WALL STREET JOURNAL: California Job Killer

Career College Central Summary:

  • Attorney General Kamala Harris is running in California for the seat of retiring U.S. Sen. Barbara Boxer on her record as a prosecutor, which is starting to look noteworthy mainly for overkill. Her latest target is Heald College, a subsidiary of the Santa Ana-based for-profit Corinthian Colleges.
  • Last summer Corinthian agreed to sell 85 campuses nationwide and wind down 12 others as part of a consent agreement with the U.S. Education Department. The Department drove Corinthian out of business by choking off federal student aid for putatively not complying with exhaustive document requests. A source tells us Attorney General Harris had sought the Department’s assistance in building her own legal case against Corinthian.
  • In November the Education Department brokered a sale of 56 Corinthian campuses to the nonprofit Educational Credit Management Corporation (ECMC). The nonprofit agreed to cut tuition by 20%, submit audited financial statements for two years, and pay the federal government $17.25 million in return for a release from successor liability—an essential condition of the sale.
  • But ECMC declined to buy Corinthian’s 20-some campuses in California because Ms. Harris refused to drop her legal claims against any new owner. The AG wants to burden any prospective buyer with Corinthian’s alleged wrongdoings, which no sane company will take on. Under the federal government consent agreement, all campuses were supposed to have been sold by the end of last year.
  • Heald College President Eeva Deshon warned Ms. Harris in a letter this month that its 10 campuses in California would have to close if she didn’t drop her prosecutorial offensive by mid-April. Nine thousand students could be thrown out of school and 1,500 staff would lose jobs. The Education Department intended to prevent such seismic collateral damage by allowing Corinthian to sell most of its campuses. The California AG’s office then declared that “our approval is not required for the sale of the college,” as if a legal threat isn’t incentive enough not to invest.
  • Curiously, the Education Department last week intervened by accusing Heald of misrepresenting job placement rates for 900 or so students dating back to 2007. These are mostly trumped-up charges. Neither the federal government nor Heald’s accreditor specifies a formula for calculating job placement rates. So the Department is charging Heald with violations of omission such as inconsistently disclosing its methodology and not noting that some students had started jobs prior to graduation.
  • The Department assessed the maximum fine of $35,000 per regulatory violation, which its bureaucrats count as each student that was improperly counted. But the bigger penalty is that Heald will have to shut down. Ms. Harris praised the Department. Will she now give Heald employees a new job?

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THE WALL STREET JOURNAL

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