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The lawsuit was filed against Union Institute in April 2023 after employees claimed the school had not paid them in over a month and asked them to continue working without pay.
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That means all students attending the university will have to pay out of pocket to stay enrolled.
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On top of the sanction from the Department of Education, the Ohio Department of Commerce's Division of Industrial Compliance is in the middle of investigating Union Institute & University in Walnut Hills.
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The goal of the audit is to find out why Union Institute's finances declined so rapidly in recent years. Since President Karen Schuster Webb began running the school in in 2018, Union Institute has lost money each year, according to tax filings.
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The university usually starts classes in late August, but now it's planning to begin the year Nov. 6.
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Meanwhile, faculty remain unpaid and students are still missing federal loans.
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The faculty council at Union Institute & University in Walnut Hills passed a vote of no confidence in President Karen Schuster Webb and Board of Trustees Chair Edgar Smith Jr. last week following a string of missed paydays and financial trouble in recent months.
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In previous emails to staff, school leadership has insisted Union Insitute will not close, but the ongoing financial issues could put the institution's accredited status at risk.
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When asked if they would be returning to the school for the upcoming summer and fall semesters, one university employee told WVXU, "Hell no!"
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The university president informed staff the school was approved for a line of credit and paychecks would arrive Friday, April 7. That didn't happen.