Zenith, The New Owners of Corinthian Colleges Still Advertising Programs That No Longer Exist
By Consuella Pachico -Mar 20, 2016
SHAREFacebook Twitter
The Department of Education has permitted Zenith, the new owners of Corinthian Colleges, to recruit students using large-scale telemarketing and paid media campaigns that sometimes advertise programs that no longer exist. Zenith also continues to recruit students using the very same ads that Corinthian ran during the very same daytime TV talk shows.
Executives who formerly oversaw Corinthian’s business practices, which state and federal officials said were fraudulent, remain employed at Zenith.
As with Corinthian, Zenith still requires students to waive their right to sue the school in a class action, which is unheard of among traditional colleges.
Recent graduates claim that they are struggling to find work which would allow them to pay back their student loans. This could mean additional student loan defaults for the U.S.
“I graduated in April at the top of my class, with honors,” said Shane Satterfield, a roofer in Georgia who now owes more than $30,000 in debt for the associate’s degree in computer science he completed last year. “And I can’t get a job paying over $8.50 an hour.”
Zenith Chairman, David Hawn said some marketing practices were problematic, and he acknowledged that graduates are not yet graduating with key credentials for getting a job. But he said the schools were on the right track.
“We are spending a lot of money to right the ship,” Hawn said. He added that Zenith had shrunk down to about 15,000 students and lost more than $100 million in its first year and expects to lose money again in its second. “Every step we’re taking is in support of our quest to become a really great career school,” he said.
“The Department of Education sold these schools to a firm that had no experience in providing education and insufficient motivation to genuinely fix the business model,” said David Halperin, a Washington lawyer and consumer advocate who helped identify problems at Corinthian. “It would have been better to help existing students find new opportunities elsewhere.”
“The fact is that we were able with Zenith to provide a plan for tens of thousands to move on,” said Ted Mitchell, the Department of Education’s Undersecretary. “If Zenith is not doing right by its students, we won’t hesitate to act.”
The reasons for Corinthian Colleges’ collapse were not surprising:
A January 2011 whistleblower lawsuit alleged that Corinthian employees routinely fabricated employers to make it appear that unemployed graduates had landed good jobs in their chosen careers.
A July 2012 report by the Senate Health, Education, Labor and Pensions committee found that more than half of Corinthian students dropped out.
Undercover investigators at the Government Accountability Office enrolled in Everest, Corinthian’s flagship among its schools, and got passing grades for obviously plagiarized or incorrect assignments.
A lawsuit by California’s Attorney General, filed in 2013 and amended in 2014, alleged rampant lying to students about job placement and cited internal marketing documents that identified Corinthian’s best prospects as people with “low self-esteem” who have “few people in their lives that care about them.” That case is pending.
Despite allegations of misconduct, the Department of Education continued to provide hundreds of millions of dollars in student loan dollars to Corinthian. The harshest punishment the department imposed was a three-week hold on payments in June 2014. The temporary delay in loan disbursements led to Corinthian’s abrupt collapse.
The financial failure left the department in a nasty position. After years of payouts to investors and multimillion-dollar bonuses for its executives, Corinthian had few assets, 70,000 students, and massive legal trouble.
Simply allowing Corinthian to fold would have forced the U.S. government to absorb hundreds of millions of dollars in losses on student loans and put students on the street. Keeping the schools alive would save the government from much of the damage.
“There was this strong sense, from the media communications standpoint, where they said ‘Do we really want all these students getting thrown out of school,’” said Robert Shireman, a former deputy undersecretary who left the department in 2010. “Somewhere in there, someone came up with ECMC,” Education Credit Management Corp., the nonprofit student debt collection company based in Oakdale, Minnesota, that controls Zenith.
When Zenith Education Group acquired the remains of Corinthian, its executives knew what they were getting.
.....