This is easy to believe, given Donald Trump's track record for shady dealing:
- Trump Empire Built on Shady Tax Breaks
- Cruz: Trump in 'Shady Deals' with Mobsters
- Forget Clinton's fake scandals- Trump's history of real estate grifts is the real deal
Trump aside, as many colleges and universities face financial crises in this challenging Fifth Wave in higher ed's history, what moral obligations do we face?
For example, the for-profit higher education sector has been under attack by the Department of Education for the past couple of years... and for good reason.
EXAMPLE: The Late, Great Corinthian Colleges
Less than three years ago, Corinthian Colleges, Inc. was one of
the biggest and most powerful players in the for-profit sector of higher
education. But by mid-2014 its neck was
in the Department of Education’s noose. The U.S. Department of
Education’s Federal Student Aid (FSA) office has placed Corinthian Colleges
Inc. on an increased level of financial oversight after the company failed to
address concerns about its practices, including falsifying job placement data
used in marketing claims to prospective students and allegations of altered
grades and attendance.
“The Department’s foremost interest is
to protect students and make sure they are educated by institutions that
operate in accordance with our standards,” said U.S. Education Under Secretary
Ted Mitchell. “We made the decision to increase oversight of Corinthian
Colleges after careful consideration and as part of our obligations to protect
hardworking taxpayers and students’ futures.”
Corinthian was the parent company of
the Everest Institute, Everest College, WyoTech and Heald brands, which enroll
72,000 students nationwide who receive $1.4 billion in federal financial aid
money annually. All of Corinthian’s campuses were required to wait 21 days
after submitting student enrollment data to draw down money for federal student
aid. The Department remains in close contact with Corinthian executives to
protect the interests of the students enrolled at its various campuses.
FSA places higher education institutions
on heightened financial oversight for a variety of reasons. The Department has
requested data from Corinthian multiple times in the last five months to
address inconsistencies in the company’s job placement claims for graduates,
but Corinthian officials have not turned over the documents. Since January
2014, the Department had sent Corinthian five letters requesting data and other
documentation required by law. The Department notified Corinthian of heightened
monitoring on June 12, which the company acknowledged today in a filing with the Securities and Exchange Commission. (DOE, June 19, 2014)
On June 23, 2014, the Depart announced that it
was working with Corinthian on a plan to avoid an immediate closure of the
career training program chain and prevent suddenly disrupting the education of
72,000 students and the jobs of 12,000 employees.
The
Department and Corinthian signed a memorandum of understanding Sunday that
requires the company to develop a plan to sell and teach-out programs across
the country over the next six months, including hiring an independent monitor
approved by the Department to oversee its finances and the sales process. In
exchange, the Department has agreed to immediately release $16 million in
federal student aid for students currently enrolled at Corinthian campuses.
Corinthian is required to provide enrollment documentation to back up the
funding request.
“Students and their interests have been
at the heart of every decision the Department has made regarding Corinthian,”
said U.S. Under Secretary of Education Ted Mitchell. “We will continue to
closely monitor the teach-out or sale of Corinthian’s campuses to ensure that
students are able to finish their education without interruption and that
employees experience minimal disruption to their lives. The Department is
committed to ensuring all students receive a quality education that leads to a
well-paying job and a strong future.”
Under the agreement, Corinthian is required to
put teach-out plans in place for all schools, including those for sale. An independent monitor approved by the
Department will review matters related to ongoing operations and will have
fulltime access to Corinthian’s financial and operating records. In addition,
Corinthian is permitted to continue enrolling new students but must reimburse
any students who enroll in a campus found to be ineligible for federal student
aid through the Department’s reviews and investigations.
The Department put Corinthian on
heightened financial monitoring with a 21-day waiting period for federal funds
on June 12th, after Corinthian failed to comply with repeated
requests to address ongoing concerns over the company’s practices, including
falsifying job placement data used in marketing claims to prospective students
and allegations of altered grades and attendance.
As part of the agreement, heightened
financial monitoring remains in effect and Corinthian has agreed to turn over
data that the Department has been requesting for the last five months to
address inconsistencies in the company’s job placement claims for graduates, as
well as grade and attendance records. Inquiries by the Department and other
federal agencies into Corinthian’s practices will continue. (DOE, June 23, 2014)
With the swiftness of the changing tides, by early July 2014 the DOE and Corinthian agreed to an operating plan
that provided the company’s 72,000 students at the company’s career colleges a
chance to complete their education and protects taxpayers’ investment while
Corinthian works to either sell or close its campuses across the country in the
next six months. The plan calls for an independent monitor that will oversee
this process for all programs owned by Corinthian, including Everest, Heald and
Wyotech campuses. “We have accepted an operating plan for Corinthian Colleges
Inc. that will protect students’ futures and fulfill the Department’s
responsibilities to taxpayers moving forward,” U.S. Education Under Secretary
Ted Mitchell said. “Ensuring that Corinthian students are served well remains
our first and most important priority, and we will continue to work with
Corinthian officials and the independent monitor on behalf of the best
interests of students and taxpayers.” In order to ensure that Corinthian can
still provide classes for its current students, the Department has agreed to release
$35 million in student aid to be used solely for education activities - all of
which must be approved by the Department. Under the operating agreement, which
is effective July 8th Corinthian also agreed to the following:
- Corinthian’s
campuses will inform students of their options, and every campus will
institute a plan so students can complete their programs without
disruption, if they choose to do so. The operating plan will also
immediately halt enrollment at schools that are operating under this teach-out
provision and require additional notification and disclosures for campuses
that are being sold.
- Corinthian
will only use federal student aid funds for normal daily operations,
including student refunds, payroll expenses (including retention arrangements),
accounts payable, interest and related fees, and related professional
fees. Corinthian will not use federal funding to pay dividends, legal
settlements of lawsuits or investigations, or debt repayments.
Additionally, bonuses, severance payments, raises and retention agreements
must be reported to the monitor and the Department at least two weeks
prior to the creation of contractual obligations and are subject to the
approval of the Department.
- Corinthian
will hire an independent monitor - approved by the Department - that will
have full and complete access to Corinthian personnel and budgets to
ensure prudent financial management and see that taxpayer-funded federal
student aid dollars are spent well. The monitor will also review teach-out
plans and sales of schools, and ensure students have multiple ways to
submit feedback and any complaints about the process.
- Corinthian
will also make refunds available to students in a number of circumstances.
Corinthian and the Department will work together with the assistance of
the monitor to establish a reserve fund of at least $30 million for
Corinthian to pay those refunds.
- Corinthian
will turn over all enrollment and job placement data required by federal
law – and overdue to the Department since January - by July 15th. (DOE, July 3, 2014)
By the middle of that fateful month, the DOE took
additional steps to ensure Corinthian Colleges’ students and the American
taxpayer are protected by announcing that Skadden, Arps, Slate, Meagher &
Flom LLP & Affiliates, under the leadership of former U.S. Attorney Patrick
Fitzgerald, has been selected to take on the role of monitoring various aspects
of the career college company.
As part of the operating agreement reached
earlier this month with Corinthian, the Department required that an independent
monitor oversee Corinthian’s actions moving forward as the company begins to
sell and wind down its campuses over the coming months.
“Mr. Fitzgerald and his team will play a
critical role in making sure that the Department is provided with an accurate
accounting of Corinthian’s operations to ensure students are protected as well
as protecting the integrity of taxpayers’ investment,” said U.S. Under
Secretary Ted Mitchell. “The monitor will strengthen our efforts to ensure
prudent financial management while overseeing an orderly process for students
to complete their education – rather than students being left in the lurch as a
result of an abrupt closure. With every action we’ve taken, our priority has
been, and will continue to be, to put the interest of students first. We are
confident that today’s announcement underscores that priority.”
Fitzgerald was appointed U.S. Attorney
for the Northern District of Illinois in 2001 by President George W. Bush. As U.S.
Attorney, Mr. Fitzgerald led several high profile investigations and
prosecutions, including the convictions of two former Illinois Governors,
George Ryan and Rod Blagojevich. Mr. Fitzgerald was also selected as Special
Counsel to investigate the leaks in the Valerie Plame matter and tried the case
of United States v. Lewis “Scooter” Libby. Skadden was selected by The American Lawyer as a finalist in its 2014 Litigation
Department of the Year issue and was named “Investigations Firm of the Year” at
the 2014 Who’s Who Legal
Awards.
As articulated in the operating
agreement the Department signed with Corinthian Colleges, the monitor was given full and complete
access to Corinthian personnel and budgets for the company, review all sales
processes, and ensure that teach-out plans, which allow students to complete
their program, are followed. The monitor will also confirm that Corinthian is
in compliance with the production of documents and will review Corinthian’s
rosters prior to their submission for the drawdown of Title IV Student Aid
Funds and will also review campus eligibility. In addition, the monitor – which
is fully funded by Corinthian – will see that students and Corinthian employees
have multiple ways to submit feedback and complaints. The monitor reports
solely to the Department and will do so on a regular basis.
As part of the operating agreement,
Corinthian agreed to make full refunds available to students in a number of
circumstances. Corinthian and the Department also agreed to work together with
the assistance of the monitor to establish a reserve fund of at least $30
million for Corinthian to pay those refunds. Corinthian is limited in using
federal student aid funds to pay only for normal daily operations, and it
cannot use federal funding to pay dividends, legal settlements of lawsuits or
investigations, debt repayments, or payments related to private student loans.
In addition, the Department continued its
investigation of various Corinthian campuses and continued to do so throughout
this process. Under the Higher Education Act, the Department is responsible for
ensuring the effective administration and oversight of the approximately $150
billion in federal student aid that is disbursed each year to all Title IV
institutions. Corinthian receives approximately $1.4 billion a year in federal
student aid. For several months, the Department has been looking into serious
concerns about Corinthian’s compliance with federal law. This includes
assessing issues that have been identified through investigations conducted by
other federal, state and local agencies.
The Department announced that it would
“work closely with Mr. Fitzgerald and his team in the coming weeks and months,
to ensure that students are protected and have the information they need to
make informed decisions about their education.” (DOE, July 18, 2014)
The following year, Arnie Duncan’s other shoe dropped. In April 2015 the DOE confirmed
cases of misrepresentation of job placement rates to current and prospective
students in Corinthian's Heald College system. The Department found 947
misstated placement rates and informed the company it is being fined about $30
million.
Specifically, the Department determined
that Heald College's inaccurate or incomplete disclosures were misleading to
students; that they overstated the employment prospects of graduates of Heald's
programs; and that current and prospective students of Heald could have relied
upon that information as they were choosing whether to attend the school. Heald
College provided the Department and its accreditors this inaccurate information
as well.
The Department also notified Corinthian
it intended to deny Corinthian's pending applications to continue to
participate in the Title IV federal student aid programs at its Heald Salinas
and Stockton locations. Corinthian has 14 days to respond to the Department's
notice, after which the Department will issue its final decision. Moreover, the
Department has determined that Heald College is no longer allowed to enroll
students and must prepare to help its current students either complete their
education or continue it elsewhere.
Commented the DOE’s Press Office, “The
Obama Administration has led unprecedented efforts to protect consumers from
predatory career colleges. It has established new gainful employment regulations
to
hold career-training programs accountable and ensure that students are not
saddled with debt they cannot repay. These regulations ensure that programs
improve their outcomes for students – or risk losing access to federal student
aid. Last year, the Department announced a new federal interagency task force
to help ensure proper oversight of for-profit institutions, which will be led
by Under Secretary Ted Mitchell.
"This should be a wake-up call for
consumers across the country about the abuses that can exist within the
for-profit college sector," U.S. Secretary of Education Arne Duncan said
of the Department's enforcement action against Corinthian. "We will continue
to hold the career college industry accountable and demand reform for the good
of students and taxpayers. And we will need Congress to join us in that effort.
"Instead of providing clear and
accurate information to help students choose which college to attend,
Corinthian violated students' and taxpayers' trust," said Under Secretary
Mitchell. "Their substantial misrepresentations evidence a blatant
disregard not just for professional standards, but for students' futures. This
is unacceptable, and we are holding them accountable.
“As part of these ongoing efforts to
ensure that career colleges prepare students for the workforce, institutions
are required to provide accurate information about their graduates' job
placement success and the types of employment their graduates obtained. The
Department expects all institutions to adhere to the highest standard of care
and diligence in following the requirements of participating in federal student
aid programs to ensure colleges are always doing right by students and
taxpayers.”
The majority of Corinthian's campuses
were sold to the nonprofit Zenith Education Group, which agreed to provide a
number of new consumer protections, such as providing refund and withdrawal
opportunities to students in poorly-performing programs, and has taken steps to
strengthen programs and improve affordability, including by reducing tuition.
The sale allowed most students to continue pursuing their career goals without
disruption, and the Department and the Consumer Financial Protection Bureau
have since worked to provide more than $480 million in loan forgiveness for
borrowers who took out Corinthian's high-cost private student loans.
In
its investigation of Corinthian Colleges, the Department found numerous causes
for concern with practices throughout the Heald College system. Some examples
include:
- Heald paid temporary agencies to hire
its graduates to work at temporary jobs on its own campuses – and counted
these graduates as placed. For example, Heald paid companies to hire
graduates for temporary positions as short as two days, asked them to
perform tasks like moving computers and organizing cables, and then
counted those graduates as "placed in field."
- Heald College counted placements that
were clearly out of the student's field of study as in-field placements. For example, one campus classified a 2011
graduate of an Accounting program as employed in the field based upon a
food service job she started at Taco Bell in June 2006. Another campus
counted a 2011 Business Administration graduate as placed in the field
based upon a seasonal clerk position she obtained in Macy's Shipping and
Receiving Department during November 2010, which the student stated ended
prior to her graduation.
- Heald College failed to disclose that
it counted as "placed" those graduates whose employment began
prior to graduation, and in some cases even prior to the graduate's
attendance at Heald. The Department's
analysis revealed that, according to Corinthian's own data for 2012
graduates, over one-third of the graduates reported to have been
"placed in field" started their jobs prior to January 1, 2012,
and over one-quarter started their jobs prior to January 1, 2011. And in
follow-up interviews with some of those students, they told the Department
that their jobs were not related to their field of study, nor had they
received promotions or increased responsibilities or otherwise progressed
in those jobs because of their Heald education.
- In some of its disclosures, Heald
failed to state that it had excluded students from its placement rate
calculations who the college said had deferred employment for one reason
or another. In one case, a criminal
justice program claimed a placement rate of 100 percent, but it had
classified almost 60 percent of the graduates as unavailable for
employment. In another case, a medical assisting program claimed a
placement rate of 100 percent based upon 51 graduates having been placed,
but it had classified almost 43 percent, or 38 of the 89 total graduates
of the program, as unavailable for employment.
Throughout this process, the Department
sought a wind down of Corinthian Colleges that protects students, safeguards
the investment taxpayers have made in their success, and creates opportunities
for students to finish what they started. In the coming days, the Department
will provide more information to Corinthian's students to help answer questions
about their federal student aid and their options. The Department is also
working on a process to help federal student loan borrowers submit a defense to
repayment of their federal student loans.
"We have kept students at the heart
of every decision we have made about Corinthian, and we will continue to do so
as we move forward," Under Secretary Mitchell claimed. "When our
borrowers bring claims to us that their school committed fraud or other
violations of state law against them, we will give them the relief that they
are entitled to under federal law and regulations." (DOE, April 14, 2015)
Two weeks later, Corinthian posted this
announcement on its website:
Corinthian Announces Cessation of
Effectively All Operations
All campuses closed effective Monday, April 27
SANTA ANA, Calif., April 26, 2015 – Corinthian Colleges, Inc.
(Nasdaq: COCO) today announced that the Company has ceased substantially all
operations and discontinued instruction at its remaining 28 ground campuses.
The company is working with other schools to provide continuing educational
opportunities for its approximately 16,000 students. Corinthian said those
efforts depend to a great degree on cooperation with partnering institutions
and regulatory authorities.
Campuses closed include Corinthian’s 13 remaining Everest and
WyoTech campuses in California, Everest College Phoenix and Everest Online
Tempe in Arizona, the Everest Institute in New York, and 150-year-old Heald
College–including its 10 locations in California, one in Hawaii and one in
Oregon.
Since signing an operating agreement with the U.S. Department of
Education in July 2014, the Company has been focused on completing the orderly
sale or wind-down of all of its schools. In November 2014, the Company
announced that it had entered into an agreement to sell 56 Everest and WyoTech
campuses to Zenith Education Group, Inc., a subsidiary of ECMC Group. As part
of that sale, Zenith also agreed to conclude the teach-out process at 12
additional schools that were being closed. That transaction was completed in
February of this year for all but three locations, the Everest College Phoenix
campuses in Phoenix and Mesa, AZ, and Everest Institute in Rochester, NY. As a
result of the sale, nearly forty thousand students were able to continue their
studies and thousands of employees kept their jobs. Zenith has recently advised
Corinthian that it will not consummate the purchase of Everest College Phoenix,
and the closing conditions have not been satisfied for Everest Institute
Rochester.
In parallel, the Company had been in advanced negotiations with
several parties to both sell the 150-year-old Heald College and to arrange for
teach-out partners to allow its Everest College and WyoTech students in
California to continue their education. The Company said these efforts were
unsuccessful largely as a result of federal and state regulators seeking to impose
financial penalties and conditions on buyers and teach-out partners.
”We believe that we have attempted to do everything within our
power to provide a quality education and an opportunity for a better future for
our students,“ said Jack Massimino, Chief Executive Officer of Corinthian.
”Unfortunately the current regulatory environment would not allow us to
complete a transaction with several interested parties that would have allowed
for a seamless transition for our students. I would like to thank our employees
for their selfless dedication and commitment to fulfilling the educational and
career goals of all of our students.“
The Company said that its historic graduation rate and job
placement rates compared favorably with community colleges. Corinthian also
said that approximately 40 percent of its students previously attended a
traditional higher education institution where their needs had not been met
before attending a Corinthian school.
”Colleges like ours fill an important role in the broader education
system and address a critical need that remains largely unmet by community
colleges and other public sector schools,“ Massimino said. ”Overall, our
schools did a good job for the students they served. We made every effort to
address regulators’ concerns in good faith. Neither our Board of Directors, our
management, our faculty, nor our students believe these schools deserved to be
forced to close.“
THE LATEST
This new attack calls into question the integrity of a large, and once highly successful, sector of higher education. As such, it dwarfs the Trump U. trials in significance to US higher education as a whole. We in the non-proft sector should not be complacent as this drama unfolds. New DOE rules could touch us in sensitive spots, too.
In the words of one observer: "New rulemaking says that fraudulent and financially risky schools may be
subject to disclosure and repayment penalties, which jeopardizes
for-profit schools, but also other institutions, like Hispanic-serving
institutions and historically black colleges. The department remains in
negotiations about how to more evenly apply the new rules with fewer
unintended consequences, but with yesterday's announcement, it remains
to be seen if that effort supersedes the department's rescue of
misguided students and taxpayers."
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