School of Hard Knocks

State laws regulating vocational schools have been gutted. Disadvantaged students are paying the price.

aura LaRosa must leave in a few hours to report for a job that entails smiling behind the makeup counter of a local department store. What she hates most about the job is staying after work to pen a personal thank-you note to every last woman who buys a powder compact or a vial of nail polish. It's the store's way of building customer rapport.

But since her divorce, the 45-year-old LaRosa has been forced to support herself and her two kids for the first time in years, and this job is the best she's found so far. "You make the most of what you've got, right?" she says, sitting at her kitchen table. Ready for her eight-hour shift, LaRosa has donned a handsome business suit, and skillfully prepared her face: a mix of Sandstone and Topaz eye shadows, Tawny rouge, Dry Rose lipstick, and a Very Cherry lip liner that matches her hair.

Makeup is what she does best, and it's what she'd like to do professionally -- not selling tubes of lipstick, but working as a makeup artist in a salon. That requires an aesthetician's license from the state, however, and getting a license means completing 600 hours of training at a state-certified vocational school.

Following a class-action lawsuit, Zenzi's reopened at a new location South of Market.
Following a class-action lawsuit, Zenzi's reopened at a new location South of Market.
Following a class-action lawsuit, Zenzi's reopened at a new location South of Market.
Anthony Pidgeon
Following a class-action lawsuit, Zenzi's reopened at a new location South of Market.
Matthew Dodds, a former student at Zenzi's, returned to electrical contracting, rather than pursue cosmetology.
Anthony Pidgeon
Matthew Dodds, a former student at Zenzi's, returned to electrical contracting, rather than pursue cosmetology.
Matthew Dodds, a former student at Zenzi's, returned to electrical contracting, rather than pursue cosmetology.
Anthony Pidgeon
Matthew Dodds, a former student at Zenzi's, returned to electrical contracting, rather than pursue cosmetology.
Laura LaRosa has never gotten back any of the tuition she paid Zenzi's.
Anthony Pidgeon
Laura LaRosa has never gotten back any of the tuition she paid Zenzi's.

LaRosa tried attending a beauty college once. For her money, she received a rude lesson in just how meekly the state regulates the 3,000 or so trade and vocational schools that operate in California.

In the early 1990s, when LaRosa's kids were in grade school and her marriage still rosy, she enrolled at Zenzi's Beauty College in San Francisco. She and her husband paid several thousand dollars for the education that would presumably set her on the way in her chosen field.

But Zenzi's was a disaster. The facilities were outdated, she says, and the teaching staff apathetic. "Everyone knew they didn't care," she says. "It was all about getting you in and out, like cattle."

After three months, LaRosa says it became clear that Zenzi's was not going to prepare her for much of anything. She quit, then joined her fellow students in a class-action lawsuit against the school. The students -- many of whom had taken out loans to pay for the classes -- demanded their money back, claiming that Zenzi's lied to them about the quality of the education they would receive. Students said they spent some class time watching movies and soap operas, or taking naps. Things got especially bad after a fire forced Zenzi's out of its Mount Davidson location and into temporary quarters at a recreation hall.

Ultimately, a Superior Court judge ordered Zenzi's to pay LaRosa and 129 other former students about $650,000 in refunds, interest, and penalties for breaking state laws governing vocational schools.

Three years later, LaRosa and the others have yet to see a dime of the money. The operators of Zenzi's, Curtis and Zenzi Cook, avoided paying the judgment by simply closing their business and starting a new corporation in their son's name. Zenzi's itself is still operating -- in a new location -- and has remained in business with the blessing of the state, which never yanked its license.

Even after Zenzi's stiffed them on the judgment, LaRosa and other former students still should have been able to get at least some of their money back. A special state fund was set up in 1989 specifically to reimburse students who are victimized by rogue trade schools. But that fund has been tapped out since last year, and hundreds of claims filed by students who paid good money for bad educations remain stacked up in Sacramento, with little prospect of ever being paid.

All told, the state of California's efforts to regulate trade and vocational schools utterly failed LaRosa and her classmates. And the tale of Zenzi's Beauty College is not an isolated case.

Each year, approximately 440,000 students enroll in private trade and vocational schools in California -- almost as many students as attend the University of California system and state university system combined. These students pay more than $1.34 billion in tuition each year. And many who come from disadvantaged backgrounds have to take out federally guaranteed student loans for the privilege of learning a variety of skills ranging from pipe fitting to court reporting.

The task of policing these schools -- granting them licenses, investigating complaints filed against them, dropping in from time to time to ensure that all is as it should be -- falls to the Bureau for Private and Postsecondary Vocational Education, a division of the state Department of Consumer Affairs.

By many accounts, the bureau is doing a pathetic job. It has allowed schools with poor track records, like Zenzi's, to remain in business even after students have proven in a court of law that the school cheated them. It has fallen years behind in reviewing licenses and investigating complaints.

In the worst cases, as the bureau drags its feet, students burned by bad trade schools have seen their credit ruined and their wages garnished after finding themselves with loans to pay but no skills to offer employers.

Things were not always this bad. In the early 1990s, in fact, California's regulation of trade schools was among the most aggressive in the country. But then the vocational school industry got organized, paid some lobbyists, and convinced the Legislature and former Gov. Pete Wilson to gut the laws. The state's most disadvantaged students have been paying the price ever since.


In the late 1980s, fly-by-night trade schools were making a killing off California students. Some sold phony Ph.Ds. Others took money from students and then closed their doors. In a book on the subject, called Diploma Mills: Degrees of Fraud, researchers David Stewart and Henry Spille called California's oversight of the vocational school industry a "national joke."

Former state Assemblywoman Maxine Waters saw firsthand how bad the system really was. To help young people in her Los Angeles district find jobs, she actively encouraged them to enroll at vocational schools. But, according to her former staff, all she heard were complaints about how bad the schools were. Many young people left the schools no better prepared for careers than when they entered.

And many, unequipped to find work, were defaulting on their student loans, not just in South Central Los Angeles, but statewide, costing taxpayers millions of dollars. (Waters, now representing L.A. in Congress, said through a spokesman that she was too busy to comment for this article.)

For students to receive federally guaranteed loans, a school must be licensed by the state, and accredited by a federally authorized agency. But Waters, her former staffers say, found that the state's licensing division, essentially its first line of defense, was too lax, allowing too many bad schools into the system. To fix the problem, the assemblywoman convinced the state Legislature to enact the Maxine Waters School Reform and Student Protection Act, a series of laws forcing vocational schools to be more accountable.

The new laws created the Council for Private and Postsecondary Education to police the vocational schools. Supported by industry fees, the council scrutinized the colleges more closely than ever before, beginning with a pre-license review, followed by periodic inspections. The agency could suspend or revoke licenses of schools that did not comply with the new laws. It could also assess penalties on colleges that were out of line.

The act also required the schools themselves to publish their graduation and job placement rates, and prove that they were financially responsible and wouldn't stiff their students.

And to make sure taxpayers wouldn't have to foot the bill when students, victimized by bad schools, defaulted on their loans, Waters' bill required vocational schools to start making annual contributions to a statewide pool called the Student Tuition Recovery Fund. The fund was intended to reimburse students left stranded when trade schools went out of business or otherwise shortchanged them.

According to consumer advocates, the Waters Act was among the most stringent consumer protection laws in the country, and became a model for federal laws.

Council investigators hit the ground running, reviewing almost 1,000 complaints a year, and closing suspect trade schools right and left. In the six years preceding the Waters Act, 200 vocational schools in the state closed, largely for financial reasons, according to the Corporation for American Education, a vocational school trade association. In the six years after the legislation, 1,400 schools closed, mostly because they were unable to comply with the new laws.

In 1996, Spille, whose book had previously lambasted California, wrote a letter to the council, commending it for making "tremendous progress." By 1997, the student loan default rate for vocational schools in California had dropped to 14.7 percent, down from 23.9 percent in 1991.

"We really cleaned up the industry," says Stan Diorio, a legislative staffer who helped draft the act. "But with any strong piece of legislation, eventually there's a backlash."

That reaction came from trade school owners who thought the Waters Act was working a little too well. They regarded the council as a bureaucracy gone out of control, and accused the staff of being vindictive. "They ruled with a very heavy hand," says Robert Smith, owner of Pacific Coast Horseshoeing School. "They took a baseball bat and started beating everybody up."

The industry saw its chance to turn things around in June 1997, when the Waters Act was due to expire, and its author had made the jump to Congress.

In 1996, consumer advocates and public interest lawyers backed a bill to extend the legislation for another five years, but trade school owners convinced then-Gov. Wilson to veto it. In 1997, pro-regulation lawmakers decided that watering down the legislation was the only way to get any laws through the then-Republican-dominated Legislature.

Assemblyman Rod Wright, a protégé of Waters' representing her former district in Los Angeles, introduced a bill that at least maintained a semblance of the Waters Act. But the industry spent piles of money lobbying Republicans, hiring lobbyist Kevin Sloat, who just months before had served as Wilson's legislative secretary. The trade groups spent more than $114,000 on lobbying efforts that year, and tripled their campaign contributions to $29,800 that election cycle, giving mostly to Republicans.

Evidently, it was money well spent. When Wright's bill was approved in July 1997, much of the Waters Act had been dismantled: Schools had fewer reporting requirements, and many were exempted from the law altogether. In addition, the industry's assessment fees were cut across the board by as much as 15 percent, reducing the size of the tuition recovery fund.

Most damaging of all, however, the Legislature abolished the council, transferring its duties to a newly created bureau under the purview of the Department of Consumer Affairs. This new agency had to start from scratch. Only a few of the 80 bureaucrats from the council moved to the bureau, and all institutional memory was lost.

For trade school owners, the new laws were a welcome relief. "Any time you shut down an entire bureaucracy -- that's a good thing," says Smith. "We cleared out the entire staff."

Wilson appointed a pro-industry education consultant from Carson City as the first bureau chief, but he got very little done before Gray Davis became governor and promptly fired him. Davis appointed Douglas Laue as the bureau's interim director, but Laue had no experience in education. He had spent 10 years as deputy chief of the Bureau of Automotive Repair. Making matters worse, Laue was dividing his time between his new role overseeing vocational schools and his other position as deputy director of the California Medical Board.

Slowly but surely, the paperwork began to pile up. By the end of its first year, the bureau reported that it had massive backlogs: 446 applications for school licenses, 1,845 compliance reviews, and 662 claims against the Student Tuition Recovery Fund. The bureau was doing half of what the council had done a year before. At that point the tuition recovery fund had been cut in half as well, dwindling from $1.2 million in 1995 down to $589,000.

In a January 1999 letter sent to an attorney representing hundreds of angry students, the bureau estimated that it would be at least another year and a half before it was up to speed. "The bureau faced an impossible task," the letter said. "It has performed all of its duties to the best of its ability within the operating constraints it was given."

Students complained that the bureau wouldn't investigate their complaints, or respond to their requests for payment from the Tuition Recovery Fund. "They wouldn't pick up their phones," says Gabrielle Snedeker, who lost thousands of dollars at a surgical-assisting school in Chico. "I didn't believe anyone actually worked there."

But the bureau's collapse was not nearly as horrifying to the schools' owners; they had finally gotten the state off their backs.


At 9:30 on a recent morning, Zenzi's, all white light and mirrors, is already hopping with customers. A wall by the front door is decorated with fancy-looking certificates, including the L'Oreal de Paris,the Diplome de Specialiste, Tienture pour Cheveux, a degree Zenzi Cook apparently earned while living in France. Anyone walking into the school, now at 843 Howard, would have no idea that this is essentially the very Zenzi's that Laura LaRosa once attended, the school that lost a class-action lawsuit for cheating its former students.

Current students, wearing black T-shirts with a cursive "Zenzi's" splashed across the front, do their best imitations of professional stylists. Marcus Cook, a large, jowly man in his early 30s with a goatee and thick mass of pomaded curls, introduces himself as the owner. Gazing up fondly at a portrait of his grandmother on the wall, he says the school springs from his family's 68-year history of cutting hair. His grandmother was a stylist, then his mother started the college 16 years ago. Now he owns the business (his parents are getting on in years, he explains), though he has never earned a cosmetology license.

He describes the school as a place for students who are serious about styling. Many of the students have finished college, others are looking for a change of career.

Significantly, Cook notes that all of the school's students pay their tuition without any help from the government. Zenzi's is what you call a "cash-pay" school, Cook says, the only one of its kind in the area. The school doesn't want any dilettantes who might use student loans to enroll at the school on a lark, he explains. Cash-pay ensures the students are serious about the profession, he says.

"We played the financial aid game for a while," he says. "We decided it wasn't for us. We're much happier dealing in cash."

Actually, the school doesn't have much choice in the matter. The federal government cut off its ability to offer guaranteed loans in 1994, midway through the class-action lawsuit brought by the school's former students in 1991.

In their suit, a group of aspiring cosmetologists claimed the school had not delivered on the promises it made. Zenzi's had lied about the number of its graduates that had gone on to pass the state licensing exam and find work in the field, the students claimed.

"They sold us on these stories of how the school was state-of-the-art, and that's why we were paying all this money, when, in fact, it was real mom-and-pop," says Matthew Dodds, who attended Zenzi's for a few months in 1993.

The case dragged on until 1997, when Superior Court Judge Alfred Chiantelli, while dismissing some of the students' claims, ruled that students who had enrolled at the school after the Waters Act became law were entitled to damages. Chiantelli found that Zenzi's had, as the students claimed, misrepresented the job placement rates of its graduates, one year claiming a near 70 percent placement rate when it actually was less than 50 percent.

Chiantelli ruled that the former students were due a total of $328,119 in refunds and interest. As further punishment, he ordered Zenzi's to pay double that figure for violating the new laws.

But Chiantelli also ruled that only Zenzi's Beauty College Inc., the corporation, was responsible for paying the award, not owners Zenzi and Curtis Cook personally. That distinction effectively gave the Cooks a way out. By the time the judge's ruling came down, the Cooks had already transferred the school to a new company, headed by their son, called CZM Enterprises Inc. Shortly thereafter, they disbanded Zenzi's Beauty College Inc.

To students who had waited years for a refund, some staving off collection agencies all the while, the outcome was a disappointment. But an attorney for the school's owners is not sympathetic. As he sees it, the Waters Act was an onerous law to begin with. "I call it overlegislation," says John Boone, Zenzi's attorney. "They put in penalties that just made no sense."

Most of the students took the loss and went on with their lives. Dodds, who was owed almost $5,000, returned to work as an electrical contractor, and dutifully continued to pay off his loan. There's still a possibility he might get some of the money back from the state, he says, but he's not holding his breath.

The fact that Zenzi's has remained in business, without even receiving a warning from the state, is a glaring example of how badly California's Bureau for Private and Postsecondary Vocational Education has stumbled on the job. Four other schools across the state have also lost class-action lawsuits, and in at least one instance, the owner has continued going about his business as if nothing had happened.


Michael Abbott arrives in a rush, late to the meeting he has arranged. Abbott, chief of the Bureau of Private and Postsecondary Vocational Education since last November, has come to discuss his department's state of affairs. The first thing he does is take off his coat. "It's officially Friday afternoon," he says, grinning around the room.

Members of Abbott's staff have begun answering questions without him, specifically the status of Zenzi's. Deborah Godfrey, the bureau's lead analyst, has just explained that Zenzi's applied for a license renewal in December. The bureau is doing a routine investigation because the school has changed ownership, she says. Abbott nods his head in agreement.

But when Abbott and his staff learn that Zenzi's changed hands three years ago, ducking its obligation to pay the $650,000 awarded from the lawsuit, the room suddenly grows very quiet. All eyes turn to Abbott, who lets out an audible gasp. "Well, we may be doing something more than a routine investigation, but we're not allowed to say," he says.

Apparently, the top state official in charge of policing vocational schools -- and his staff -- had no idea that Zenzi's was ever sanctioned in a court of law. In the three years since, Abbott's department has taken no disciplinary action against the school.

Abbott won't say anything more about the Zenzi's case but, speaking hypothetically, says schools are required to inform the bureau 30 days before they close or change ownership. "At that point we must evaluate the old and new owners," he says. "To the extent that that doesn't happen, well, it's a problem. It's illegal. If it looks like the entities are concealing the change to avoid liability, that's a problem."

Boone, Zenzi's attorney, says he is not sure when his client notified the bureau about the change in ownership.

Abbott finds himself stepping in these messes all the time. By most accounts, he's just the man to lead the bureau out of the mire. But he has taken over a department that is still investigating complaints dating back to the Wilson administration, and when problems sit around that long, they tend to explode.

The Student Tuition Recovery Fund is a perfect example. The fund was meant to serve as a payer of last resort, "a safety net for students who don't receive the educational outcome they expected," says Abbott. But, Abbott says, the fund's architects never anticipated the vast number of students who would be asking the bureau for money.

Trade schools across the state are tanking in the face of class-action lawsuits. Now the agency is facing millions of dollars in claims, and has admitted the fund is simply broke. First in line for payment are approximately 250 students from a now-bankrupt medical trade school in Chico. They have submitted claims for $2 million. Once those students collect, another 400 to 500 students from four other schools, including Zenzi's, are waiting for their fair share, estimated at a couple million dollars more at least. A bit of resentment seems to creep into Abbott's voice as he describes the fund's bleak financial straits. "As a policy matter, the fund was a good idea. But was its construction sound? Not when you consider the burden these class actions place on the department and other schools," he says.

But it's not as if the fund lost all its money overnight. In fact, the fund remained solvent until the industry shook things up in 1997, and the agency went to pieces. It took another lawsuit, this one against the state itself, to focus attention on the fund's problems.

In 1994, Mary Catherine Wirth, a hotshot attorney with San Francisco-based law firm McCutchen, Doyle, Brown & Enersen, filed suit against Career West College on behalf of its former students.

Wirth and a few of her colleagues had offered their services free of charge after hearing horror stories about the Chico medical trade school. The school had convinced young people from the poorest neighborhoods in Chico to take out loans for as much as $21,000, promising training on modern, high-tech equipment and a job placement rate of 86 percent. But in reality the school used paper cutouts in lieu of real instruments, and no self-respecting hospital wanted anything to do with a Career West graduate.

When the aspiring surgical assistants failed to find jobs after graduation, it wasn't easy to recover and go on with their lives. Many wound up in jobs at fast food restaurants, and gave up on paying their student loans.

With Wirth's help, they won a class-action lawsuit against Career West, but the school declared bankruptcy as soon as the judge ruled against it in 1997. By that point, the state's Student Aid Commission was attaching liens on the students' tax refunds and garnishing their wages from Burger King. So Wirth, who had thought her work was done, pushed them all to file claims with the Student Recovery Tuition Fund.

But the bureau wouldn't respond to the claims. Soon Wirth says she was leaving messages at the agency weekly, but no one would return her calls. Finally, after months of stonewalling, the bureau's staff agreed to meet with her. "It was Kafka-esque," she says. "We met in this office filled with stacks of paper. And this grumpy, gravelly voiced woman motions around the room, 'You see these piles? Those are all the claims ahead of you in line. So why should we pay yours?'"

Wirth was determined to see her clients paid, so she took the agency to court and won. In March, a San Francisco Superior Court judge ordered the bureau to replenish its fund by collecting fees as high as $16,000 from vocational schools across the state. But that money will only cover the Career West lawsuit. The bureau will undoubtedly have to collect even more fees in the future to pay the long line of remaining students. Wirth says someone should file another lawsuit on behalf of the others. "What other choice do we have?" she says. "This agency would have sat around and done nothing if I hadn't put their feet to the fire. Remember, it has a responsibility to protect these kids, but by not doing anything, it's ruining their lives."


Like any good mother, Gabrielle Snedeker wants something better for her daughter, Kayla. The two live in a cramped, subsidized apartment in Ukiah. Snedeker dreams of buying a house someday, so her daughter can play in the back yard. In the meantime, it would be nice simply to spend more time with Kayla, who's going on 10 years old.

"I'd like to do a lot of things, but until I get over this credit issue, that's not going to happen," she says.

Life became more difficult after Snedeker made the mistake of going to Career West College a few years ago. Snedeker was luckier than her peers. She found a decent job after graduating from Career West, working at a pediatrician's office. But the job didn't pay wages high enough for her to cover her student loans. Like other students from the school, Snedeker defaulted, and ruined her credit, waiting for the state to respond to her tuition recovery claim. "For a single mother, having your wages garnished is hard," she says. "That's one PG&E bill that didn't get paid."

Now the original $2,500 loan has ballooned into a $6,000 debt, and Snedeker still has not seen a cent from the bureau. It's too late to save her credit, anyway, she says, making it very unlikely she'll ever be able to buy a house or a new car.

Worse yet she can't take out any more student loans. Snedeker has applied for a competitive medical program at Santa Rosa Junior College, where she would finally get the training she needs to become a registered nurse. She says she is determined to go, though she doesn't know how she'll pay for it. Most likely she will have to work full time while going to school full time, leaving little time to spend with her daughter. "For a year or so there, I was mad at myself," she says. "I wondered how I could be so stupid to go to this obviously crappy school. But now I don't know who to be angry at. Career West screwed me over, but I think the bureau screwed me over even worse."

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