How is it that our government is allocating 1 billion
dollars a year to sub-contract student loan debt collection agencies, when they
should be providing services that allow for the modification of such loans and
also assist in protecting the American consumer from predatory collection agencies
and their terroristic threats tactics to such clients.
Mike DiGiacomo has witnessed first hand to the nature of the
Art Institute – AI and Education Management Corporation EDMC – in which Goldman
Sachs owns over 40%, anyone see a conflict of interest there? Mr. DiGiacomo was
also responsible for all the links provided here, which support this thesis.
This is not in the form of an executive summary as of yet, just a small outline
of the impropriety and lack of ethics of the company EDMC. A more comprehensive
evaluation will later be explained, once all the pieces have been brought
together.
According to the Huffington
Post, Education Management Corp, “they engage in Predatory Lending,”
Whistleblower Claims, written by Chris Kirkham 3/15/2012
“The company is ‘motivated by profit rather than student
success or rankings,’ and has ‘every incentive to maximize enrollment by
recruiting unqualified students who will not be able to repay their loans,’ the
suit says.”
“The suit, brought by Jason Sobek, who worked as an
admissions manager at Education Management's South University online, likens
the company's business model to ‘the predatory lending industry, taking zero
risk in signing up students for federally guaranteed loans’”
“A bachelor's degree in graphic design at The Art Institute
of Pittsburgh, one of Education Management's colleges, costs more than $90,000,
according to the school's disclosure. Education Management has more than
150,000 students across more than 100 college campuses. The company's schools
include the The Art Institutes, Argosy University, South University and
Brown-Mackie College.”
According to Bloomberg, Education Management Preys on Students, Ex-Recruiter Claims
written by John Hechinger 3/15/2012
“Education Management used “boiler-room” tactics to receive
millions of dollars in federally backed student loans and grants, Jason Sobek,
a former recruiter for the company’s South University, said in a complaint
unsealed yesterday in Pittsburgh federal court. The company targeted “troubled”
students, including the homeless and mentally ill, according to the lawsuit.”
“For-profit colleges, which can receive as much as 90
percent of their revenue from federal financial-aid programs, are under
scrutiny by Congress, state attorneys general and federal prosecutors for their
sales practices and student-loan default rates.”
“Education Management targeted “a troubled population” that
included “the poor, the undereducated, the homeless,” students with criminal
records, single mothers on welfare and those living in shelters and halfway
houses, Sobek said in the complaint.
The company routinely enrolled mentally ill students who had
to retake classes and were likely to default on their loans, according to the
lawsuit.”
The case is U.S., ex. rel. Jason Sobek v.
Education Management, 10-cv-0131, U.S. District Court, Western District of Pennsylvania (Pittsburgh).
(http://www.bloomberg.com/news/2012-03-15/education-management-preys-on-students-former-recruiter-claims.html?utm_source=twitterfeed&utm_medium=twitter).
According to New America Foundation, What’s the Matter with EDMC? written by Stephen Burd 10/10/2011
According to New America Foundation, What’s the Matter with EDMC? written by Stephen Burd 10/10/2011
“There was a time not so long ago that Education Management
Corporation (EDMC) was considered to be one of the better for-profit higher
education companies in the business. The arts schools that it had run since the
early 1970s were generally well regarded, and the company seemed to be focused
on its long-term success, rather than just its quarterly profits.”
So what happened? That question can be answered in two
words: Goldman Sachs.
In 2006, Goldman Sachs and two other private equity firms
acquired EDMC for $3.4 billion. The deal eventually gave Goldman about a
40-percent ownership stake in the company.”
“Despite all of this
scrutiny, EDMC has been among the most resistant for-profit higher education
companies to reforming its practices -- going so far as to quit a lobbying
coalition it started after that group began developing a voluntary code of
conduct for its members to follow.”
“To execute the plan, they hired a team of executives from
the Apollo Group who had been instrumental in the massive expansion of the
University of Phoenix but had come under fire for the tactics they used to
achieve this aim. In fact, the man they chose to lead EDMC -- Todd S. Nelson,
who served as Apollo Group’s CEO from 2001 to 2006 -- had the rare distinction
among for-profit college executives for having been forced out of his job for
having been, according to his former boss University of Phoenix founder John
Sperling, too “preoccupied” with the stock price of the company.”
According to New America Foundation, The Transformation of EDMC? written by Stephen Burd 10/13/2011
In other words, under the leadership of Todd Nelson and Goldman Sachs, the days when Education Management had a “reputation for quality and doing things the right way” appear to be long in the past.”
“When Goldman Sachs and its private equity partners purchased EDMC in 2006, only about 4,000 of the company’s students were enrolled in its online programs exclusively. Five years later, that number has increased more than tenfold, and there have been serious allegations that the company has pumped up these numbers by aggressively recruiting unqualified students.”
(http://higheredwatch.newamerica.net/blogposts/2011/the_transformation_of_edmc-59018).
According to New America Foundation, How EDMC went bad? written by Stephen Burd 10/20/2011
“The drive for numbers has created a recruiting
staff that could care less about the well-being or success of the students,
they bring in, a recruiter for EDMC's South University told the Huffington
Post, in the online publication's words. ‘They’re wolves; they’re
hunters,’ the recruiter said. “They have one objective: They’re there to make
money and get students.”
“In other words, firms that do these types of deals
are not invested in the long-term health and well-being of the corporations
they purchase. Instead, their mission is to build the companies up as fast as
they can so they can sell them off and make a killing.”
Even worse, they loaded these students up with federal and private student loan debt that many of them will never be able to repay.”
(http://higheredwatch.newamerica.net/blogposts/2011/the_extraordinary_growth_and_decline_of_edmc-59329)
According to Courthousenews.com,
For-Profit Art Institutes of California Accused of Swindle
written by Matt Reynolds 04/13/2012
“Importantly, no one at AICH ever advised plaintiff that federal student loans for her AICH bachelor's degree were subject to an aggregate limit of approximately $57,500 which would not cover the full cost of tuition," the complaint states.”
“Since Washington did not qualify for private student
loans, and could not afford the school's $650 monthly payment plan, she says
she was forced to drop out of school with a $52,162 debt.
In August 2011, the U.S. Department of Justice and
four states filed suit against The Art Institutes' owner, Education Management
Corp., for fraudulently receiving $11 billion in state and federal aid.”
(http://www.courthousenews.com/2012/04/13/45603.htm).
[EDMC's 50th Anniversary Passes Without Much Ado, Wonder Why?]
According to Triblive.com, EDMC: Party’s Off at For Profit Juggernaut written by Andrew Conte 05/15/2012
“The for-profit company generated $229 million in
net income last year for its owners, which include equity funds at Goldman
Sachs, a major Wall Street investment firm. Much of that money comes from
federal grants and government-backed student loans.”
“Criticism of EDMC, the nation's second-largest
for-profit educator behind Apollo Group, which owns the University of Phoenix,
occurs amid increased pressure on the industry. Students at for-profit colleges
make up 11 percent of the nation's 11 million full-time undergrads but account
for 26 percent of borrowers and 43 percent of defaulters, according to the
Department of Education.”
“The revenues of these institutions are dependent
on the number of students they enroll in their programs," the Education
Department wrote when it issued the rules in the Federal Register. "They
are not otherwise dependent on whether their students graduate, find jobs and
ultimately repay their loans.”
“EDMC last year received $2.6 billion, or 74
percent of its revenue, from the Education Department's Title IV programs such
as Pell Grants and government-backed Stafford Loans.”
“Student retention rates are so low at 13 EDMC
schools that the Accrediting Council for Independent Colleges and Schools, a
national accrediting agency, increased its monitoring.”
“For-profit schools tend to enroll students who
are more financially disadvantaged and who tend to take out more loans, said
Brian Moran, general counsel for the Association of Private Sector Colleges and
Universities, a Washington-based trade group. To remain viable, he said,
schools need successful graduates.”
(http://triblive.com/news/adminpage/1803123-74/edmc-company-schools-students-education-federal-percent-profit-programs-student?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+alltribstories+%28TribLIVE+News%29).
According to Triblive.com, For Profit Grad Struggles written by Andrew Conte 05/15/2012
According to Triblive.com, For Profit Grad Struggles written by Andrew Conte 05/15/2012
“EDMC says bachelor of fine arts students in the media arts and animation program at the Schaumburg campus where Oliver attended pay $130,000 for tuition, room and board, and other costs.
Fewer than a third of the students in that program finish in four years, EDMC says, and two-thirds of its graduates find jobs in the field.”
(http://triblive.com/home/1803183-74/edmc-animation-institute-oliver-art-students-bachelor-borrowing-debt-degree).
According to WJLA.com,
Art Institute of Washington Seniors blocked from Graduation written by Ben Eisler
05/11/2012
“Some seniors at a local institute say their school won't let them graduate, and not because they didn't pass their classes.
They say their advisers
miscalculated their credits.
The students say since they came to
the Art Institute of Washington, their advisers told them which classes to
take, and that they were on track to graduate. Then just weeks before
graduation, they got the devastating news.”
“Art Institute officials
declined to be interviewed on camera, but in a statement the school wrote,
"The Art Institute of Washington is unaware of any student not on track to
graduate this quarter due to revised credit hour requirements...(The Institute)
encourages any student who may have concerns to contact their academic advisors
or academic department chairperson directly.”
“Now
the school has instructed any students with this problem to meet with the dean.”
According to Projectcensored.org, Change to Win Goes after the Educational Management Corporation for Violations of Regulations in an effort to Protect Members’ Pension Funds written by Danny Weil 02/15/2012
Mick J. Beekhuizen – he joined Goldman, Sachs & Co. in 2000 and has been a
Managing Director in the Merchant Banking Division since 2010.
Samuel C. Cowley – he served as Executive Vice President, Business Development, General Counsel and Secretary of Matrixx Initiatives, Inc., a seller of over-the-counter healthcare products, from May 2008 until its sale in February 2011.
Adrian M. Jones — he joined Goldman, Sachs & Co. in 1994 and has been a Managing Director within the Principal Investment Area of its Merchant Banking Division since 2002, where he focuses on consumer-related and healthcare opportunities and is also a member of the Corporate Investment Committee of the Merchant Banking Division of Goldman, Sachs & Co.
Jeffrey T. Leeds — he is the co-founder of Leeds
Equity Partners, LLC, a leading New York-based private equity firm focusing on
the education, training and information services industries. Prior to
co-founding Leeds Equity Partners, Mr. Leeds spent seven years specializing in
mergers and acquisitions and corporate finance at Lazard Freres & Co.
John R. McKernan, Jr. – he is Chairman of the Board of
Directors. Mr. McKernan served as our Executive Chairman from February 2007 to
December 2008 and our Chief Executive Officer from September 2003 until
February 2007.
Leo F.
Mullin is a retired as Chief Executive Officer of Delta Air Lines, Inc. in
December 2003 and Chairman in April 2004, after having served as Chief
Executive Officer of Delta Air Lines, Inc. since 1997 and Chairman since 1999.
Paul J.
Salem – he is a Senior Managing Director and a co-founder of Providence Equity
Partners. Prior to joining Providence Equity Partners in 1992, Mr. Salem worked
for Morgan Stanley & Co. in corporate finance and mergers and acquisitions.
Prior to that time, Mr. Salem spent four years with Prudential Investment
Corporation, an affiliate of Prudential Insurance, where his responsibilities
included leveraged buyout transactions and helping to establish Prudential’s
European investment office.
Peter O.
Wilde — he is a Managing Director of Providence Equity Partners. Prior to
joining Providence Equity Partners in 2002, Mr. Wilde was a General Partner at
BCI Partners, where he began his career in private equity investing in 1992.
Joseph R.
Wright – he currently serves as Chairman of Seamobile/MTN Satellite
Communications and is a director of Federal Signal Corporation, where he serves
on the Compensation and Benefits Committee, and Cowen Group, Inc., where he
serves on the Audit Committee (http://www.edmc.edu/about/Board.aspx).”
“One of those investors is Change
to Win, a coalition of labor unions founded in 2005 whose central mission is,
in the words of their website, “to unite the 50 million American workers who
work in industries that cannot be outsourced or shipped overseas into strong
unions that can win them a place in the American middle class — where their
jobs provide good wages, decent working conditions and a voice on the job”
“In 2008 the company received
70.2% of its operational revenue from the government with the amount steadily
increasing to 81.3% in 2009, 88.5% in 2010 and a whopping 90.3% in 2011 with
the .3% taking it over the government threshold of no more than 90% allowance
from federal funds. The company is clearly in violation of the 90/10 rule which
regulates how much federal dollars a for-profit corporation can take from
taxpayers.”
“Currently, for-profit
institutions are also prohibited from participating in Title IV programs unless
they meet one of the following three criteria which are part of the new gainful
employment regulations promulgated in 2011 by the Department of Education:
35% of former students are paying down debt, typical graduate’s annual loan payment does not exceed 30% of discretionary income, and typical graduate’s annual loan payment does not exceed 12% of total income.”
“For more information as to what
SEIU is doing to fight for-profit education and educate members and the public
as to their predatory status please visit http://www.ForProfitU.org.”
(http://www.projectcensored.org/top-stories/articles/change-to-win-goes-after-the-educational-management-corporation-for-violations-of-regulations-in-an-effort-to-protect-members-pension-funds/).
Helping Students with Crushing Student Debt
Senator Dick Durban from Illinois & Lisa Madigan - Illinois - Attorney General, addresses the deceptive practices from Westwood College a school whose lacking in accreditation and those who attend are not being acknowledge for those degrees, by employment possibilities. Individuals are graduating with $50,000 - $70,000 worth of debt for what, a degree that means absolutely nothing.
How is it even possible that an educational institution that receives Title IV funds lacks in accreditation for the degrees they tout? Why are these institutions being federally backed, when they are nothing than diploma mills, and diplomas which happen to be as worthless as the paper in which they are written on.
According to the Huffington Post, Auctions 2012: For Profit Colleges Win when
Lobbying Blitz Weakens Regs written by Chris Kirkham 02/03/2012
“Data showed that for-profit colleges accounted for nearly half of the defaults on federal
student loans, despite educating only about 10 percent of the nation's college
students.”
“Beginning in 2010, the administration announced a
broad package of new regulations that would crack down on programs that leave
students with outsized debt and few career prospects. But a year later, those rules had been substantially weakened, following a $13 million lobbying blitz by the colleges aided by some
of Washington's most powerful Democratic influence peddlers.”
“The well-coordinated lobbying and public relations campaign,
targeted largely at Democrats, was an effort to protect the industry's access
to more than $30 billion in federal student loans and grants that fuel the vast
majority of its revenues. Some of the largest higher education corporations
receive more than 85 percent of their revenue from federal student aid dollars.”
“Among the all-star cast of lobbyists hired by the
industry: former Democratic House Majority Leader Dick Gephardt; Tony Podesta,
one of the most prominent lobbyists in Washington and the brother of John
Podesta, who led President Barack Obama's transition team; and Penny Lee, a
former top adviser to Senate Majority Leader Harry Reid (D-Nev.) who was also a
senior staff member for the Democratic National Committee. In total, 14 former
members of Congress were hired by the industry to fight regulations that would
have cut federal aid to programs in which students fared poorly.”
“In order for a program to be disqualified from
receiving federal student aid dollars, more than 65 percent of students would have to be delinquent in repaying
their loans, and graduates would have loan debts that constituted more than 30
percent of their discretionary income or more than 12 percent of their total
earnings.”
“Though the vote was largely symbolic, it revealed
many Democrats siding with the for-profit colleges, including House Minority
Leader Nancy Pelosi (D-Calif.) and Democratic National Committee Chairwoman
Debbie Wasserman Schultz. (D-Fla.).”
Among those in attendance were influential executives such as Donald
Graham, chairman and chief executive of the Washington Post Co., which owns
Kaplan University; and John "Jock" McKernan, chairman of Education
Management Corp., a former congressman and Maine governor, and husband of Sen.
Olympia Snowe (R-Maine). By contrast, a coalition of civil rights and student
advocacy groups met just once with the administration.”
(http://www.huffingtonpost.com/2012/02/03/auction-2012-education-for-profit-colleges_n_1251072.html).
According to the NY Times, For Profit College Group Sued as U.S. Lays Out Wide Fraud
written by Tamar Lewin 08/08/2011
“The
government’s incentive compensation ban was designed to stop companies from
signing up unqualified students for their aid money. The False Claims Act, the basis for the
government’s lawsuit, provides for triple damages, and since the complaint said
all the government student aid came from such claims, the damages could be as
much as $33 billion. As a practical matter, though, such huge cases are usually
settled for far less than the maximum damages.”
“Publicly traded for-profit college companies have
recently been a target both of government scrutiny and whistle-blower suits. In
2009, the Apollo
Group, which owns the University of Phoenix, the largest for-profit college,
settled a whistle-blower case for $78 million.”
“In 2003, Education Management’s chief executive
was Jock McKernan, a former governor of Maine who now serves as chairman of the
board. Mr. McKernan is married to Senator Olympia J. Snowe, a Maine Republican
whose 2010 financial disclosure form lists Education Management stock and
options worth $2 million to $10 million.”
(http://www.nytimes.com/2011/08/09/education/09forprofit.html).
According to Pittsburg City Paper,
For Profit Educator EDMC Gives its Employees a Tough Lesson in Business written
by Charlie Deitch 02/01/2012
“Actually, EDMC wasn't lacking money before: The company had $400
million on hand last year, financial records show. But the firm has directed
much of its cash elsewhere. Weeks before the layoffs, EDMC announced it would
spend millions to buy back its own stock.
That move, analysts say, will create another group of winners: the
investors who own the vast majority of shares, including some EDMC board
members.”
“In 2006, it joined with two other firms — Providence Equity
Partners and Leeds Equity Partners — to purchase EDMC for $3.4 billion. Leeds
is a private-equity firm that has built a portfolio investing in what it calls
the "knowledge industry." The company's advisory board is chaired by
Colin Powell, former Secretary of State under President George W. Bush.
Providence is also a private-equity company with a wide array of investments —
including the YES network, which is best known as the television home of the
New York Yankees — totaling roughly $23 billion.”
“Among the shifts in the "regulatory environment,"
meanwhile, was a lawsuit filed by the Obama administration's Justice
Department, as well as ongoing congressional inquiries into the recruitment
practices of EDMC and other for-profit educators. During the conference call,
Nelson partly blamed "negative press" for faltering enrollment.”
“As the Times noted, "The principle behind buybacks is
simple. With fewer shares in circulation, earnings per share can rise smartly
even if the company's underlying growth is lackluster." But meanwhile, the
paper added: "Liberal critics insist the trend is another example of top
corporate executives raking in an inordinate share of the nation's wealth, even
as their employees suffer.”
“Of EDMC's 10 directors, two are principals in Goldman Sachs, three
either directly represent or have ties to Providence Equity Partners and one
represents Leeds Equity Partners. Nelson is the only executive to serve on the
board, though former CEO John McKenran Jr. serves as its chairman. (The
remaining members are a former airline executive and a corporate lawyer.)
Together, those 10 directors, as well as the private-equity firms tied to
several of the directors, control 80 percent of EDMC's shares.
By contrast, according to financial documents, managers, directors
and large investors at the Apollo Group, Nelson's former employer, hold only
14.4 percent of shares at that company. At for-profit educators Capella and
Career Education Corporation those numbers are 9 percent and 3.8 percent of
shares, respectively.”
“Goldman has a very large position here," agrees Griffin.
"You've got two of Goldman's main players — Mick Beekhuizen and Adrian
Jones — sitting on the board of directors. They have a big interest in keeping
this stock price up.”
(http://www.pittsburghcitypaper.ws/pittsburgh/for-profit-educator-edmc-gives-employees-a-tough-lesson-in-modern-business/Content?oid=1487478#.TyvZo_22n_Q.email).
much, much more to come - check back at a later time.
Education over Corporation
The Faculty Federation of the Arts of Philadelphia fight for their right to a fair wage. A protest against another corporation or should I say vulture capitalistic endeavor; to cut the pay for those who keep the show on the road, all for the profit margin of EDMC Board of Directors and Goldman Sachs. It's the American way, right?
much, much more to come - check back at a later time.
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