Globe University, Minnesota School of Business file for bankruptcy as students seek refunds
ST. PAUL — The now-defunct Globe University and the Minnesota School of Business filed for federal bankruptcy protection Thursday, Nov. 21, just two weeks after the state Supreme Court ruled more than a thousand defrauded former students could get tuition refunds.
In court documents, leaders for the closed schools said the institutions had thousands of creditors that were owed as much as $50 million in debts and less than $500,000 in assets. Those creditors include about 1,200 students who attended the schools’ criminal justice programs.
Earlier this month, the Minnesota Supreme Court ruled that all students who attended that program could seek refunds for tuition and other education expenses. The schools had fought to limit the students owed refunds to the 15 who testified during a 2017 fraud trial.
In September 2017, a Hennepin County judge found the schools had defrauded students by leading them to believe completing the criminal justice program would help them become police and probation officers.
Ellison: Schools fail to take responsibility
In a statement Thursday, Attorney General Keith Ellison criticized the schools for failing to take responsibility for fraudulent actions.
“Right now we don’t know how or when students are going to get their money back. That will be for courts to sort out,” Ellison said. “What I do know is that my office will fight for every last dollar from MSB and Globe to make up for the harm they did.”
The schools’ attorney declined to comment.
How we got here
Then-Attorney General Lori Swanson filed a lawsuit against the schools in 2015 after receiving multiple complaints from former students who were misled. As part of that lawsuit, Globe and the Minnesota School of Business were found to have made illegal loans to students that violated state consumer protections.
The fraud finding led the state Office of Higher Education to revoke the schools’ ability to operate in Minnesota. The U.S. Department of Education cut off the institutions’ access to the federal student aid programs shortly after.
Those punitive actions forced the institutions to close most locations, but some continued to operate for a short time under other names.
Leaders of the two schools, once based in Woodbury, have accused state officials of being overzealous in the legal actions that led to the institutions’ closures. They’ve argued the schools addressed issues with the criminal justice program as soon as they were raised by state officials.
Both Swanson and Ellison have said the institutions’ violations were too serious to allow them to continue to operate in Minnesota.
“MSB and Globe committed pervasive fraud that left students who wanted to serve their communities as police and probation officers with nothing but worthless degrees and a mountain of debt,” Ellison said. “The schools fought for years to evade responsibility and lost. Now they’re filing for bankruptcy instead of doing the right thing and paying students back for the fraud they perpetrated.”
Schools hope to avoid cash flow crisis
In the bankruptcy filing, representatives for the institutions said despite no longer educating students the schools have related subsidiaries that still own multiple pieces of real estate worth $36 million. Some of those properties also have mortgages worth about $8 million.
The schools also have loans they are collecting from former students that were not found to be invalid by the state.
Documents filed Thursday say the schools are seeking bankruptcy protection to avoid a “liquidity,” or cash flow, crisis because they fear the state will move to quickly recoup money owed to former students for tuition and other expenses.
The bankruptcy case said the schools’ leaders plan to use existing assets to pay creditors.