House Democrats threatened to subpoena Secretary of Education Betsy DeVos, accusing her and high-ranking department officials of willfully obstructing their investigation into the Department of Education's role in allowing the operator of two now-defunct for-profit colleges to mislead students and continue operating the schools despite losing their accreditation.

In a letter sent Tuesday to DeVos, Rep. Bobby Scott, Virginia Democrat and chairman of the Education and Labor Committee, said department officials have failed to substantively respond to questions and provide requested documents since July, undermining the committee's ability to conduct oversight. Despite having tried to avoid the nuclear option, Scott said, he's run out of ways to get the information.

"If the Department continues to refuse to respond, the Committee will then be forced to conclude that the Department is purposefully frustrating Congressional oversight for reasons that are not in the best interest of the American taxpaying public," Scott wrote. "Therefore, the Committee is left to consider utilizing the full powers at Congress' disposal to obtain these critical documents."

The letter also details new documents that Scott said show how the Education Department facilitated the transfer of upward of $10 million in federal student aid to for-profit schools that at the time should have been ineligible to receive the funding.

"Until the Department produces documentation to the contrary, the Committee is left to rely on the documents it has, ones that suggest that conduct was at the least highly concerning," he wrote.

At issue is the Education Department's handling of Dream Center Education Holdings, a Los Angeles-based Christian charity that in 2017 bought Argosy University and the Art Institutes chain from Education Management Corporation, previously one of the largest for-profit operators in the country. At the time, Education Management was struggling to stay afloat after a $200 million settlement stemming from allegations that the company illegally paid bonuses to student recruiters and misled students about employment prospects.

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After the purchase, which transferred to Dream Center about 100 schools and 50,000 students, the accrediting agency for the schools alerted Dream Center that two of the schools were about to lose full accreditation, which by law is required in order to be eligible to receive federal funding.

The accreditor pulled accreditation in January 2018 and asked Dream Center to notify some 8,000 students that as a result it was possible that their credits wouldn't transfer to other colleges and may not be recognized by future employers. But Dream Center continued operating the schools and, according to documents released by Scott, enrolled new students while misrepresenting its accreditation, allowing it to bank millions in federal financial aid dollars.

Documents released in July by Scott's committee appear to show that Dream Center executives did so with the understanding that the Education Department, which under DeVos has prioritized unburdening the for-profit sector from the increased scrutiny placed on it by the previous administration, was working on its behalf to secure the schools a retroactive accreditation.

Pulling the strings behind the scenes to do so, Scott said emails from Dream Center executives indicate, was principal deputy undersecretary Diane Auer Jones. Jones came to the department after working for and on behalf of for-profit operators, including as vice president of regulatory and external affairs for Career Education Corporation, where she was responsible for company-wide regulatory operations, licensure and accreditation, government affairs, among others things, and oversaw the organization's political action committee.

Department officials, including Jones herself during testimony before the House Oversight Committee last year, have consistently rejected claims that she was working to assist Dream Center.

They argue instead that they were concerned with finding a way to allow students impacted by the loss of accreditation, as well as those at other for-profits that had abruptly closed, to finish their programs and safeguard their credits – not with providing any special treatment to Dream Center. Jones has underscored that Dream Center's problems predated her arrival at the department, and department officials have also said that once Jones was made aware that Dream Center was misrepresenting its accreditation, she ordered it to stop.

The Education Department eventually cut off federal aid to Dream Center and blasted its executives for mismanagement, ultimately jump-starting the chain's abrupt demise in March, which left tens of thousands of students – some just weeks away from a degree – in the lurch.

A spokeswoman for the Education Department in a statement again insisted that the agency did not favor the interests of Dream Center.

"It seems to us that the Chairman is cherry-picking facts and lacking important context," the spokeswoman said. "The Department maintains that it acted in the best interest of students and has continued to act in the best interest of students."

The spokeswoman said the agency "will continue to comply with all lawful oversight requests."

Reed Rubinstein, the acting general counsel for the department, said in a letter to Scott in September that they've cooperated with his investigation, providing nearly 900 pages of requested communications between department officials and Dream Center executives.

But nearly 550 of those pages, all of which were reviewed by U.S. News, are press clippings that are sent to all department employees. Only two of the correspondences in the data dump are pertinent to the case, Scott said.

"The Department only produced two other emails, but both pre-dated [Jones'] tenure at the Department and the Department redacted the majority of the text of those emails without any justification for the redactions," Scott wrote. "Neither the substance nor the rate of the Department's production indicates that the Department is cooperating with this investigation."

Scott said new documents obtained by his committee raise further questions about the department's role and introduce new evidence that department officials oversaw the transfer of $10.7 million to the two unaccredited schools despite knowing that their status as unaccredited meant they were not eligible for the funding.

The two, nearly identical letters – one to the Art Institute of Colorado and the other to the Illinois Institute of Art – are dated May 3, 2018, and signed by Michael Frola, the division director for the Multi-Regional and Foreign School Participation Division in the Department of Education's Office of Federal Student Aid. They were not part of the nearly 900 pages of documents given to Scott by the department.

In the letters, Frola wrote that since the schools were not fully accredited, they were not eligible to receive federal funding. At the time, the schools' official status was "preaccredited." Under federal law, Frola noted, preaccredited schools are eligible to receive federal funding only if they are registered as non-profits. Only a handful of for-profit schools have ever changed their status to non-profit – a complicated process that requires the blessing of the IRS, the accrediting agency and the Education Department and has taken schools anywhere from weeks to months to complete.

But the letters seem to indicate that Frola simply authorizes the switch, granting the school non-profit status and back-dating that status to cover a period of time during which the schools received federal funds when they shouldn't have.

"To avoid a lapse in eligibility," he wrote, "the Department is granting the institution temporary interim non-profit status."

This type of retroactive change in status from for-profit to non-profit has never before occurred, according to Scott, his committee staff and higher education policy experts who track for-profit schools and who also question whether Frola had authority to reclassify them.

The letters suggest, Scott said, that any disbursement of taxpayer dollars from the Education Department to the two schools between Jan. 20 and May 3, 2018, was unlawful and only deemed lawful after the fact by the department's decision to grant the schools non-profit status retroactively.

The letters also serve to bolster Scott's narrative that high-ranking Education Department officials knew the schools weren't accredited, pressed to get them retroactively accredited and also secure them a retroactive non-profit status – all to make legal previously illegal payments and all instead of protecting thousands of students whose programs unexpectedly shuttered.

"Instead of conducting rigorous oversight of a complex and risky financial transaction, the Department focused instead on papering over the liability of the two institutions' executives, while these very executives were actively misleading their students," Scott wrote.

"We now know the retroactive non-profit conversion of these schools allowed Dream Center [schools] to remain eligible recipients of federal student aid longer than they would otherwise have been eligible," he wrote. "This 'special treatment' allowed more students to become entangled in Dream Center, magnifying the abrupt closure of the schools and the displacement of thousands of students."

Scott's intensified inquiry comes as DeVos has largely succeeded in dismantling Obama-era rules that sought to protect students from for-profits that abruptly close and those that misled students about the quality of their programs and expected earnings post graduation. In an effort to fill the skills gap by allowing non-traditional, career and technical schools to thrive, the secretary has rewritten the rules to give the for-profit sector more flexibility.

Most recently, she's come under fire for refusing to discharge the student loan debt and process the claims of borrowers who qualified or applied for loan forgiveness on the basis that their schools engaged in deceptive or illegal practices. More than 150,000 borrower defense claims are currently pending, many of them from students who attended programs operated by now defunct for-profit chains, like Corinthian and ITT Tech.

Since Democrats took control of the House in 2018, Scott has explicitly avoided threatening subpoenas, focusing instead on chipping away at a number of the committee's oversight projects that are almost entirely rooted in issues of equity. In this case, the worst actors among the for-profit sector that take advantage of students – many of whom are low-income, first-generation, servicemembers and single parents – and an administration that wants to loosen the rules for them.

But Scott's subpoena threat marks an increased level of urgency and signals the chairman's newfound willingness to pursue DeVos more aggressively and possibly issue additional subpoenas going forward. It also comes as House Democrats pursue an impeachment inquiry into President Donald Trump.

For Scott, the Dream Center investigation – though narrow in scope – exemplifies a much larger and insidious shift inside the Department of Education, one that officials advertise as an effort to bring more career and technical focused programs into the mainstream but one that many critics say gives rise to a sector that's bilked hundreds of thousands of students.