ITHACA, N.Y. – The Finger Lakes School of Massage has been denied reaccreditation through the Accrediting Council for Continuing Education and Training, the agency’s accrediting commission announced Wednesday.
The news comes just one day after the National Labor Review Board closed a case in which seven former employees alleged they were retaliated against for speaking up about concerns at the school’s Ithaca campus, after the employees and FLSM reached a settlement.
ACCET’s decision to deny reaccreditation is appealable, but if upheld, could carry serious consequences for the school, which also has campuses in Mount Kisco, New York and Frederick, Maryland. While ACCET is an independent organization, it is recognized by the U.S. Department of Education as an authority on compliance with educational standards.
At the same time, the investment group that owns a majority share of the Trumantra Education Group, FLSM’s parent company, is suing former owners David Merwin and John Robinson for concealing the school’s financial distress, including allegedly hiding the possibility that it would lose its accreditation and Department of Education licenses. The lawsuit was filed March 28 in the New York State Supreme Court.
In April 2018, Kuzari Investor, LLC bought an 80% stake in the Trumantra Education Group, which includes FLSM’s three campuses as well as four campuses in Arizona. Robinson cashed out during the deal, while Merwin retained a 20% stake in the company and remained CEO. The lawsuit brought by Kuzari asks for judgments against Merwin and Robinson on counts of breach of contract, fraud and breach of fiduciary duties, requesting both compensatory and punitive damages.
While ACCET’s accreditation review and the lawsuit are independent issues, the loss of accreditation could affect Trumantra’s financial standing.
“The Company is an educational institution that is regulated closely by Department of Education and its accrediting agency, ACCET. Being excluded from Title IV funding or losing accreditation would have very severe, even fatal, repercussions on the Company,” the complaint filed by attorneys representing Kuzari reads.
Questions arose about the school’s accreditation after an on-site inspection by ACCET staff at the Ithaca campus in September. The inspection, along with complaints submitted to the commission by FLSM students and staff, raised concerns about the school’s record keeping, curriculum, human resources procedures and compliance with certification rules.
When the ACCET commission met in December, FLSM’s application for reaccreditation was deferred until April. The commission cited 14 areas of concern that needed to be addressed, including several related to financial and personnel record keeping. The commission said an unannounced follow-up inspection would take place to assess whether the issues were adequately remedied.
On February 14, ACCET sent a letter to Jerry Barber, FLSM’s campus director at the time, notifying him that the school had been issued an “Institutional Show Cause” directive. Based on a two-day site visit conducted at the Ithaca campus Jan. 9-10, the commission determined FLSM needed “to show cause why its accredited status should not be withdrawn.”
The letter states, “This action is taken as a result of substantive concerns regarding the institution’s continued operations,” and cites “egregious noncompliance” with standards related to human resource management, record keeping, financial aid and scholarships, program and instructional materials, supervision of instruction, student satisfaction, employer and sponsor satisfaction, and completion and job placement.
FLSM was required to submit a “Teach-out Plan” detailing the steps it would take to close its Ithaca campus, “due to the Commission’s serious concerns regarding the institution’s continued operations,” the letter continues.
According to ACCET Document 32 – Teach-out Closure Policies, plans need to accommodate current students until the end of an agreed-upon term and provide for refunds to students who will not complete their education by the time the institution closes.
Losing accreditation does not mean that FLSM is forced to close. The decision to deny reaccreditation can be appealed, and the school could seek accreditation through a different agency recognized by the Department of Education. The lawsuit filed by Kuzari, however, alleges several issues beyond the loss of accreditation threaten the school’s future.
The complaint filed by Kuzari’s attorneys alleges Merwin and Robinson lied about the company’s status throughout sales negotiations. “Defendants consistently lied about the health and capitalization of the company, hiding the mounting debt and crippling financial distress from Kuzari through blatant lies and omissions. Defendants’ pattern was to hide the truth and then, when wholesale lies no longer worked, to release small truths little by little until eventually the whole truth could no longer be hidden,” the complaint reads.
The complaint alleges Merwin and Robinson concealed that $670,000 in accounts payable were significantly past due, including more than $400,000 due to key vendors who put the company’s accounts on hold. “The inability of the Company to continue to purchase textbooks, supplies and other key items from its existing partners poses a significant threat to the Company’s ability to operate,” the complaint states.
The complaint alleges Trumantra owed more than $160,000 in credit card payments, as well as $170,000 in rent. After receiving an eviction notice for the Mount Kisco campus, the complaint alleges Merwin and Robinson concealed the litigation and that Merwin entered into an unauthorized settlement and payment plan after Kuzari took majority ownership of the company. Kuzari did not become aware of the settlement until January 2019, when “it became clear that Merwin had also caused the Company to be in breach of the settlement plan payments,” according to the complaint.
The complaint cites emails allegedly sent by Merwin to suppliers indicating he was aware of Trumantra’s financial problems while concealing them from Kuzari. He allegedly referred to a Department of Education investigation in an email to a supplier on Nov. 2, 2017, writing, “I’m telling you this is the worst situation I’ve been in during my 15 years as owner. I’m not sure what to do at this point, because if I can’t get our results up I’ll lose my Title IV status and if I lose that I will shut the schools down.”
Finally, the complaint alleges that while the company was in financial distress Merwin embezzled funds through an entity owned by him and his wife, made side payments to an entity owned by him and Robinson, and paid for personal expenses through the company’s credit card and bank account.
Merwin was terminated for cause on Feb. 26, and the lawsuit was filed on March 28.
Shannon Yerkic, who has worked in multiple capacities for Trumantra since early 2017, was promoted to CEO after Merwin’s termination. Yerkic has been at the center of complaints raised by employees at FLSM’s Ithaca campus, who in previous interviews with The Ithaca Voice alleged a hostile work environment. Yerkic was one of two supervisors employees demanded be investigated during a September walkout.
Seven of the employees who raised concerns about the school’s operations in September subsequently lost their jobs. They brought charges to the National Labor Review Board, and after an investigation, the agency found that their charges had merit. The employees reached a settlement with FLSM and their charges were withdrawn on April 30.
The Ithaca Voice was unable to reach company management for comment Wednesday.