Today, the U.S. Department of Education 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 an 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.”
Mr. 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 on July 3, the monitor will have 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.
In June, the Department placed Corinthian on heightened cash monitoring after the company continually 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. After the Department took this action, Corinthian revealed the extent of its financial problems and the company signaled that it was closing. Since then, the Department has been working hard to avoid an abrupt closure and mitigate the impact on the 72,000 students attending a Corinthian institution.
Rather than risk instantly shutting students out of their courses, the Department negotiated a number of conditions to establish an orderly, fair and structured process for winding down Corinthian’s 97 U.S. campuses, while creating enhanced protections for current and prospective students. The Operating Agreement requires all of Corinthian’s campuses to inform all students of the status of their school as well as 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 agreement also immediately halts enrollment at schools that are operating under a teach-out plan and requires additional notification and disclosures for campuses that are being sold.
As part of the operating agreement, Corinthian must make full 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 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 is continuing its investigation of various Corinthian campuses and will continue 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 will 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. More information for students is available on the Department’s website at studentaid.gov/Corinthian.