FBI Probes Finances of Iade Trade Schools : Investigation: Firm has closed most Southland classes but promises reopenings soon. Inquiry is thought to focus in part on return of U.S. funds when students drop out.

The Federal Bureau of Investigation is looking into the financial practices of one of the largest trade school chains in Southern California, sources disclosed Wednesday.

The chain, Los Angeles-based Iade American Schools, has served about 3,500 mostly Latino students at six Southland campuses extending from Santa Ana to Oxnard, including four in Los Angeles County. Iade American suspended most of its classes at the end of last week, citing financial problems, but has pledged to reopen at least five of the campuses by Monday.

Gonzalo Freixes, general counsel for Iade, denied any knowledge of the FBI investigation and said his company was working to resolve questions raised by vocational school regulatory agencies that threaten its accreditation.

Sources familiar with the FBI investigation did not disclose the specifics of the inquiry, but it is believed to parallel issues raised by the state regulatory agency, the Council for Private Postsecondary and Vocational Education.

Les Cochren, manager of student and consumer protection for the state agency, said one of the chief issues he is investigating is whether Iade has made proper reimbursements to the federal government of federal loan and grant funds.

The school receives an estimated $10 million to $12 million in federal tuition aid annually. When students drop out, however, the chain is obligated to return money already advanced to cover those costs, and it is the handling of those funds that regulators are scrutinizing.

In addition to the Santa Ana and Oxnard campuses, Iade has schools in North Hollywood, El Monte, South Gate and in Los Angeles, on West Washington Boulevard.

Cochren said his agency also is investigating whether the school properly verified the vocational backgrounds of students in its English as a second language program. To qualify for government funds, students in such programs are supposed to have demonstrable vocational skills and career potential that would be enhanced by learning English.

In addition, Cochren said, the state is concerned about whether the school has enough financing to continue operating properly.

“We’re keeping an intense focus on the school,” Cochren said. “We’re monitoring their progress on a daily basis . . . to be sure to protect the students and the federal government from any financial harm.”

Freixes replied that his company’s differences with the agency were technical matters but acknowledged that the chain has faced hard times lately. He said the company shut down most of its classes this week to discuss a reorganization plan with its employees.

That plan will be launched next week as the campuses reopen, he said. The company hopes to avoid eliminating classes, but it remains unclear how students will be affected.

“We’re trying to keep the cuts as far from the classroom as possible,” Freixes said.

As part of the chain’s overhaul, 90 to 160 of 380 jobs will be cut, mostly in the administrative ranks, he said. The overhaul also calls for employees to accept wage concessions.

But the company faces problems on other fronts. Its national accrediting agency, the Accrediting Council for Continuing Education and Training, has issued a show cause directive asking Iade to explain why its national accreditation should not be withdrawn.

In addition, the U.S. Department of Education recently slapped tighter restrictions on its financial dealings with Iade.

Iade American was founded more than a decade ago by Abraham Stofenmacher, an Argentine national living in Los Angeles, and he continues to run it with his three sons. In addition to its English as a second language program, the chain offers 14-month courses in auto mechanics and using computer software.