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GI Bill Funds Flow To For-Profit Colleges That Fail State Aid Standards

Evening Edition

Aired 6/30/14 on KPBS Midday Edition.

GI Bill Funds Flow To For-Profit Colleges That Fail State Aid Standards

Aaron Glantz, reporter, Center for Investigative Reporting

Robert Muth, law professor and supervising attorney for Veterans Legal Clinic, University of San Diego

Mark Brenner, Apollo Group, University of Phoenix parent company


Navy veteran David Pace holds his University of Phoenix business degree. When he looked for a job, he said no employer seemed to respect his degree.

Air times

This story will run on KPBS 89.5 FM on Monday at 11 a.m.

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Over the past five years, more than $600 million in college assistance for Iraq and Afghanistan veterans has been spent on California schools so substandard that they have failed to qualify for state financial aid.

As a result, the GI Bill — designed to help veterans live the American dream — is supporting for-profit companies that spend lavishly on marketing but can leave veterans with worthless degrees and few job prospects, The Center for Investigative Reporting found.

“It’s not education. I think it’s just greed,” said David Pace, a 20-year Navy veteran who used the GI Bill to obtain a business degree from the University of Phoenix’s San Diego campus.

Although taxpayers spent an estimated $50,000 on Pace’s education, he has the same blue-collar job he landed right after he left the service: running electrical cable for a defense contractor.

Financial records analyzed by CIR show that California is the national epicenter of this problem, with nearly two out of every three GI Bill dollars going to for-profit colleges.

The University of Phoenix in San Diego outdistances its peers. Since 2009, the campus has received $95 million in GI Bill funds. That’s more than any brick-and-mortar campus in America, more than the entire 10-campus University of California system and all UC extension programs combined.

For the University of Phoenix, this is a sign of success.

“Veterans choose the University of Phoenix,” said Garland Williams, its vice president for military affairs. “The programs we offer are the ones that they desire and lead to careers that they want to aspire to.”

The school’s large share of GI Bill funding reflects more than just the number of veterans enrolling. The programs are expensive. An associate degree costs $395 a credit, for instance — nearly 10 times the cost at a public community college.

The University of Phoenix won’t say how many of its veterans graduate or find jobs, but the overall graduation rate at its San Diego campus is less than 15 percent, according to the U.S. Department of Education, and more than a quarter of students default on their loans within three years of leaving school.

Those figures fall short of the minimum standards set by the California Student Aid Commission, which dispenses state financial aid. The commission considers a graduation rate lower than 30 percent or a loan default rate of more than 15.5 percent as clear indicators of a substandard education.

No such restrictions govern GI Bill funds. And nearly 300 California schools that received GI Bill money either were barred from receiving state financial aid at least once in the past four years or operated without accreditation, CIR has found.

Of the $1.5 billion in GI Bill funds spent on tuition and fees in California since 2009, CIR found that more than 40 percent — $638 million — went to schools that have failed the state financial aid standard at least once in the past four years.

Four of those schools were University of Phoenix campuses, which together took in $225 million.

Among the others are massage schools, paralegal programs and auto repair academies. More than a third — 121 schools — have no academic accreditation, like the Institute for Advanced Study of Human Sexuality in San Francisco and the Pacific Coast Horseshoeing School in Amador County.

This is not what advocates hoped for when they pushed a new GI Bill through Congress in 2008. With its approval, the government for the first time since World War II committed to funding the full cost of a college education for veterans — pegged to the price tag for in-state tuition at the most costly public universities, up to $19,000 a year.

The advocacy group Iraq and Afghanistan Veterans of America pushed hard for the bill’s passage. The results have been disappointing, said Kate O’Gorman, the organization’s political director.

“Enormous amounts of GI Bill dollars” are going to schools that don’t see veterans as the future of the country, O’Gorman said. Instead, companies are “seeing the benefit dollars they can line their pockets with.”

Education At The University Of Phoenix

Photo by Adithya Sambamurthy/CIR

Nationally, the University of Phoenix received nearly $1 billion from the new GI Bill over the last five years.

Nationally, the University of Phoenix received nearly $1 billion from the new GI Bill over the past five years. In all, 80,000 veterans from America’s recent wars spent their GI Bill money at 89 of its campuses and its online college, Department of Veterans Affairs data shows.

But it’s impossible to tell whether those veterans are receiving a quality education. In fact, no one from any state or federal government knows whether veterans who go to school on the GI Bill graduate or find jobs.

The University of Phoenix’s San Diego campus doesn’t look like a college. It’s a few mid-rise office buildings in a suburban office park, indistinguishable from the life insurance company that occupies the glass-and-steel structure across the street.

Like all of the other campuses in this for-profit college chain, the buildings here are leased, not owned, so the company can quickly respond to changing market conditions. Faculty members are just as temporary. No instructor has tenure. The vast majority of them are part time.

On a Friday morning in early May, a team of inspectors from the California VA pulled into the parking lot and headed to a conference room, where the college’s staff had laid out piles of student veterans’ transcripts and financial records.

The audit’s purpose was to ensure that GI Bill money was properly spent, but auditors don’t sit in on classes or review the qualifications of instructors. “That’s not a part of the visit at all,” said Latanaya Johnson, one of the agency’s senior inspectors.

Auditors look exclusively at paperwork, Johnson said, to make sure schools aren’t billing the government for students who don’t exist. No one from the state or federal government is checking to see if the education taxpayers are paying for is helping veterans find jobs.

The day before the auditors arrived, Kelly Price Noble taught a graduate course to 17 students, 15 of them veterans. Although the course was on human resources management, Noble spent much of the three-hour session providing tips on how to get a job, rather than how to manage employees.

Don’t talk about your children during a job interview, she advised. “To me, as an employer, that means that you don’t want to work overtime or on the weekend. Talk about that after you get hired.”

One of Noble’s students, Joe Ellis, spent 24 years in the Army, serving in Desert Storm, Iraq and Afghanistan. He finished his bachelor’s degree at the University of Phoenix and returned for his master’s while programming fighter jets for a military contractor. He enjoys the camaraderie of learning alongside other veterans.

“You’d be surprised how many guys work for me now that are afraid of computers or dealing with people, and I won’t see that with the guys I … go to school with, because they’re all open,” said Ellis, 49. “The new exposures, the new programs, new people and we realize we’re all the same.”

Yet the University of Phoenix is under fire from its accrediting agency. In a public disclosure in October, the Higher Learning Commission said the school failed to show that its “learning resources support student learning and effective teaching.” The commission also found that it didn’t demonstrate “that acquisition of a breadth of knowledge and skills and the exercise of intellectual inquiry are integral to its educational programs.”

Williams, the University of Phoenix vice president, downplayed the severity of the sanction, noting that the school was given a year to present a correction plan. But he wouldn’t detail specific failures that led to the sanction, and as a private company the university is exempt from public records laws.

“As a university, we have chosen, for various reasons, things that we’re going to disclose,” Williams said.

Officials from the California VA twice have written to the University of Phoenix asking for a complete copy of the accrediting body’s findings, to no avail.

“It concerns us that some schools don’t feel any obligation to provide us with details that are essential for us to establish whether they are effectively serving veterans or not,” said Keith Boylan, the state’s deputy secretary for veterans services.


Chart comparing the graduation rate and loan default rate of the University of Phoenix-San Diego to all the schools in the University of California system.


Chart comparing amount of money the University of Phoenix-San Diego received via GI Bill compared to all the schools in the University of California system.

Efforts To Change GI Bill Blocked

Lawmakers in Washington are well aware that GI Bill money is being wasted. In 2012, Iowa Sen. Tom Harkin, a Democrat and chairman of the Senate Committee on Health, Education, Labor and Pensions, issued a scathing 5,000-page report detailing the practices of 30 large for-profit education firms.

But when Harkin and his colleagues try to solve the problem, they run into a wall of opposition from the for-profit industry.

Among the failed legislation: a bill that would have blocked schools with no academic accreditation from receiving GI Bill money. Another bill, which would have barred for-profit schools from spending GI Bill funds on advertising, marketing or recruiting never got out of committee.

“We see for-profit school lobbyists consistently on the Hill,” said O’Gorman, of Iraq and Afghanistan Veterans of America. “Almost every time the veterans community goes into an office and says, ‘We need these strong reforms and regulations,’ we see a for-profit school lobbyist walking out.”

Since the new GI Bill became law, the University of Phoenix’s corporate parent has spent $4.8 million on lobbying Congress, the White House and the federal VA, official lobbying records show.

Bridgepoint Education, owner of the almost exclusively online Ashford University, has put $4.6 million toward lobbying, and Corinthian Colleges Inc. spent $4.4 million. Education Management Corp. — which controls the for-profit schools South University, Brown Mackie College, Argosy University and the Art Institutes chain — spent $2.8 million.

Now, the legislative fight is moving to the state level, where the for-profit education industry also wields considerable clout.

In California, legislation to prevent schools with low graduation rates and high student loan default rates from receiving GI Bill money was gutted of those measures before its first legislative hearing earlier this year.

At a hearing before the Assembly Higher Education Committee in April, the bill’s author, Democrat Jim Frazier of Fairfield, called the weakened legislation “a reasonable approach to provide the necessary oversight of educational institutions in order to protect the taxpayer investment in our student veterans.”

For-profit colleges continued to oppose the bill, however, because it would have forced schools to tell regulators how many veterans graduate and how many find jobs.

“This is a direct attack on our sector,” Matt Back, a lobbyist for the California Association of Private Postsecondary Schools, told the Assembly Higher Education Committee at the hearing.

A week later, the University of Phoenix’s lobbyist, Scott Govenar, sent a letter to Mike Gatto, D-Burbank, chairman of the Assembly Appropriations Committee. It argued that telling state regulators how many veterans graduate and find jobs would be cumbersome and “of little practical value.”

The bill passed the Assembly at the end of May on a 62-4 vote and headed to the state Senate. But by then, the reporting requirement also had been removed, though unaccredited schools would become ineligible for GI Bill funds in 2017.

Frazier characterized the weakened bill as a first step in a yearslong battle.

“If you try to take too big a bite of the apple in some instances, it’s counterproductive because they fail,” he said. “So you try to go in increments.”

Big Spending On Marketing, Lobbying

Photo by Carlos A. Moreno for CIR

“The programs we offer are the ones that (veterans) desire,” says Garland Williams, the University of Phoenix’s vice president for military affairs.

Over the past three years, 40 percent of the revenue at the University of Phoenix’s parent company — $5.1 billion — has gone to academic instruction, according to U.S. Securities and Exchange Commission filings from the school’s corporate parent, the Apollo Education Group.

During the same period, the for-profit education firm spent $3 billion on marketing and recruiting, while $1.2 billion in student fees turned into profit.

Those numbers are typical of the for-profit education industry.

For example, SEC filings show Ashford University’s parent company, San Diego-based Bridgepoint Education, spent $871 million on marketing and recruiting over the past three years and took in $336 million in profit. Combined, that was more than the firm spent on instruction.

Nationally, Ashford University has received $110 million to educate Iraq and Afghanistan veterans in the last five years. In May, it agreed to pay $7 million to consumers in Iowa after that state’s attorney general, Tom Miller, accused the company of making false statements to prospective students to persuade them to enroll.

“As far as I’m concerned, Ashford committed fraud,” said Patrick Keane, a 20-year Navy veteran from Iowa who spent his GI Bill funds on a teaching program at the online college only to find no schools would recognize the degree.

Representatives of Bridgepoint Education declined to be interviewed. In a statement, the company said it never promised Keane that he would be able to teach with a degree from Ashford.

Bridgepoint also is being investigated by California Attorney General Kamala Harris.

Last July, she asked a Superior Court judge in Sacramento to compel the company to provide recordings of telephone calls made by recruiters. The goal, Harris told the court, “is to evaluate whether Bridgepoint has violated California law by making false and misleading statements.”

The investigation has not jeopardized Bridgepoint’s GI Bill money, which continues to flow.

Taxpayer dollars also continue to pay for veterans to attend Heald College, Everest College and WyoTech — three for-profit college chains whose corporate parent, Corinthian Colleges — was sued by Harris in October for false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals.

The company has received $184 million to educate 12,000 Iraq and Afghanistan veterans at 98 campuses across the country over the past five years, according to VA records.

The attorney general’s lawsuit cites internal company documents, obtained by the state, in which Corinthian describes its target demographic as “isolated,” “impatient” individuals with “low self-esteem” who have “few people in their lives who care about them,” and who are “stuck” and “unable to see and plan for the future.”

In an interview, former Marine Cpl. Moses Maddox said the University of Phoenix also targets veterans’ vulnerabilities.

Maddox served in Iraq as a mortuary affairs specialist during the 2004 siege of Fallujah. When he returned home, he went to work for the University of Phoenix’s parent company as a recruiter, calling up to 100 veterans a day.

“My job was to assess their fear and then harp on that fear, capitalize on that fear and get them to buy,” said Maddox, 33. He said he was so disgusted by the company’s recruiting practices that he quit and rejoined the military for 16 months.

The University of Phoenix says high-pressure tactics are not tolerated. Williams bristles at the word “recruiters.” The company calls them “enrollment advisers,” many of who are veterans themselves.

“They take this as a calling,” he said. “They have fought with these people. They have led them into battle, and they want to lead them to the next place in their transition, to their civilian education.”

After Business Degree, No Office Job

At 4:30 in the morning, David Pace is up, getting ready for work running electrical cable on ships at Naval Base San Diego. He takes a 2-gallon jug of water out of his freezer and puts it in his insulated lunch bag.

“It’s hot on that boat. It’s hot as hell outside,” said Pace, 43, as he walked, keys jangling, toward the door of the three-bedroom apartment he shares with his wife, two college-age daughters and 2-year-old grandson.

During his 20 years with the Navy, Pace spent time on nearly every continent, including delivering humanitarian aid to civilians in Somalia and India. During the Gulf War in 1991 and the Iraq War, he maintained video systems in the Persian Gulf that monitored airplanes as they came and went on their bombing runs.

Before he retired in 2009, Pace met a University of Phoenix recruiter who he says told him he could turn his military experience into academic credit and graduate in 18 months. That would have left Pace with enough GI Bill money to pursue a master’s degree.

But that’s not what happened.

A year into his 18-month plan, Pace was told he would have to take 10 additional classes to graduate — adding another year and a half to his schooling.

The University of Phoenix declined to comment on Pace’s case but denied any pattern of deception in its recruiting practices.

By the time Pace graduated, his GI Bill was used up. When he looked for a job in the business world, he said no employer seemed to respect his degree.

So instead of working in an office, Pace gets up early every day and spends his day carrying 50-pound spools of cable for his job as a maintenance electrician.

“It’s hot, cramped and dirty,” he said of the work. “The most frustrating part about it is that I could have come right out of the Navy and got this job without the time and the headache.”

This story was edited by Amy Pyle and copy edited by Nikki Frick and Christine Lee.

This story was produced by The Center for Investigative Reporting, an independent, nonprofit newsroom based in the San Francisco Bay Area. For more, visit Glantz can be reached at Follow him on Twitter: @Aaron_Glantz.

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Avatar for user 'thompsonrichard'

thompsonrichard | June 28, 2014 at 12:43 p.m. ― 2 years, 9 months ago

I did accept employment as a teacher with the San Diego branch of the University of Phoenix, but I was fired after my second night of teaching.

I sent a demand letter that I receive the full amount of money that I would have received had I completed our contract -- and they paid me the full amount -- so I can't discuss my wearing pajamas to class.

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Avatar for user 'kenleedavis'

kenleedavis | June 30, 2014 at 10:58 a.m. ― 2 years, 9 months ago

Another negative and flawed media story. It would be nice to hear about the students who are succeeding from both traditional and non-traditional schools. We have so many problems in this nation to fix when it comes to education but you never hear the whole picture or both sides of the story. We will never get ahead by merely adding to problems instead of offering solutions and opporutnities to work together.

I recently graduated with my bachelor's degree from University of Phoenix. One month before graduation, I devised a plan for my career progression which included researching, asking questions, and comparing information. I made sure that my experience, knowledge, and passion aligned with the right job. Proudly to say, I interviewed with 6 well-known companies one week after graduation, was made three offers and I accepted one. My hard work and prep certainly paid off.

Sadly, so many people think that opportunities are handed to them on a silver platter and simply because they have a degree - not so. You have to develop and execute a plan and change your situation if you do not like it. It sounds like David Pace and his family made some bad decisions along the way in life, which happens to all of us, but you can't blame someone for your circumstance that is controlled by you.

For-proft education is doing things different and something that traditional schools were never interested in doing - creating opportunities for an underserved market. Now everyone wants to embrace an online teaching model but not give props to the inventor who created it. Talk about disruptive innovation at work!

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Avatar for user 'hmpeace'

hmpeace | June 30, 2014 at 1:27 p.m. ― 2 years, 9 months ago

I am attending the University of Phoenix working on my Masters Degree in Nursing. I am a vet but I'm not using VA funding. I am questioning the quality of the education I am receiving. One of the instructors told our class that global warming is a hoax. I complained about this to the administration but the administration still has not informed me that they disagree with the instructor and as far as I can tell the University is still backing the instructor and stating that global warming is a hoax. I have written a letter to the president of the university but he has not written back to me to explain the university's position on global warming. For the moment I am still attending the U of Phoenix since I support the on-line education format but I may have to transfer to another institution if the University continues to teach inaccurate information.

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Avatar for user 'myeclecticself'

myeclecticself | June 30, 2014 at 3:03 p.m. ― 2 years, 9 months ago

Global warming has been and still is to this day a divisive topic. There are many theory's and opinions on both sides. I have attended classes at other colleges where instructors have felt the same way. Colleges are and should be a place to discuss varying opinions regardless of how others feel. Now, I have no idea the context in which the instructor said this, but I can say that University of Phoenix engages in a great deal of "green" initiatives and encourages their staff and faculty to do the same. The comment that the instructor made should be regarded as the instructor's opinion on the matter. If you disagree, why not start a class discussion? Debate them about it, try to convince them; you both may learn something in the process.

This article is very one sided. Sure there are negatives to any organization but I would love to hear some of the success stories as well that I am sure are out there. As far as part time instructors go, the University of Phoenix requires that professors have at least 15 years of experience in the field; so I am sure that many of them still work in their field and teach on the side. As far as the education goes, since your instructors have a great deal of real world experience, you know that your education will prepare you for the working world.

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Avatar for user 'JeanMarc'

JeanMarc | June 30, 2014 at 4:06 p.m. ― 2 years, 9 months ago

hmpeace global warming is a hoax and a scam. The globe has not warmed at all in 17 years. Sorry, it's true. Look it up.

Go ahead and spend some more money on "green" things though if it makes you feel better. The phrase "useful idiots" is very appropriate for the leftist crowd.

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Avatar for user 'graduate1'

graduate1 | July 1, 2014 at 8:03 a.m. ― 2 years, 8 months ago

I find it interesting how the media twists stories. I was one of the individuals in the class the reporter visited at University of Phoenix. The reporter was only in our class 45 minutes, didn't interview each of us, and claims to know everything about our education and what went on in our class.

Our professor spoke about HR, management, employers and employees, how to interview, and how to become good leaders and managers in the civilian sector. She expressed the importance of using our military training and how to transition those skill sets to the civilian world. Too bad the reporter chose not to speak about that. We need that information. We need real world scenarios that are applicable to class materials. I guess he did not review our homework either.

She also told us how important our education is and what to do once we graduated. But NOT for three hours, according to what I just read! And, he gets paid to lie. WOW! Funny. The reporter had agenda!

I thought PBS was a class act. I may have to reconsider my donations and support. If this reporter should do his homework first. HIs comments about Cal Grants were also interesting. Did he investigate that only state schools would receive those funds? And, comparing for-profit schools to Community Colleges was not fair. The latter receives state funding!

Did the reporter research the demographics of San Diego against his home in San Francisco? The Military and Veteran population here is one of the highest. Think about the bases here; think about the two military / veteran medical centers here. Think about the families here. Where did this reporter receive his education? Obviously, his research abilities are lacking. He had an agenda, and when he found out the truth, particularly when he interviewed a student, he was more than likely embarrassed to find military personnel and veterans like University of Phoenix. Hard to swallow the truth. So, he had to lie.

Did the reporter ask us about our class choices? Did he realize that UOP offers classes at convent times for us?

As someone who served, I am ashamed of a group of people who want to bash my educational system, my choice. Interesting how people twist things so they can get paid. I have to ask this reporter. "Did you serve?"

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Avatar for user 'Instructor2'

Instructor2 | July 1, 2014 at 10:09 a.m. ― 2 years, 8 months ago

I have been an instructor at UoP for six years. I have two master’s degrees in psychology and education from a Cal state university and a doctorate in education from Northern Arizona University. I have been working as a school psychologist in California for over 25 years. I continue to work in the field and teach a class about assessment and measurements part time for UoP . I am uniquely qualified to be teaching this class and I work very hard to explain the content of this class to my students. I have participated in creating and norming many different tests from survey tests to tests of autism. I loved my university professors, but I know more than they did when they were teaching me because their main focus was doing research, not working with children, counseling and administering assessments. In my opinion, the investigators of UoP who wrote this article had serious bias.

My daughter attends a Cal State college right now which is close to home and she is studying literature, writing and communication disorders. Although she attained a 1980 on the SAT and had a 4.5 GPA, she did not get into UCLA or USB. She did get into UCI and UCM, but chose not to spend the extra money since they were not her first choice. She has taken three online classes from her university because they are convenient and she can’t always get into certain classes. She has tried to get into classes at the local junior classes to fill requirements, but sometimes these are full too. Face reality, there is a place for the for profit education system; there aren't enough colleges.

The article did not mention that UoP was compared to California UC campuses that require high SAT scores for entrance. What about comparing UoP the graduation rates of junior colleges and other private universities who do not require an SAT? All of the UC, CSU and junior colleges in California now offer online classes and they are expanding. If the graduation rates are the main source of this article’s insistence that UoP is a worthless university, I propose that a multiple regression analysis be conducted to determine if the SAT scores from universities predict graduation rates. Could it be that a high SAT predicts graduation rates?

Look into the state licensing requirements for the state of California. They will provide a drop down list of accredited universities in the state. UoP is within those lists. I regularly work on the “paper screening” for potential employees and there are frequently candidates with bachelors and master’s degrees from UoP. The main potential candidates are put into the “to be interviewed pile” because someone knows them. We have left out potential candidates from UCLA, Stanford and Harvard and interviewed one of the UoP candidates because someone knew their good work ethic. PBS, could you use some ethics and provide all sides of an issue when a report is published?

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Avatar for user 'graduate1'

graduate1 | July 1, 2014 at 10:49 a.m. ― 2 years, 8 months ago

Spouse of graduate1.

Sounds like PBS is mimicking the likes of TMZ. Is this the kind of reporting we can now expect from PBS? If this is the case, I WILL NOT be renewing my subscription!

It is funny that KPBS happens to be housed at San Diego State University Campus. Is there some sort of bias reporting here? As a graduate of SDSU, it was difficult to even get classes when I attended, and today even more so. SDSU is impacted. I know several students today, noting is takes sometimes six years to complete a four-year degree there. I believe SDSU is a fine institution, but I also know it is not without its ills. So, if UOP can offer excellent courses taught by highly degreed professors, and I might add trained in the very field in which they are teaching, why does Mr. Glantz shoot down UOP’s curriculum and how it educates active duty military and veterans?

I understand from my spouse, who was in class when Mr. Glantz came, that he picked on the instructor for teaching job skills for the better part of three hours when he was only in the class for approximately 45 minutes! Math skills or a downright liar? Further, he took the professor’s comments about kids to the extreme. Really? My friends and I have had some good conversations about Mr. Glantz’s reporting. Did Mr. Glantz ever serve?

I am not a student at UOP, but I know many who are. They do not seem to be having the issues Mr. Glantz reports. He truly does not seem to be an expert in military veterans affairs even though he claims to be “a veterans’ reporter” on his website. What he is doing is trying to promote himself, his books, and his agenda, causing more problems not trying to identify a solution.

I worked for catastrophically disabled veterans and volunteered in their programs. If Mr. Glantz was really interested in assisting veterans, why does not he go ask the government to speed up the VA Claims process to take care of those who really did the serving.

Mr. Glantz even sold his story to the San Diego UT. As a third generation San Diegan, the UT’s reporting has been questionable for decades. What do you expect from a company who sells its papers in the traffic median, distracting drivers? Is KPBS selling out its standards, too??

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