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How Hesser Failed
A look at the 115 year old school that's closing its doors for good

12/17/15
By Ryan Lessard news@hippopress.com, Kelly Sennott ksennott@hippopress.com



The 115-year-old Mount Washington College, formerly Hesser College, in Manchester is a drab scene these days.

The parking lot is barren, and the hallways are quiet, almost completely devoid of students. Closed office doors are accompanied by empty side mailboxes, and the welcome sign is a poster asking you to check in at the front desk upon entering. Even the school’s Facebook page has little activity, with no posts since the Aug. 4 announcement: The school will close this spring due to declining enrollment.
The college, which renamed itself Mount Washington College in 2013, was purchased in 2000 by Kaplan Inc., a for-profit corporation headquartered in Fort Lauderdale, Florida, that owns campus and online institutions across the country. In the last 15 years, MWC has seen six presidents and a variety of changes, including the new name and, also in 2013, new online program offerings. 
Those changes a few years ago did not have the desired effect. The college, which once had five campuses across southern New Hampshire, closed its Concord and Portsmouth locations in 2013, followed by its Nashua and Salem campuses in 2014. The Manchester spot on Sundial Avenue is, for now, all that’s left.
It’s not the first New Hampshire higher education institution to fail in recent years; it follows Chester College, which closed in 2012, and Lebanon College, which shut down a year ago.
But once upon a time — as recently as 2009 — it seemed that Hesser was on a similar path to success as Southern New Hampshire University. One was a nonprofit, the other a for-profit, but they both had rich Manchester histories, both targeted non-traditional students, and six years ago their enrollment numbers were similar, with Hesser around 4,500, SNHU around 4,700. This year, Mount Washington College reached a low of just 500 undergrads, while SNHU’s fall undergraduate enrollment numbers, including campus and online students, totaled more than 43,000.
So, what went wrong? The answer is a perfect storm of factors, some local and others part of what’s unfolding on the national stage for higher education.
 
A speedy decline
The Mount Washington College Board of Trustees said low enrollment was the reason for the decision to cease operations. Indeed the numbers show a rapid decline. In the fall of 2009, Hesser College had 4,512 students, the highest it had ever seen, but it went downhill from there. In 2010, fall enrollment decreased to 4,148, and it steadily fell to 2,284 in 2013, according to numbers taken from the Integrated Postsecondary Education Data System.
In June 2013, the board announced Hesser would undergo major changes, the biggest of which was renaming it Mount Washington College in an attempt to serve students beyond New Hampshire. The name “connotes a substantial institution that provides high-quality outcomes to students,” Hesser Interim President Andrew Temte said in a Union Leader article. At the time, Temte was also president of Kaplan Professional Education, having taken over after former Hesser President Jacquelyn Armitage retired earlier that year. In addition, the school began offering online-only associate and bachelor degree programs in business administration, with the goal to better serve busy adult learners.
Months later, the school announced it would close its Concord and Portsmouth campuses because enrollment was still low. When numbers dropped to 1,511 in 2014, Nashua and Salem campuses were also shut down, and by 2015 there were just 500 undergraduates on campus and online.
Daniel Webster College, the state’s only other degree-granting for-profit since ITT Technical Institutes purchased it in 2009, also saw decline during this period, moving from 787 students in 2009 to 648 in 2014. 
In contrast, SNHU saw enormous growth during this period. It started the fall of 2009 at 4,777, and from there it grew, to 5,347 in 2010, then to 7,630, 11,110, 18,083 and 29,353 from 2011 to 2014. Today, there are a grand total of 43,440 undergraduates, according to SNHU’s institutional research department. About 7 percent of those undergrads are on campus.
Community colleges, Manchester Community College in particular, also saw fairly steady growth from 2009 to 2015, with numbers ranging from 2,559 to 3,455. Today, MCC has approximately 3,139 students.
Spokespeople for Mount Washington College and its parent company Kaplan declined to comment on the reasons enrollment became low during this period, and they declined formal interviews.
“The simple fact is that enrollments steadily declined over time. Campuses were correspondingly consolidated. We did not see the enrollment trend reversing in the near future, despite the hard work and dedication of the faculty and staff that never wavered. The College’s Board of Trustees made a decision that was in the best interest of the students,” said Stephen White, Mount Washington College spokesperson, in an email which then stated the school had no additional comment.
 
The history of Hesser
Despite the recent decline in enrollment over the past 17 years, the school had a modest yet steady growth for the first 98 years of its life.
Joel H. Hesser founded Hesser Business College in 1900 at 913 Elm St. in Manchester. According to history blogger Janice Brown, the 1901 Manchester Board of Trade Report shows that early courses included bookkeeping, shorthand and typing.
The school was small, it was local, and while it moved to multiple locations those first 15 years — to 1017 Elm St., to 146 Concord St. and 155 Concord St. Joel Hesser purchased Bryant and Stratton’s Business College in Manchester in 1925, and continued shepherding the school until his death in 1945. The Mount Washington College website says his daughter, Gladys Hesser Lord, was next in line and gained ownership with her husband, Captain George Lord, until 1967, at which time  former Director of Operations Mildred Goff took the helm as president. In 1969, the board approved Hesser Business College’s request to change its name to Hesser College.
The college focused mainly on business but diversified later. Early graduates were likely entering the workforce in administrative and clerical positions, according to Patricia Edes at the Division of Higher Education.
But Hesser’s golden age began when a new family stepped in to steer the school.
In 1973, Kenneth Galeucia, a retired businessman from Massachusetts, purchased the college.
As his son Richard “Dick” Galeucia remembers it, Ken Galeucia saw the school as a sort of pet project.
“I think it was something that he wanted to play with. He had retired from industry, he was running a small consulting firm and it gave him something to do. I think he saw some small potential in it and he decided he was going to try to do it,” Galeucia said. “It wasn’t to make a lot of money.”
Almost immediately he began efforts to expand the school. In the early 1970s, Galeucia merged Hesser with Concord College in Concord, which had been around since 1887 and had been offering associate’s degrees for accounting, management and computer science by the 1970s. 
Ken Galeucia became the school’s president and started to create satellite locations in other parts of the state. Between 1975 and 1980, a second location was opened in Nashua, and they relocated the Manchester campus from the building on Concord Street to another building on Lowell Street, where it had more room to grow.
Dick Galeucia began working at Hesser in 1981 and his younger brother Linwood, who would become president in 1987, joined a couple years later. Dick served as executive vice president and treasurer.
In the 1980s, they opened enrollment for Portsmouth classes, and Nashua’s classes moved to a more permanent location. 
In 1990, Ken Galeucia, the family patriarch, died. The same year, the Manchester campus moved for its last time, to its present address on Sundial Avenue. The school later opened sites in Salem and Concord, and students studied business, computer science, early childhood education, criminal justice and accounting.
Galeucia says the time when his family owned the school was when it was most successful. He points to the rapid expansion of facilities and enrollment to bolster the claim.
“They had 150 students [when my father bought the school], and when I came about they had 1,500 students. And when Lin and I sold the school we had 3,500 students,” Galeucia said.
Meanwhile, Galeucia credits new and upgraded degree programs, a few new bachelor’s degrees (in business administration, criminal justice and accounting) and advertising for much of Hesser’s success in the 1980s and ’90s. But, he says, the thing that probably helped the most with keeping their programs up-to-date was advisory boards. The boards consisted of industry leaders in business, criminal justice and other areas who were plugged in to the sectors that would ostensibly employ those who graduated from these programs.
Ultimately, he says the school got this far through the hard work and dogged determination of everyone involved, including its founder.
“Joel Hesser just kept on plugging. I found his diary one time, I had that in my hands. And he wasn’t sure he was going to make it. But he kept on plugging,” Galeucia said. “His enrollment was fairly low. It was well under 100 students, but he just kept on going.”
Eventually, Dick and Lin Galeucia wanted to retire and decided against keeping it in the family.
They sold the school to Quest Education Corporation in 1998, the same year they opened the Concord satellite. Quest, a network of schools with a focus on medical studies, owned 30 for-profit schools by the time it was bought by Kaplan Inc. two years after that. Kaplan is a wholly owned subsidiary of Graham Holdings Company, formerly The Washington Post Company. It started in 1938 as a test preparation company, and after The Washington Post Company bought it in 1984 it began buying up other education companies, which it continued to do throughout the 1990s. When it bought Quest, it entered the higher ed world.
 
Common for-profit roots
Mount Washington College and Southern New Hampshire University together make a useful example of how colleges across the country have changed over the last century.
Tom Horgan, president of the New Hampshire College and University Council, says most of Hesser College’s history was fairly typical of for-profits that were born in the late 19th and early 20th centuries.
“The tradition of for-profit colleges had really been, all across the country, that they were small, private family-owned businesses. And they really provided training, specific training [like] secretarial skills or bookkeeping skills,” Horgan said.
Just as the school began in 1900 as the Hesser Business College, SNHU began in 1932 as the New Hampshire School of Accounting and Secretarial Science. 
“They were both sort of business schools, sort of locally owned and serving a very similar population,” Horgan said.
By the 1960s, Horgan says, for-profit colleges were dropping like flies because the federal government had become increasingly involved in higher ed funding, which in turn required schools to adhere to strict standards for accreditation.
“A lot of them just closed across the country. Others just held on. Others changed, like New Hampshire College,” Horgan said.
But in general, former SNHU President Dick Gustafson says, it was a time of expanding higher ed. Baby boomers were reaching college age, and lots of Vietnam vets were coming back with G.I. benefits. 
“And at the same time, federal financial aid was really just beginning. The Pell grants and other grants that were available for college students were really targeted to nonprofit institutions,” said Gustafson. who ran SNHU from 1987 to 2003.
Just a few years before Ken Galeucia bought Hesser, the New Hampshire School of Accounting and Secretarial Science reinvented itself as a non-profit and changed its name to New Hampshire College. It began offering bachelor’s degrees just a few years before that. 
“The two institutions diverged and then ultimately the family that owned New Hampshire College divested itself of it and turned it into a not-for-profit college, which really changes the focus and the mission and the purpose of the institution,” Horgan said. “So, ultimately, the two [schools] went down very different paths.”
According to attorney Brad Cook, a shareholder at the Sheehan Phinney Bass & Green law firm, which has represented SNHU since as far back as the 1950s, the school was founded by Harry Shapiro. After Shapiro died in 1952, his wife Gertrude made SPBG partner Bill Green the chairman of the board of directors. Cook said Gertrude Shapiro, Green and other members of the board agreed to turn the school into a nonprofit in order to gain “credibility” in the higher ed world. The nonprofit organization was registered, the assets of the school were conveyed to the new organization and new bylaws and articles of agreement were drafted. But the principal players remained the same. The board of directors became a board of trustees and Harry and Gertrude’s son Ed would later become president of the school. Cook says the only transaction in the process involving money was the sale of farmland by the Shapiros to the school, which was used for the future site of the campus, but Cook said they sold it for the same amount for which it was acquired.
After the change, they submitted to the regional accreditor to be reviewed, but Cook said even then it was believed accreditors looked more favorably on nonprofits than on for-profits.
“It was some real foresight and some real serious thinkers who were not worried about the buck,” Cook said.
From then on, New Hampshire College pursued a path that would transform the college into a four-year liberal arts institution.
Dick Galeucia says a deal (called an articulation agreement) was in place between the two schools in the 1980s and ’90s that allowed students with Hesser associate’s degrees to start classwork at New Hampshire College as full-fledged juniors.
 
Paths diverge
In the mid-’90s New Hampshire College began offering online classes under Gustafson, who says they started with on-campus students only to work out the kinks. Back in 1995, schools were very nervous about stepping into the online realm. Today, SNHU’s online students number about 70,000, including both graduate and undergraduate students (compared to about 3,000 students who attend classes at the campus), but back in 1995, the Internet was still kind of new and many schools were nervous about stepping into the online realm. 
“People said, what are you, crazy? How could people possibly learn online?” Gustafson said. “We studied [the market] carefully.”
Hesser, by contrast, didn’t enter the online market until 2011, and by the time it attempted to rebrand itself as Mount Washington College and create an “innovative national online education platform,” according to its website, other schools like SNHU had been offering online classes for more than 15 years.
Around this time, New Hampshire College expanded its campus in Manchester and opened satellite locations in Portsmouth, Nashua and Salem. 
For the most part, programming at SNHU stayed the same and business remained the primary course of study. According to Gustafson, the purpose of building these satellite locations and going online was to diversify delivery and attract a variety of prospective students, working adults and veterans in particular. 
Programming changes didn’t start till the mid-1990s, when SNHU leaders began considering going after university status, delving into the liberal arts, graphic design, psychology and other majors typically found at liberal arts colleges. Changing to Southern New Hampshire University in 2001 meant the school became more attractive to international students.
“In many countries, high schools are colleges. When you graduate, you go to university. We were trying to market to the international audience. That was part of it — positioning the institution to be more attractive to international students,” Gustafson said. “[Master’s degrees] were also very strong, and we were beginning to look at doctoral programs, so it was just a natural development, to move to university status.”
While Hesser offered a few bachelor’s degree programs, it remained largely a two-year school offering classes in areas like criminal justice, business administration, early childhood education, psychology and information technology. 
Galeucia says the mission of Hesser was very similar to that of a community college. Night school made up about two-thirds of the students, while day school filled the remainder, by Galeucia’s estimation.
“As far as day school goes, [the] market was probably people who couldn’t get into four-year schools initially and would come to Hesser for the first two years. It was a little bit more affordable for them because we were cheaper than the four-year schools,” Galeucia said. 
Still, Hesser’s tuition was more expensive than community colleges’. According to the College Scorecard released by the federal government in September, the average annual cost (based on federal aid) for Manchester Community College over the past 18 years was $14,315. For Hesser during the same period, the cost averaged $16,841.
Horgan says Hesser’s student market was like most other for-profit schools’.
“The for-profit institutions really are attracting more non-traditional students, are serving students that are looking for specific skills so they can improve their careers and get a better job,” Horgan said.
For a while, the relationship between Hesser and SNHU was somewhat symbiotic. They both focused on non-traditional students, and while Hesser offered the gateway to higher ed, SNHU could step in for the student’s last two years. But in more recent history, as Hesser fell under the flag of a major online education company and SNHU began marketing more aggressively, the two schools grew into a more competitive relationship.
 
Effects of recession
In 2008, when the Great Recession hit, it made a significant impact on the higher ed world. 
Barbara Brittingham is the president of the commission that accredits New Hampshire’s colleges through the New England Association of Schools and Colleges. 
“Every institution, in one way or another, had to pay more attention to their financial resources [after the recession],” Brittingham said, speaking about colleges generally. “It hit everybody, whether it was a decrease in endowment, whether it was families not being able to afford tuition, whether it was the state cutting the subsidies for public higher education.”
As MacKay points out, schools like Hesser may have actually enjoyed a boost in enrollment thanks to the recession. This tends to happen at community colleges, because, like Hesser, their market niche is career-focused, non-traditional students. When folks are laid off en masse, many of them are driven to the classrooms of these schools in an effort to improve their chances of employment. 
This could explain why Hesser’s fall enrollment shot up from 3,800 in 2008 to more than 4,500 in 2009.
MacKay believes it was the recovery, perhaps more than the recession, that caused Hesser to suffer enrollment declines.
“I think individuals have decided they don’t need to pursue additional degrees or credentials in order to obtain a job, and they’re … more likely to be fully employed,” MacKay said. 
While the community college system has seen some enrollment declines in recent years due to the recovery, they weren’t as dramatic as Hesser’s. 
 
Competing for students
Brittingham says the region’s colleges are all fighting over an increasingly scarce resource: high school graduates.
“The demographics of enrolling traditional-age students are very difficult in New England and in the northern part of the Midwest. And in New England, the farther north you go, the harder it gets,” Brittingham said.
Horgan says the answer is to cast a wider net.
”Nineteen percent of the marketplace is that 18- to 22-year-old. The other 81 percent is a more non-traditional student that is looking to complete their education and ultimately improve their life and their career,” Horgan said. 
Shannon Reid, New Hampshire Community College System spokesperson, says the community colleges we know today evolved over the past several decades, with Manchester Community College alone having gone through eight name changes in its lifetime. For most of their history, they were technical schools with a vocational mission. Students went there to learn welding and automotive mechanics.
“In about the 1990s, the colleges began to broaden their mission,” Reid said in an email.
She says this played out partly in the form of expanded course offerings at the community colleges, which coincided with a rebranding from technical colleges to community colleges. But it also has a great deal to do with expanding articulation agreements with four-year schools, allowing community college students to more easily transfer to four-year schools.
“The university system and the community college system have worked hard on breaking down those articulation barriers,” MacKay said. “There was some bias there, some prejudice [against community colleges].”
Manchester Community College President Susan Huard says this flexibility is to better meet student needs.
“We’re not just one thing. We’re not just technical, and we’re not just transfer or business or health care. We have the flexibility of moving our resources depending on what’s happening with the economy,” Huard said.
Now that students can more easily use the community colleges as gateway schools to higher degrees, and with cheaper tuition, MacKay believes Hesser could no longer compete. Horgan agrees.
“I think competition with the community colleges was one of many factors that probably led to Hesser/Mount Washington closing,” Horgan said.
According to the College Scorecard, community colleges have also offered better outcomes to students. The median annual salary of MCC graduates after 10 years was $33,000, which is about the national average. Salaries after graduating from Nashua Community College were $34,500, and from NHTI, $37,700. The salary for Hesser grads was below the national average at $30,900.
 
SNHU competition
Given this competitive climate, Horgan says, in the past decade or so, non-profits like SNHU have stepped up their role in the online education sector — a sector Horgan says had traditionally been the domain of the for-profits. MacKay echoes this.
“A number of not-for-profit institutions have decided that they need to be in the online or distance education space and have made significant investments in entering that space,” MacKay said. 
Entering that space is crucial for two reasons. The first is demographics.
The 80/20 split of non-traditional to traditional students is a refrain often repeated by SNHU President Paul LeBlanc, who has been at the helm since 2003 and is widely credited for expanding the school’s online options.
“If you take a look at the pattern, adults are moving ... online,” LeBlanc said.
The second reason is economy of scale: Schools can serve an exponentially greater number of students with far less overhead. As college costs skyrocket, schools are under increased pressure to control those costs. 
But achieving economy of scale is still a point of controversy in the higher ed world. 
University of New Hampshire president Mark Huddleston criticized what he called “nearly-for-profit” online colleges during his 2014 State of the University address, saying, “The first thing we shouldn’t do is yield to pressures to commodify higher education, turn students into customers, and drive relentlessly to lower unit costs of production.”
LeBlanc argues that since SNHU does not receive tax dollars as a private institution, it needs to be as nimble as a business in order to be successful. 
“I think [being a private university] forces us in some ways to run more efficiently. We have to be more responsive. No one’s going to come in and rescue us,” LeBlanc said. “We’re able to get [programs] up and running faster.”
Marketing has also been crucial for SNHU growth. One of the first things LeBlanc did when he started in 2003 was have an outside marketing survey done about name recognition. Nobody knew who SNHU was.
“[Name recognition] was really low. I mean, it was low in New Hampshire, and we were here. Never mind Mass. and the rest of New England,” LeBlanc said.
About five years ago, he made it his mission to build a national brand, and they got to work with marketing.
 
Regulatory challenges
During the 1980s and ’90s, Dick Galeucia says, Hesser was making more than $1 million in annual net profit, save for a couple years in the ’80s when it lost money. But with great success comes more government oversight, especially if you are a for-profit school, Galeucia said. He said during the 20 or so years he was there, the school was audited by the IRS about a dozen times.
“And, of course, the [U.S.] Department of Education made it known they wanted to put for-profit schools out of business,” Galeucia said. “We were the ‘money-hungry’ guys.”
Back then, the critical sentiment among regulators, while a thorn in the side of Hesser, was not the killing blow more recent government crackdowns have been. Since 2010, when former Sen. Tom Harkin of Iowa led the charge, the Government Accountability Office, the White House and U.S. Attorneys General have been aggressively mobilized against for-profits. 
During Galeucia’s time at the school, Hesser was accredited by an NEASC commission for career and technical colleges and vocational high schools. But in 2006 NEASC did away with that commission, and all the community colleges plus Hesser transitioned to the same higher ed commission that accredited all the four-year higher ed institutions in New England.
 
Kaplan management
After the school went corporate, things began to change. 
In the past 17 years (at the end of Quest’s ownership and while it was owned by Kaplan), Hesser saw at least six presidents, not including interim or acting presidents. According to the New Hampshire Department of Education, Robert Moon took over as president in 2000, and Mary Jo Greco succeeded him in 2005. In October 2007, John Roche was inducted as president. Harold R. Griffin served for a time until the end of 2009, after which Jackie Armitage took the reins from 2010 to 2013. The last president was Francis “Frank” X. Mulgrew, but he stepped down earlier this year. There were several interim presidents in between. Maureen Znoj, the vice president of operations, is the current acting president.
Kaplan representatives declined several requests to be interviewed, and current faculty were instructed by management not to speak to the press, according to a currently-employed professor. To do so would risk termination.
By 2012, the first signs of trouble appeared at Hesser. Kaplan closed the Manchester day school, shut down the dorms in the upper floors of the south wing and stopped leasing most of the west wing of the Sundial plaza, where it had medical and physical therapy laboratories, radio and television studio spaces, a fitness center and a library with tutoring services.
In 2013, when the school announced its name change and new online associate’s and bachelor’s degree programs for business administration and information technology, it was too little too late. The satellite schools began to close only months later.
Kaplan’s other campuses have seen their share of scrutiny. In August 2010, the U.S. Government Accountability Office released a report showing Kaplan’s California and Florida schools among 15 for-profit colleges whose recruiters encouraged prospective students to commit fraud on financial aid applications or misled them about things like tuition and post-college salaries. In response, Kaplan initiated a third-party “secret shopper” program at many campuses, including Hesser, to ensure malpractices were identified and fixed, according to its website, and it implemented a new performance system for admissions employees that encouraged them to report inappropriate behavior.
This summer, Kaplan paid a total of $1.375 million to resolve allegations it inflated job placement numbers and employed unfair recruiting tactics at Kaplan Career Institute schools in Massachusetts, but it admitted no violations, claiming a settlement agreement was because of litigation costs. The company closed those schools by 2013.
In February, Kaplan sold the vast majority of its physical higher ed campuses (38 out of 42) to the Education Corporation of America in an all-stock transaction.
 
For-profit struggles 
Right now, it’s hard to be a for-profit school.
“The for-profit higher ed industry has sort of really been rocked the last few years, in a combination of the feds really shining a light on some really poor practices, some abuses. [They’re] really coming down hard on them from a regulatory perspective,” LeBlanc said, noting a particularly scathing story by the PBS documentary series Frontline, which revealed the University of Phoenix improperly gaining exclusive access to recruit on military bases by sponsoring events. Phoenix went from an enrollment of 460,000 about five years ago to less than half that today. Its former competitor, Corinthian Colleges, went bankrupt and closed in May.
Meanwhile, in November, Education Management Corporation was required to pay a $95.5 million settlement amid allegations it lied about its recruiting practices, which some former employees characterized as high-pressure “boiler room” style tactics born of an illegal incentive pay plan. Once the second-largest player in the for-profit education world, EDMC’s best-known brand is the Art Institutes.
LeBlanc says even for-profits following the rules are struggling.
“If you take a look at DeVry University, which is a pretty well-respected for-profit, actually — I often use it as an example as one of the better players — they’re closing 17 of their physical campuses in the U.S. So what happened to Hesser is not unusual in the context of what’s happening in the for-profit higher ed,” LeBlanc said. (According to The Wall Street Journal, DeVry Education Group Inc. earnings also fell 73 percent in the last quarter).
LeBlanc thinks nonprofit status is something prospective students are looking for, which wasn’t necessarily the case five years ago.
“Six, seven years ago, if someone looked at our online programs, they never asked if we were not-for-profit. … Now they ask that question all the time. If you look at our commercials, we actually feature the phrase ‘not-for-profit’ quite predominantly because it’s important for people. … Students are reading about the questions about the quality of for-profit providers, and they’re reading about the abuses,” LeBlanc said.
Huard says Manchester Community College’s non-profit mission has helped the school garner both financial and public support. 
For-profits, on the other hand, hold a primary fiduciary responsibility to shareholders.
“People ... invest to see growth in their investment,” LeBlanc said. “Part of what happened in the for-profit sector is that shareholders and owners wanted to see the kinds of growth they were seeing five, six, seven, eight years ago, but that’s hard to sustain.”
Dick Galeucia doesn’t know if Hesser could have weathered this storm better had his family, or another, been in control. But he knows it would have been a challenge regardless.
“I’m sorry to see it go, but I’m not surprised at it,” Galeucia said. “I enjoyed it while I was there, I have no regrets for what we did and I feel sorry for the employees that were there.” 





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