Arizona-based Christian university sued by FTC over deceptive advertising and illegal telemarketing

The Federal Trade Commission (FTC), on Wednesday, filed a lawsuit against Arizona-based Grand Canyon University (GCU), Grand Canyon Education (GCE), Inc., and GCE CEO Brian Mueller, who is also the president of GCU, for allegedly misleading students about the cost of its doctoral programs over several years.

The FTC also alleges in its lawsuit that the school misled prospective students about being a nonprofit and engaged in deceptive and abusive telemarketing practices.

In the complaint filed in the U.S. District Court for the District of Arizona, the FTC accused GCU and GCE of telling prospects the total cost of the university’s "accelerated" doctoral programs was equal to the cost of 20 courses, or 60 credits.

But according to the FTC, almost all doctoral students are required to take additional "continuation courses" that cost thousands of dollars.

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The FTC points to a report from the U.S. Department of Education that said fewer than 2% of doctoral graduates at the university complete the course within the advertised cost, adding that almost 78% of the students take five or more continuation classes.

Along with claims the school falsely advertised pricing of the program, the FTC said the school advertised as a nonprofit, but GCE and its investors profited off the university.

"The FTC alleges that GCU has been operated for the profit of GCE and its stockholders, and pays 60% of its revenue to GCE pursuant to an agreement designating GCE as the exclusive provider for most university-related services," a press release from the FTC read.

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Mueller also benefits as both CEO and a stockholder of GCE, the FTC claimed, receiving bonuses tied to GCE’s performance.

"Grand Canyon deceived students by holding itself out as a non-profit institution and misrepresenting the costs and number of courses required to earn doctoral degrees," Sam Levine, director of the FTC’s Bureau of Consumer Protection said. "We will continue to aggressively pursue those who seek to take advantage of students."

GCU told Fox News Digital this was "unfortunately" another example of the Biden administration "weaponizing federal government agencies" to target institutions to which they are ideologically opposed.

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"The FTC, U.S. Department of Education and U.S. Department of Veterans Affair announced publicly in October 2021 they would be targeting for-profit institutions and that is exactly what has taken place even though GCU is lawfully recognized as a nonprofit by the IRS, State of Arizona and Higher Learning Commission (HLC)," the school said. "GCU categorically denies these unsubstantiated allegations and will take all measures necessary to refute them."

The school said the FTC’s allegations about misleading students about the costs associated with the doctoral program have been refuted twice in federal courts, citing Young v. GCU as one of the cases.

In Young v. GCU, the courts rejected the claim that GCU’s disclosures misrepresented the time or cost to complete a doctoral program.

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"The FTC’s accusation that GCU is operating for the profit and benefit of Grand Canyon Education is equally as absurd," the school said. "Revenue share agreements with third-party education service companies are common in higher education, and GCU’s master services agreement with GCE follows those industry norms, including the 60-40% revenue split the FTC cited. In fact, GCU receives higher levels of service for that split than many institutions receive."

The school said the FTC and Department of Education chose to disregard transfer pricing studies and fairness opinions from two accounting firms it called "nationally recognized, highly respected and independent" that concluded the purchase price of the transaction and terms of GCU’s master services agreement were fair market value and beneficial to GCU.

As for Mueller’s dual role with GCU and GCE, the school said such arrangements are permitted under the guidelines of the Higher Learning Commission, and was approved by the commission after review.

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The FTC accuses the defendants of using abusive telemarketing calls as well, to boost enrollment. On GCE’s website, prospects were urged to submit their contact information on digital forms. The information was then allegedly used to "illegally contact" people who requested to not be called, as well as those on the National Do Not Call Registry.

In doing so, the FTC says the defendants violated the FTC Act and the Telemarketing Sales Rule. The commission voted unanimously to authorize the staff to file the lawsuit.

The school said the FTC’s claim of abusive telemarketing calls "completely lacks merit."

"This accusation is similar to the doctoral complaint levied by the FTC and DOE in that they are looking at practices that are common among institutions in higher education, yet they are singling out GCU in an effort to impose punitive actions and harm the university," the school said.

GCU, the largest Christian university in the U.S., announced plans in November to appeal a $37.7 million fine imposed by the Department of Education on the same allegations that the Arizona-based higher learning institution misled students about the cost of its doctoral programs.

The Department of Education claimed an investigation found GCU "lied" to over 7,500 former and current students about the cost of its doctoral programs.

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After the fine was imposed, Mueller held a news conference to announce plans to appeal the fine and stand up to the federal government’s broader efforts to target the university.

"I have spoken to thousands of students, parents, employees, alumni and community stakeholders in Arizona, and they all tell me the same thing: We need to fight this tyranny from federal government agencies not only to stand up for ourselves, but to ensure this type of ideological government overreach and weaponization of federal agencies does not happen to others," Mueller said. "American people are losing confidence in the federal government to be fair and objective in their operations and there are clearly no checks and balances to prevent this type of behavior from the Department of Education, which is out of control and continues to broaden its authority and selective enforcement powers."