LIPSTICK ON A PIG
Beauty School’s Ugly Scam Made $50 Million Off Taxpayers
Marinello schools built a high school diploma mill to let dropouts join, then let them graduate with tons of debt and no jobs.
It was an ugly business plan for a beauty school.
Marinello Schools of Beauty bilked taxpayers for years by running a high school diploma mill to rake in prospective students and then get them to rake $50 million of financial aid straight into its coffers, according to the Justice Department, which settled a case against the school this week.
Once students were raking in federal bucks for the beauty school chain, the proprietors deceived them with false promises that they could get a good job in their respective field, and demanded staffers make numbers “no matter what” or get sacked.
Matthew Morris, 30, was a high school dropout who had gone from Tennessee to Las Vegas two years ago when he landed on Marinello over Vidal Sassoon and others because of the discounted annual tuition of $22,000.
Marinello set up their own “high school diploma mill” by establishing Parkridge Private School in Long Beach, California, to get students quickly passed so they could matriculate.
The effort lived up to the school’s credo “Pack the front end then backfill for success!” The passing rate at the Moreno Valley campus, for instance, shot up from 53 percent to 90 percent after the sham test methods were incorporated.
According to the complaint, the school relied on “big volume” and so-called aggressive appointment setting to push up their enrollment rates and offered “Ability-to-Benefit” (ATB) tests to earn a high school diploma in days.
Tests were proctored by unqualified administrators, surrogate test takers were routinely used to “sit for applicants” (according to the complaint, “one proctor allowed a wife to take the ATB exam for her husband”), and students were “improperly” coached on the questions and answers before the exams.
Internally, the Marinello execs rubbed their palms knowing their diploma mill was working and claiming victory with “budget success” and touting in the original complaint that “we are anticipating a huge increase in student participation.”
Unlike some other campuses though where high school diplomas were almost rubber-stamped, Morris’s took weeks to complete.
“For each credit you missed you have to do a series of workbooks and you have to read your textbook and then fill the whole workbook out before you taken an online final exam,” he said.
When the high school diplomas were earned, Parkridge had them sent directly to the beauty school and essentially held ransom until the student had completed his or her program and all the money was pocketed, the complaint details.
Once the diploma was official, the student was matriculated and welcomed with overcrowded classes, out of date equipment, mediocre instruction, and unsafe campuses where car thefts, drugs, fights, and prostitution were the daily extracurriculars.
Aside from the overcrowded classrooms which Morris says were replenished “every week” he says his teacher did away with the standard “Milady” curriculum to push Marinello’s own signature style guide.
“It was confusing us because we were learning from this book and then they were trying to teach us something different from the nationwide curriculum,” he said.
Still, Morris managed to find a mentor at the Las Vegas campus where he studied.
“I just sat in front of her for six months,” he said. “That’s why I learned. But lots of other students left there and didn’t learn.”
Morris graduated last summer from one of Marinello’s two Las Vegas campuses but could only find immediate work as a cashier.
While tendering receipts was legitimate, he admits it was a far cry from holding a chair at a salon.
“The new [Marinello] director put that down as working in the field,” he said. “She called my general manager and requested for me to come in to give her my paycheck stub.”
For many, Marinello Schools of Beauty were a chance to master a trade to become a barber or cosmetologist. The Los Angeles-headquartered institution leaned on its century-old name that had been seized in 2004 by two brothers—CEO Dr. R. Rashed Elyas and Dr. Nagui Elyas—whose B&H Education outfit acquired the company founded by Ruth Maurer, who concocted face cream in her kitchen back in 1905.
“Cosmetology is one of the last things that a lot of young kids that don’t have any hope turn to,” Sherrie Booth, the former director of Marinello in Ontario, California, told The Daily Beast. She says she fought back constantly. “This was the last thing a student could do to get out of prostitution. That drug dealer, maybe he thinks this is the last thing he can do to get out of that life and work in a salon.”
The court documents name Marinello’s Rashed and Nagui Elyas as well as various other senior officers as the ringleaders who brazenly picked taxpayers’ pockets by instructing staffers to “pump up” financial aid records to push the funding well beyond the amounts they were eligible to receive.
The school’s rep sank after a federal probe found that the for-profit school used greedy tactics to bleed federal funding out of their students to no end.
“The operator of this school manipulated the system in order to fraudulently secure student aid funds without which the school could not function,” U.S. Attorney Eileen M. Decker said in a statement.
To maximize bottom lines, Marinello’s recruiters fanned out to all reaches to attract a student body who didn’t have a high school diploma and often were living at homeless shelters or working at McDonald’s to sell delusions of grandeur: flee the fryer, earn the missing diploma in days, and graduate as a bona fide beautician in just over a year.
But a lion share of graduates remain saddled with deep debt and brandishing degrees that often amount to squat.
“It’s a racket,” Morris stressed. “They were pushing and pushing students into the program and then out as fast as they could all because of greed.
“It was a revolving door; rather than take time to train teachers properly and train students who would have become productive students in the work force.”
According to the federal complaint filed back in July 2013 (and amended in April 2015), Marinello “fabricated placement statistics” by initially selling a beautiful future to find a job in the respective field. They also juiced their enrollment records—crediting absent or unenrolled students as current, to reap every cent of federal funding they could.
Geralyn Skapik remembered when the first two whistleblowers from a Marinello campus in San Bernardino came knocking at her law firm’s door in late 2012. The firm then reached out to the Department of Education and the Department of Justice, who determined the school’s schemes spread “to different campuses” and was a black eye for Marinello who would go on to quickly shutter its schools.
“We want you to know that we did everything in our power to avoid this unfortunate conclusion and keep your school open,” chairman and CEO Rashed Elyas wrote in a letter back in February after the federal financial faucet quit. “Unfortunately, the Department of Education’s unprecedented and unfounded actions left us with no other option except to close our schools.”
But the blame belongs to Marinello’s gluttonous methods.
“They figured out a way to basically gin up additional revenue by allowing their students to obtain additional financial aid through fraudulent means,” U.S. Department of Justice spokesman Thom Mrozek told The Daily Beast. “And clearly the company was relying on this financial aid because once the Education Department got involved and cut them off they basically immediately went out of business.”
The feds’ findings discovered that Marinello duped countless barber and aesthetician hopefuls into believing a Marinello degree would translate into plum gigs.
They promised falsely “high double or triple digit salaries upon graduation and direct career placement assistance,” the court complaint claims.
The feds found that Marinello “artificially inflated the placement figures” by counting dropouts as still enrolled—confiscating their student ID cards in their absence. Moreover, many students ended up in the real world not as hairdressers but as cashiers or even returning to jobs at AM/PM Minimart or McDonald’s. Somehow the school still counted these cases as “placed in their field of study,” like they did with Morris.
And like him, many students, according to the complaint, shelled out exorbitant tuition fees and dedicated demanding years of their lives only to leave with a one-way ticket to the poorhouse with “oppressive debt, school penalties, billing inconsistencies, delayed or lost cost of living loans and federal grant funds held.”
“Despite spending thousands of dollars for training in a new career field, many found that they were no better off after graduating from [Marinello] than they were prior to enrollment,” the feds said.
And if they owed any outstanding tuition Marinello apparently sicced their own crew of collectors on their beauty school students.
“Students were constantly harassed by [Marinello] internal collection agency, which would commonly lose or leave students aging accounts on the books to accrue penalties.”
The money fell like shorn hair.
“[Marinello] management employed a corporate strategy focused on increased admissions and profits above all else,” the original complaint states.
The school heads hung recruiters to immortal standards, telling them “to make their sales goals no matter what… If they did not meet [Marinello’s] aggressive goals they were told they would be terminated.”
Before a student could receive financial aid, they had to have a high school diploma.
“There were questions about Parkridge and did I think it was on the up and up? No,” Booth said. “I felt the students should have never received a diploma in that short of time. And some students were allowed to sit in the classes without their diplomas, which I felt wasn’t correct.”
While Booth, who left academia for the salon to work as a hairdresser, faithfully believes the education on her watch was top-notch, with many working in Hollywood commanding six-figure salaries, the for-profit school financial model employed by Marinello was flawed.
But also not unique.
“Each school does the same thing,” the former director, who has worked at two other for-profit beauty schools, said. “There are so many problems out there that the schools themselves get by cheating and falsifying their records… It’s ruined a lot of people’s lives and it ruined a lot of students’ trust in our industry.”
After his class was relegated back to remedial level by the school’s intermediate teacher, Morris decided to pen a November 2014 letter complaining “I haven’t learned anything” and added “I was not prepared for advanced training.”
He then says he received a direct threat from the school’s director at the time after suggesting that he might go to the press. “He told me, ‘I’m just going to expel you for starting a petition against the school.’”
Morris remained quiet and managed to hunker down and get his degree (despite being arrears $9,500). But he fears others graduated unprepared for the rigors of the job.
“Several of my classmates never really got past the freshman level and since have been pushed out of Supercuts and Great Clips because they’re not trained and they don’t know the basics and don’t know what they are doing.”
Most critical is some of the elderly students who hoped cosmetology would be a second calling. “The younger ones can bounce back and have time but some of the older students—they won’t ever be able to recover from this.”
Over a short time, the outcry over Marinello’s egregious behavior went beyond a pair of whistleblowers and grew to six. “We had a lot of evidence with all of them coming forward,” Skapik, attorney to one of the whistleblowers, said. “And they knew what we had.”
Skapik suspects the school conducted an effort to duck the heat that was on back in February.
“I know that once they started to close down their campus they did some stuff with the documents.”
The various schemes ran for years until six whistleblowers sounded off and will now be handsomely rewarded after an $11 million federal settlement was reached.
Terisa Caron, Veronica Trejo, Paige Stevens, Heather Luedtke, Tameca Shelton, and Cindy Juarez were all high-level executives at Marinello Schools of Beauty and will split a $2.5 million sum after being credited with bringing down the house of cards.
Various testimonials online slammed the beauty school from everything from its money-grubbing collections to subpar instruction.
Angie Martinez back on on Feb. 5, 2016, wrote that after graduating from Marinello “… I was not good enough or experienced enough. That’s when I realized that they [taught] me nothing,” she said.
A woman named Erika from Rowland Heights, California, chimed in a day later claiming to be an older student who was concerned the Marinello instructor relied on antiquated props. “How can you possibly teach students and have the same doll heads for five years,” she wondered. “They never checked our haircuts—it was students teaching students.
In Mill Spring, North Carolina, a student named Tiffany posted recently that since 2007 she’s still paying off $13,000 in loans for an education where there wasn’t a teacher “for six months almost.”
“I’m so far in this [hole] with these loans I don’t know what to do.”
As for Morris, who graduated in April 2015, he knows Marinello grads who are hoping to pretend Marinello never happened.
“Many are taking their education off of Facebook because they’re embarrassed,” he said.
But he’s not giving up on cutting hair professionally despite the Marinello stain on his resume.
He received good news about an audition at a reputable salon on Friday.
“They told me ‘We have personal trainers here.’ I think basically they want a certain look for them.”
Morris may be one of the lucky ones.