Obama’s Corinthian Kill

Career College Central Summary:

  • Last month the Department of Education triggered a liquidity crisis at the Santa Ana-based Corinthian by cutting off federal student aid. Regulators then coerced the for-profit into an agreement to wind down 12 of its U.S. campuses and sell 85 others over the next six months.
  • Last week, DOE appointed Chicago lawyer Patrick Fitzgerald, notorious for prosecutorial bullying, to oversee the liquidation. Corinthian's 72,000 students will be allowed to transfer, finish their degrees or withdraw with a full refund, but 12,000 jobs are in jeopardy.
  • The White House is putatively trying to avert a chaotic Chapter 7 bankruptcy like the one that transpired in 2001 after regulators abruptly yanked federal aid from the for-profit Computer Learning Centers. Congress lashed department officials for their heavy-handed response that threw 10,000 students out of school. Yet the drive-by shooting of Corinthian may be even more vicious.
  • Department officials claimed on a call with reporters this month that "we did not know their cash situation" when they blocked federal aid and "had no foreknowledge that this would be the reaction."
  • Regulators are often caught flat-footed, but every sign suggests the Obama Administration targeted Corinthian with the intent to kill.
  • In April 2012 the Consumer Financial Protection Bureau launched a fishing expedition into Corinthian's shareholder-backed loans to determine whether the for-profit was "engaging in unlawful acts or practices relating to the advertising, marketing, or origination of private student loans."
  • Corinthian turned over 85,000 pages of documents on the lending program, which helped low-income students finance education costs not covered by government aid and personal resources.
  • Last September the agency issued a more expansive "civil investigative demand" for all emails, reports, presentations, meeting minutes, agendas, training manuals, policies and analyses related to the program without alleging specific legal violations.
  • The company explained that it would have to employ an e-discovery vendor to process the documents at an estimated cost of $9 million because it lacks a central document system.
  • None of the federal agencies has brought legal charges, but they have collectively destroyed Corinthian's bottom line.
  • The company's compliance costs have spiked while its share price plunged. In the third quarter of fiscal 2014, Corinthian recorded a net operating loss of $79.6 million.

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