said the entry was supposed to be a “place holder” for two-tenths of a billable hour, worth $60. But the Santa Ana landlord seized on it to question the “accuracy and integrity” of the charges.

“The mere fact that this entry was included in the invoices submitted to the court shows the lack of attention to detail the receiver and his team gave to their billing practices,” the landlord wrote.

In response to an inquiry from The New York Times, Dottore acknowledged that some expenses had been filed in error.

Since then, Dottore has pared back his reimbursement request. In a court filing Tuesday, his lawyers said flights had been booked at a first-class rate that had been “billed through in error” and would be resubmitted at an economy rate. On Wednesday, his firm filed an amendment reducing its request by $8,600, but did not specify which expenses it was no longer claiming.

Stephen J. Donell, a longtime receiver who is not involved in the Dream Center case, said a total bill of more than $2 million for the first few months of a complex receivership was high but plausible, given the challenges of winding down operations at dozens of campuses with tens of thousands of students and employees.

“Ultimately, a judge will be looking at these bills, and it’s solely up to the judge to decide what’s reasonable,” he said.

Dottore’s bills have drawn scrutiny before. A 2005 article in Cleveland Scene described disputes over his fees and expenses, and quoted a local judge criticizing his bills as surprisingly large. According to that report, another receiver reviewed his fees and found them to be mostly justified. Dottore told The Times on Thursday that his billings had been fair and accurate.

“When you’re in my business, you’re a lightning rod,” he said.

Alex Elson, senior counsel at the National Student Legal Defense Network, which is representing students in a lawsuit against Dream Center, said Dottore’s firm was benefiting while his clients’ lives were ruined.

“It is absurd that the receiver was expensing airport massages, hundred-dollar steak dinners and first-class flights while insisting that there was no money available to help students in need,” Elson said.

Dottore defended his work, saying his receivership had eased the transition for some students trying to complete their degrees elsewhere. He kept open two campuses, Western State College of Law in Irvine, Calif., and the Art Institute of Las Vegas, while negotiating with potential buyers, and helped move more than 1,000 clinical psychology graduate students into other programs.

The 400 pages of invoices and receipts that Dottore and his lawyers filed in court detail the final months of Dream Center’s downward spiral, as he and his employees traveled the country meeting with college leaders, taking stock of failing campuses and facing dismayed students.

In early February, Charlie Dottore took a two-day trip to Phoenix that cost $2,800, including $1,079 at the W Hotel in Scottsdale, a $155 dinner at Mastro’s Steakhouse and more than $300 for Uber rides. Later that month, Mark Dottore booked a $645 one-night stay in the Executive King suite at the Moxy Hotel in Atlanta.

In late February, Charlie Dottore was back in Phoenix, spending $1,171.85 for two nights in a hotel and $420 on car trips. At the same time, Mark Dottore was in San Francisco, spending spent $572 for a night at the Claremont Club & Spa in nearby Berkeley and $433 on car rides.

“I get paid by the hour. There is no big rainbow at the end of this for me,” Dottore said in February at an open forum at Argosy’s campus in Chicago,. “And by the way, when I put my fees on, you could all object and say, ‘Don’t pay him.’ Would you go to work every day knowing that somebody could just stand up and say, ‘This guy’s worthless,’ and not pay you?”

A student interrupted: “That’s what we’re doing now. We’re coming here, and we’re not getting anything.”

Dottore responded, “You’re getting educated.”

Two weeks later, he closed the school.