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Masters of Deceit

Jeff LeBond
Christopher Gardner

Hard Copy: Jeff LeBond had a difficult time finding a good job before completing the program at Masters. He's still looking.

Masters Institute's ads sell a fast track into high tech, but former students and industry recruiters say it's a hollow promise that ends up costing students and taxpayers a fortune

By Cecily Barnes

A SLICK BLACK receptionist's desk, stumpy office chairs and a half-dozen ailing plants fill the narrow lobby at San Jose's Masters Institute. I give my name to the receptionist and take a seat on a chair upholstered in scratchy blue fabric.

The students here look older than typical college students, appearing to be in their late 20s or early 30s. People passing through the lobby talk in hushed tones, and those traveling solo hurry on their way. Nobody talks about music, concerts or bars. No one flirts, chitchats or discusses assignments. Only a few students in faded jeans and wrinkled shirts stand around outside.

As a reporter, I had heard rumors that Masters graduates were frustrated in their job searches, defaulting on their loans and suing the school. I had come to hear the sales pitch firsthand.

Waiting, I stare off, remembering my college days of sitting on grassy lawns with friends and long talks in the hallways after lectures. Loud footsteps snap me back to reality and announce the arrival of Peggy Fenner, an exhausted-looking admissions counselor dressed like a flight attendant with unfashionably large shoulder pads. Fenner flashes a big smile, shakes my hand and leads me down a sterile hallway to her office.

Seated across from each other at a faux wood table, we begin the admissions process.

"This school trains you for two of the highest-paid, lack-of-dead-end jobs in the world," she says. I tell her I want to make about $30,000 a year. I might have to start off a little lower, she says, but eventually I could be making even more, lots more. While being careful not to promise me anything, she points out that 93 percent of their students find jobs in their field after graduation. She hands me a list of companies where ex-Masters students now work: Adobe, Apple, Silicon Graphics, Sun Microsystems. It sounds too good to be true.

After I hear out her pitch, Fenner drops a bomb: the tuition for this fast-track program, the one that's right for me, will be $15,000. (I later learn that San Jose State University's students run through four years for less than $9,000; UC-Santa Cruz goes for $16,000, for all four years. And Stanford University, with celebrity students and a national reputation, costs $21,300 a year.) Fenner quickly reminds me that with a good-paying job, the $150-a-month loan payments should be a breeze.

As we head back to the lobby to begin a tour, Fenner trots off to greet two other prospective students who are growing restless on the waiting-room couches. In the hall I notice two men in their 30s raising their voices at a third, older man who appears to be a Masters' instructor. It is the only audible conversation in the lobby.

"We went to class and no one was there. There was no note saying the room had been changed," one student griped. I strain to hear the rest of their conversation, but begin to feel uncomfortable. I'm here to research a story, and I'm afraid my cover will be blown. I just want to leave. While Fenner is still busy with the other students, I quietly walk out the front door.

Michael Altair
Cutting-Edge Technology: Michael Altair invested thousands of dollars and countless hours to get his degree from the Masters Institute, which was little help in getting his job at Round Table Pizza.

Photo by Christopher Gardner

DEANNA MULDER IS A SHARP, well-spoken account coordinator for Mitsui Comtek who signed on with Masters Institute after hearing shock-jock Howard Stern talk about Masters one morning in one of his regular-guy advertising spiels on KOME. "Can you believe all the amazing special effects these days?" Stern asks. "Every two minutes there's a commercial that makes you go 'Wow!' " At Masters, Stern boasts, anyone who wants to can learn to create Jurassic Park dinosaurs and Star Wars trilogy effects. "You can be a part of all this by calling Masters now."

"After I heard that commercial I went back to an admissions counselor and asked if I could really learn those things. What I really, really wanted to do was 3-D graphics and film effects," Mulder recalls. "She was like, 'Oh yeah, we do that here.' "

Mulder signed up for $15,000 in financial aid and was off and running.

For her first few weeks of school, she would drop off Elliot, her 5-year-old son, at his grandparents at 7:30 in the morning, go to her administrative assistant job at Kokusai Electric until 5pm and then hit the computer labs until 10 at night. Three nights a week Elliot would stay with his grandparents.

"I totally made a sacrifice," Mulder recalls. "Elliot ended up spending the night with his grandparents because I didn't want to pick him up at 10 at night. The only reason I did it is because he was old enough to understand that I wasn't abandoning him."

The schedule was a hectic one and income was sparse, but Mulder knew it was only for a year or two, and then she would latch onto a great job. At least that's what she thought.

Soon Mulder began noticing some inconsistencies between what she was promised and what was being delivered on-site. While the college had displayed top-of-the-line computers and Silicon Graphics (SGI) machines during her interview, Mulder was put to work on a Power Mac 6100. She says she never set eyes on an SGI machine again.

"These are not the computers Atari's graphic designers are using, or Industrial Light and Magic," Mulder says. "It took 10 to 24 hours just to render a 3-D modeling scene," something that should take no more than one hour on a high-end computer. "You'd come in and need to use the computer and couldn't because there was a little sign saying 'rendering.' There were also long lines for the scanner. You had to wait hours just to scan a couple of photos."

Masters, meanwhile, boasts that the school has spent $3 million in the past two years on upgrades and equipment and owns 100 IBM Pentium 200 MMX computers, computers fast enough to render a 3-D graphic in minutes.

Mulder also describes her classes as second-rate. Nearly 30 students packed her Quark XPress class, she says, despite the school's proud assurance that all classes had a maximum of 15 people per instructor. And many of her instructors hardly knew the programs they were teaching, Mulder says.

"If it weren't for the fact that I read the instruction book, I wouldn't have learned anything," she says. "The teacher was like, 'Here's the book, do the tutorials.' Occasionally we had some lectures, but we were all lost."

But despite her grievances, Mulder stuck it out. After all, she had already signed the loan papers.

"You know when you're in something and there's nothing you can do, so you just make the best of it?" she says, her voice pleading for empathy.

But when Mulder neared graduation and couldn't find work, and none of her classmates could either, they decided to take action. They weren't the only ones.

"We decided, 'Let's not be like every other person that went through here and left dissatisfied,' " Mulder says. "So we decided to sue."

Masters Institute
Blurry Future: The only high-tech firm that admits to recruiting Masters Institute grads is the Masters Institute.

Photo by Christopher Gardner

SINCE ATTORNEY Derek Albertsen posted a Web site for Dissatisfied Students of Masters Institute, he's gotten a huge response. At last count, he says, 31 disgruntled former students had contacted him expressing interest in participating in the suit. Albertsen suspects there'll be more. He's been working nights to finish the complaint against Masters Institute--which he hopes to file by mid-November--alleging fraud, misrepresentation and breach of contract.

This isn't Albertsen's first lawsuit against Masters, just his biggest. On Oct. 1, he won a SLAPP [Strategic Lawsuit Against Public Participation] against Masters, effectively eliminating a libel and slander suit the Institute had filed against an underemployed but enterprising graduate, Keith DeJarnet.

DeJarnet, like Mulder, could not find work after graduating from the Institute's multimedia program. Rather than swallow his bitter feelings, DeJarnet used his new technical skills to create a Web site called SCAM, an acronym for Student Coalition Against Masters. Its graphics consisted of the Masters Institute logo inside a slashed circle, followed by a list of organizations that dissatisfied students should send letters to, including the Council for Private Postsecondary and Vocational Education, Gov. Pete Wilson, the Better Business Bureau, Congressman Sam Farr (D-Santa Cruz) and others.

"The lawsuit they filed was meant to intimidate my client from his First Amendment rights," Albertsen says. "The judge [Superior Court Judge Richard C. Turrone] felt that was the case and that my client should be allowed to say and do the things he did."

Before Turrone decided in DeJarnet's favor, Masters tried to settle. They demanded that DeJarnet write a letter "satisfactory to Masters Institute," retracting everything bad he had ever said about the school. He was to agree never to participate in any future lawsuit against Masters and to refrain from talking with the media or posting anything concerning Masters on the Web or anywhere else. He was also to pay Masters $1,500 in attorneys' fees.

"Masters is chilling First Amendment rights and making everyone afraid to do or say anything," Albertsen says. "They don't want to settle, they just want to keep on having this chilling effect."

DeJarnet took his Web site down when the lawsuit was filed. But while it was up, nearly a dozen other Masters students took DeJarnet's posted advice and wrote complaint letters to the Council for Private Postsecondary and Vocational Education.

In response to their complaints, Masters' attorney, David Lively, sent all 11 students who wrote complaints a letter warning them to keep quiet or face a fate similar to DeJarnet's.

The letter, dated April 11, 1997, read as follows: "Masters Institute considers your recent letter to be defamatory. Should you engage in such further conduct, the undersigned [Lively] will advise Masters as to its rights to include you in the pending civil litigation."

Albertsen seethes when telling about this letter. "Who has $15,000 to defend themselves in a civil liability case?" he storms. "If these students were to get sued, they'd pretty much dry up and go away."

Ken Miller of the Council for Private Postsecondary and Vocational Education says, "Students have a right to send in complaints."

According to Masters Institute president Bernie Fortunoff, these students' complaints and woes have, to the company's satisfaction, been found to be "meritless." Attorney Lively did not return calls from Metro.


Trade schools have problems, but things were worse
before regulatory boards were created.


MASTERS INSTITUTE IS not the only technical trade school in the Santa Clara Valley being sued for fraud--Sawyer College has defended itself against seven such lawsuits in the past five years. Heald College, Computer Learning Center and Silicon Valley College each face a lawsuit, but not on the grounds of fraud.

Besides lawsuits, every trade school in the valley faces another problem--higher student-loan default rates than public and private universities. In 1993, 24.3 percent of Masters students defaulted on their loans, compared to 8.1 percent of SJSU students and 2 percent of Santa Clara University students. That same year, 36.6 percent of Sawyer College students defaulted, as did 16.5 percent at Silicon Valley College and 19.1 percent at Heald.

In 1991, the federal government shelled out $3.2 billion of taxpayers' money to cover defaulted student loans. While this covers loans to students at all colleges, trade school students in 1990 had a 41 percent default rate, while students attending four-year nonprofit schools had only a 7 percent rate.

The federal government's Guaranteed Student Loan Program, which co-signs cash loans to practically every student who can fill out the application, has cost the federal government, or the taxpayer, billions. Trade-school students have the worst track record of defaulting, and officials suspect this is because these graduates have tougher times finding jobs.

Trade colleges, in fact, were singled out in a harshly worded report issued by the General Accounting Office in 1996: "Some proprietary school operators have enriched themselves at the expense of economically disadvantaged students while providing them little or no education in return," the report reads. "Faced with large debts and no new marketable skills, these students often defaulted on their loans."

This phenomenon is nothing new to the U.S. Department of Education. Since the Guaranteed Student Loan Program started in 1965, education officials have passed increasingly restrictive laws related to the student loan program--many aimed at the trade schools. One restriction is that schools with more than a 30 percent default rate for three consecutive years, or more than 85 percent of their income coming from loans, can no longer access the student loan program. And in order to be eligible for the loan program in the first place, schools must be licensed by a state-certified accreditation agency. But even with all these restrictions, the government continues to lose millions in unpaid student loans each year, a disproportionate number of them from defaulting trade-school students, government reports show.

Nonetheless, close to one million Americans continue to enroll in for-profit trade schools each year.

Students graduating from blue-collar trade schools that teach truck driving, hairdressing, bartending and auto care report that they quickly learned the specific skills needed to land a job. Six months cutting wigs is often enough experience to land a job cutting hair. Three months learning drink combinations at a bartending school can be all someone needs to make a pretty good living behind a bar.

But high-tech graphic design is much too complex a skill to learn in a year or two, professional graphic designers say. In today's market, it not only requires computer proficiency but demands a breadth of creative experience and arts training.

In three months of interviews with dozens of current and former Masters students, not a single one had anything good to say about their education.

A handful had landed respectable graphic-design jobs, but none gave credit to the Institute, saying instead that they were self-taught, learned on the job or continued their education elsewhere. Nobody, even when solicited to do so, would sing the school's praises.

Masters president Bernie Fortunoff refused numerous requests to provide the names of satisfied students working in their field.

Mark Spencer
Singing the Blues: Mark Spencer ran the karaoke machine at Duffy's Pub in Scotts Valley before getting his Masters Institute degree. Today, he remains behind the sound board.

Photo by Christopher Gardner

MASTERS INSTITUTE is sandwiched between corporate giants AT&T and Imperial Bank. Prospective students might easily imagine walking out its back door and through the front door of one of these companies. A bulletin board inside the building displays Polaroid shots of graduates, along with the name of the company that hired them, lending credibility to admission counselor Fenner's assertion that Masters has a 93 percent placement rate. But when I interview Masters CEO Les Nicholaeff, he tells me that the school actually has an 85 to 90 percent placement rate in systems administration and about 75 percent in multimedia. And Nicholaeff cautions me about bogus placement figures touted by other trade schools. "You're going to get totally inaccurate figures from vocational schools," Nicholaeff confides. "They're going to tell you 95 percent and all that. Unless you verify it, be careful of that one."

When I return home, I decide to take his suggestion and fax a request to Masters president Fortunoff for a list of the total number of graduates in the last year, as well as the companies they work for. In response, Fortunoff sends another set of numbers. The placement rate for the multimedia program, Fortunoff writes, is 75 percent--just as Nicholaeff said. However, Fortunoff cites placement for systems administration as more than 90 percent. He sends no names of any students or where they had successfully landed jobs.

Attorney Albertsen says he sincerely doubts the validity of these figures. One of his clients is living out of his car because he can't make loan payments and rent without a job. Ex-student Michael Altair is working at Round Table Pizza, Deanna Mulder does office work and Jeff LeBron rakes leaves and does general maintenance. Casey Jones says his Masters Institute degree couldn't even land him a job at Kinko's. Unemployed, he's back living with mom and dad.

"Sure, maybe this guy just isn't a great employee and that's why he's not finding work, but he certainly doesn't need $15,000 in loans," Albertsen says about Jones. "And then what about all my other clients?"

Albertsen's clients aren't the only Masters graduates who can't find work. Others, like Rebecca May, are dissatisfied but simply don't want to deal with the hassle of a lawsuit. May graduated from Masters in September 1995 with an associate's degree in graphic design, and simply couldn't land a job. "Every time I put Masters on my résumé, [employers] would laugh at me," she says. "People don't even want to talk to you if you went to Masters." And while May acknowledges that Masters' placement service offered her graphic design jobs, she says they only paid $7 to $10 an hour--hardly enough to make her monthly student loan payments. "[Masters] is giving people degrees, and the degrees are worthless," May says. After months of looking for work in her field to no avail, May settled for a job in the accounting department of a construction firm. "I haven't been able to pay back student loans," May says bitterly.

Students say that Masters' job-placement service was of little or no help, often sending them out for low-level jobs such as data entry and filing. Others say the placement service only sent them out once or twice and then never called again despite inquiries.

High-tech recruiters openly admit that trade schools are not the first place they look for recruits. At Silicon Graphics, the head of recruiting says only that the company does not actively recruit from Masters. Typically, SGI seeks graduates of Stanford, UC-Berkeley, MIT, Harvard and SJSU, spokesman John Cristofano says.

Don Tuttle, director of technical services for Hyper Net Inc., who has been recruiting employees for technical work for almost 10 years, says that in general the skills possessed by trade-school students don't measure up.

"As a whole, they seem to be a somewhat displaced group. While most of these folks are eager and willing, they seem not to be up to the task and not as well prepared for the jobs they are seeking as they should be," he says, adding that he's hired a few, with disappointing results.

And Howard Stern's plug aside, Industrial Light and Magic doesn't employee a single Masters graduate.

"To tell you the truth, I've never heard of Masters Institute," admits Beth Sasseen, ILM's computer graphics recruiting supervisor. "We look to schools like Cal Arts, Sheridan College [in Ontario] and Art Center of Design."

After consulting her HR database, Sasseen reports that two Masters graduates have applied in the past year and both "were unqualified."

Sasseen says the people she hires have to be artists first, and the technology they use is only a tool to express their artistic talents.

"The graduate programs at UCLA and USC require a portfolio to show that you have an ability to do something aesthetically. To me that's credible," Sasseen says. "If a school accepts them without doing any sort of assessment of their creative ability, it's generally not a credible school."

APPLICANTS MUST take a test to be "accepted" at Masters. The test they gave me was filled with stumpers like "what is 21 + 42?" and "Is it grammatically correct to say, 'His hair hanged down to his shoulders'?"

"The test was a joke," ex-student Kristy Miller says. "Anyone could have passed it."

But CEO Nicholaeff estimates Masters turns away 40 percent of all applicants.

"We don't go for the low-level students," Nicholaeff says. "They have to pass a test and convince us that they really want to do this."

"We are not an open-enrollment campus," Peggy Fenner tells me during a phone conversation. "We take students and see if they're the kind of caliber students we want."

Some former students suggest that Masters also applies questionable standards in the hiring of its instructors. Robert Bedard, who enrolled in the Institute in 1994, recalls a programming instructor who would regularly snooze during class. "This instructor would routinely fall asleep during his lecture and refuse to answer questions after class," Bedard says.

Even instructors agree that at times they've taught classes they knew little about. Susan Banta, a Masters graphic arts instructor from 1989 to 1994, says she was asked to teach Stratovision, a complex 3-D program she had no experience with. She says she was told to write a curriculum three days before class.

Sally Fullstone, who once taught electronic drafting and printed circuit design at Masters, says that she, too, was asked to teach a class she was unqualified to lead.

"I was asked, almost ordered, to teach an architectural drafting class, and I refused to do it because I didn't have the background. I'm a very independent person, and I wouldn't do that," Fullstone says.

Another multimedia instructor presently employed by Masters, who wishes to remain anonymous, claims that many more Masters instructors are underqualified to teach some of their classes.

"I don't believe that a lot of the people teaching have enough experience out in the world," he says. "I know for a fact that sometimes in the higher-level classes, some of the instructors definitely don't have enough experience."

But Nicholaeff assures that all instructors at Masters have industry experience and at least the educational background necessary for the classes they are teaching.

"The ones teaching the bachelor's degree [classes], of course, have to have at least a BS degree themselves, and the ones teaching the associate's degree have to have at least an A.A.S. degree," Nicholaeff explains. "Also, they need industry experience. What we usually do is find people in the industry who just love to teach, so we bring them in here and improve their teaching techniques. It's critical to have industry experience; otherwise they just live in academia, which is useless."

Despite Nicholaeff's assurances, Masters' own catalog shows that 10 of the school's 47 instructors are Masters graduates themselves. While Nicholaeff admitted the instructors must have only the level of education that they are teaching, Fortunoff describes the instructors as "outstanding experts."

NICHOLAEFF SITS in a leather swivel chair behind a huge desk. A smile breaks across his face as we shake hands, and his calculating eyes scan my face. He is a tall man with a ruddy face and a commanding presence. From behind his long, polished wooden desk, he seems thrilled to answer questions, ticking off his accomplishments and future visions. He purchased the school for "a fairly low amount" in 1987, when the school had 30 students, six computers and four staff members. Now, he boasts, there are close to 1,000 students and 700 computers, making Masters Santa Clara County's largest technical vocational school.

"We try to teach our students not only the software but critical thinking and problem-solving so when they get up there, they can actually be useful to an employer." Presently, he explains excitedly, "I've hired a complete team to put [our curriculum] online. So we won't limit ourselves to the 10-mile radius we have now; we'll go nationwide and ultimately worldwide."

After hearing his dreams of conquering the world, I bring up the pending litigation against Masters. Even before the word "lawsuit" is out of my mouth, Nicholaeff's mood changes. The smiling businessman looks shocked and angry. His guard is up. I explain that I've looked over the lawsuits against the school and want to give him a chance to respond. I ask about ex-student Kristy Miller's discrimination suit and ex-instructor Susan Banta's sexual harassment case. Nicholaeff makes brash remarks and then refuses to comment on the record. I ask a few innocuous questions, hoping to change the subject and calm the situation, but it doesn't work.

Before I leave, Nicholaeff smiles through his teeth. His South African accent almost obscures what is certainly a threat. "If you do this and put us in harm's way, obviously I'm going to have to defend myself--you realize that--against you guys," he says. "I don't need this kind of stuff; that would not be right. We do everything we can, there's just always going to be freeloaders."

Since that day the legal threat to Masters has escalated, not only with the school losing the aforementioned SLAPP suit, but with 31 civil suits in the works for restitution of tuition and related damages. Students have banded together, written letters and talked with attorneys. The legal process is long, weighted down with forms and formalities, but the defendants are poised to have their day in court. DeJarnet had his last month, Sept. 23--and won. His attorney, Albertsen, hopes this is just the first of many victories.

I MEET MARK SPENCER at 8:30pm at Duffy's Pub in Scotts Valley. His 6-foot-4 frame is bent over, unloading boxes of records and sound equipment. He has graying hair, a brown leather jacket and large, honest eyes. It's karaoke night and Spencer is the DJ, although he'd rather not be. With Janis Joplin's sadly appropriate "Break Another Little Piece of My Heart" playing softly in the background, Spencer tells me his story.

Two years ago, Spencer enrolled at Masters Institute to become a graphic designer. Besides having been in a serious motorcycle accident that permanently chinked his back, Spencer was ready to be a stay-at-home-at-night husband and a career man. He'd seen enough plumbers and construction workers belt Bruce Springsteen into his faded mic and was ready to get out of the karaoke business.

"My wife wanted a husband who was home at night," he says, "and I really wanted to get away from karaoke."

For over a year, Spencer spent his evenings making stars of drunken bar-goers and his days poring over computer programs at Masters.

"Sometimes if I had a gig over the hill, I would sleep in the cab of my truck and then go to school," Spencer says.

But when Spencer graduated with a $6,000 loan outstanding and couldn't find a job, his life began to crumble. He applied at the Santa Cruz County Sentinel newspaper and for other graphic-design jobs, only to be told he didn't possess the necessary skills. With no other option, Spencer continued to pack up his trailer each evening and hit the bars with his karaoke equipment.

"I make $150 a night doing this," Spencer says. "It's good money."

I ask what he plans to do now. After a long pause, Spencer lowers his eyes away from mine, staring at the concrete ground.

"My wife and I are filing for a legal separation," he says softly. "I'm supposed to go and get my proverbial stuff together, and then we'll see."

In the absence of a high-tech career, Spencer has set his sights on getting a job in radio. For now, he will pay the bills by working the mic at Duffy's, where an after-work crew gathers, waiting to become stars.

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From the Oct. 16-22, 1997 issue of Metro.

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