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May 27, 2022

Education entrepreneur Scheinberg reaches $1M settlement with Feds; must cease Stone Academy ties, step down as Goodwin pres. within 5 years

HBJ Photo | Stever Laschever Goodwin University President Mark Scheinberg.
By Andrew Larson, Greg Bordonaro
Click "more information" to read the settlements with the U.S. Department of Education and U.S. Department of Justice.
More Information

Mark Scheinberg, the well-known Connecticut education entrepreneur who built East Hartford’s Goodwin University from the ground up, has reached a more than $1 million settlement with the U.S. Department of Justice to resolve allegations that he attempted to improperly influence the student loan default rates of another school — Stone Academy — that he owns. 

As part of the agreement announced Friday by the U.S. Attorney for the District of Connecticut, Scheinberg has agreed to cease his involvement and participation in Stone Academy and another for-profit school, the Paier College of Art.  The 66-year-old has also agreed to retire from  Goodwin University, where he is president, and the University of Bridgeport, where he is a board member, within five years. 

Stone Academy, a for-profit school with campuses in East Hartford, Waterbury and West Haven, was accused of concealing money order payments made by Scheinberg to prevent loans from defaulting and being counted in Stone Academy’s student loan default rate. The school also failed to disclose Stone Academy’s actual, higher default rate to the U.S. Department of Education, according to the U.S. Department of Justice.

The settlement was made to resolve allegations that Scheinberg and Stone Academy violated the federal False Claims Act.

Stone Academy, which awards degrees in medical fields, participates in federal student loan and grant programs under Title IV of the Higher Education Act of 1965. 

As part of its Title IV eligibility, Stone Academy reports its “cohort default rate,” which is the percentage of the institution’s federal student loan borrowers who default, or are expected to default, within a specified time. 

A high rate indicates that too many of an institution’s graduates are unable to repay their student loans, which can lead to an institution losing its Title IV eligibility.  

Federal authorities claimed that between February 2015 and March 2019, Scheinberg and Stone Academy mailed 154 direct payments to loan providers on behalf of 102 students in attempts to prevent the students from defaulting on their loans and being counted in Stone Academy’s cohort default rate. 

Scheinberg made the payments without students’ knowledge or consent, authorities said. 

The settlement requires Scheinberg to pay $1.02 million, plus interest. Also, Scheinberg agreed to cease involvement in Stone Academy’s operations, and divest direct ownership, of both Stone Academy and another for-profit school, Creative Workforce LLC, doing business as Paier College of Art.  

Scheinberg also agreed to retire as president of Goodwin University and from the board of trustees of the University of Bridgeport within five years.

Last year Scheinberg orchestrated a major deal: Goodwin University purchased the University of Bridgeport for $32 million. The deal was backed by state taxpayers. The Department of Economic and Community Development agreed to provide a $7.5 million low-interest loan to cover any first-year operating losses and help fund investment in the Bridgeport campus.

In a statement Friday, Scheinberg said the allegations resulted from personal funds he paid on behalf of 102 Stone Academy students over four years. 

“While it’s important to note that any increase in Stone’s default rate resulting from my actions would have been minor and still well below the thresholds that could have impacted the eligibility of Stone to receive federal funding, I have chosen to settle this issue in order to put the dispute behind me," he said. 

He continued: “At 66 years old with much yet to accomplish, I have chosen to devote my remaining educational career to the important work that brings joy to my life — creating new opportunities that students with diverse talents and backgrounds can use to succeed."

Goodwin University's board of trustees also published a statement Friday saying it "is aware of the civil settlement agreement between the federal government, Stone Academy and Mark Scheinberg regarding a regulatory matter related to Stone Academy. Goodwin University is not affiliated with Stone Academy nor is Goodwin University a party to the settlement or involved in any way."

The board also said it "has been planning for the eventual retirement of our founding president for several years now. The civil settlement agreement that Mark Scheinberg retire within five years does not change our plans. We will continue to work with the Board’s presidential succession planning committee to ensure a smooth transition of leadership so that we can advance Goodwin’s mission for years to come."

Newly appointed U.S. Attorney Vanessa Avery said educational institutions that attempt to hide high student loan default rates not only risk forfeiting their and their students’ eligibility to receive federal funds, but federal enforcement action.

“The cohort default rate is an important metric that students can use to research whether a school provides a valuable education because it can show whether the degree they would earn will help them find employment that allows them to stay current on their student loans,” Avery said.

The investigation was conducted by the U.S. Department of Education – Office of Inspector General and the U.S. Postal Inspection Service.  

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