Because it's a Chillul Hashem, Does that Mean that They Shouldn't Do It?

While I've known about this program for years, the Forward recently ran a scathing expose (and a pretty one-sided one, at that) about the Michigan Jewish Institute, a Chabad run "college" from Michigan whose students rarely go on to four-year schools, and more often than not just use the school as a funnel for Pell Grants in order to allow them to attend seminary or yeshiva in Israel.
From what I know at this point, the program is perfectly legal. MJI is accredited by an accepted agency, and they accept transfer credits that can be used towards a degree. Also, MJI isn't the first educational institution with a very low success rate whose students get Federal money.
But it also stinks. For its troubles, MJI takes a hefty percentage of the Pell Grant money (as tuition for "courses" taken overseas - i.e. Israel), leaving it with a tidy profit. And the entire enterprise smells like a clever way to let yeshiva kids get government money for Torah learning while enriching Chabad of Michigan in the process. Moreover, I believe that the program itself only reinforces negative stereotype about Jews and Torah, and leaves the impression that when push comes to shove, the holy dollar trumps morals and ethics.
Does that then mean that MJI shouldn't have the program? After all, the program is legal. What's the difference between the Pell Grants MJI's students apply for (and receive), and the thousands of dollars that U.S. citizens receive in negative income tax here in Israel? That's legal too, (although Americans in Israel be warned: the IRS is auditing like crazy! I'm in the process, and it's no picnic.)  although one can be certain that the purpose of the tax rebates were to encourage economic development in the United States, and not in Israel. When the Washington Post runs a piece about the millions of dollars that Americans in Israel receive in tax refunds, and the closet industry that has sprung up in which native Israelis travel to America to get their kids naturalized for the sole purpose of receiving the tax rebate, that too will be a big chillul Hashem, even though it's legal.