Archives for category: For-Profit

Foreign Policy published an informative article about Liberia’s determination to outsource its primary school system.

Liberia’s Education Fire Sale

Everyone knew the country’s public school system was a mess — but nobody thought the government would try to fold up shop.

Earlier this year, the government announced a plan to begin a phased public-private partnership in education that could eventually see nearly all the country’s primary schools subcontracted to foreign for-profit companies. Supporters say it’s an exciting break from a failing status quo that harnesses technology and research to improve childhood learning outcomes. Detractors accuse the government of abdicating one of its most fundamental responsibilities.

The hybrid privatization plan, which has been described as one of the most expansive and ambitious anywhere in the world, calls for 3 percent of primary schools to be turned over to private companies during a pilot year beginning this fall. Fifty schools will be run by Bridge International Academies, an American for-profit company backed by the likes of Mark Zuckerburg and Bill Gates that builds and runs low-cost schools primarily in East Africa. As many as 70 more Liberian schools will be turned over to a host of other private operators. If the pilot is deemed a success, it will be scaled up to at least 300 more schools in September 2017. It could cover the country’s entire primary school system by 2020, according to the timeline set by the government.

Is this neocolonialism or a new spirit of philanthropy or both?

But the fear isn’t just that private companies are taking over what has traditionally been a government service. It’s that they will provide an inferior product. Critics like Angelo Gavrielatos of Education International, an international umbrella body representing education trade unions, say Bridge’s model of cheap schools and lightly trained instructors who use scripted, tablet-based lesson plans is a radical departure from established norms in the education field, one that is aimed more at reducing costs than providing an appropriate learning environment for children.

“Their business plan is predicated on the employment of unqualified staff delivering a highly scripted standardized system, word-for-word off a tablet,” Gavrielatos said.

May counters that scripted lesson plans can still be engrossing for children: “When you watch Hamlet and it’s a great actor, would you say that’s rote?”

But even Werner admits that a Kenyan education official warned him that Bridge deviated from that country’s national curriculum and employed underqualified staff. “They were urging Bridge to better align with the national government, or else,” he said. “He gave me advice cautioning in terms of having a relationship with them.”

But Bridge says it achieves results. By using the technology on its tablets to monitor teacher performance in real time, it can support those who flounder and hold them accountable when necessary. Studies it commissioned purportedly show marked increases in learning outcomes for students in its schools. Although Bridge is a for-profit company, May describes it as a “mission-driven business” that is primarily concerned with providing kids with better opportunities, not turning a big profit.

Several members of the Democratic party’s platform committee sent me the draft of the platform. It is linked below so we can all reflect on what is being considered. This is a draft so it can be changed. Please read it and send your best ideas.

The section on education contains a lot of reformer lingo. Zip codes. Options. Accountability. The Democratic party favors “high academic standards.” Who favors “low academic standards?” The party opposes too much testing; who favors too much testing?

The rhetoric about “high academic standards” brings echoes of No Child Left Behind and Race to the Top. Wouldn’t it have been refreshing to see a statement about meeting the needs of all children? Or ensuring that all schools have the staff and resources they need for the children they enroll?

And then there’s the section on charters. The party is against for-profit charters: so far, so good, but how about saying that a Clinton administration will stop federal funding of for-profit schools and colleges, because they are low-quality and predatory, with profit as their top priority?

The party favors “high quality charters.” Does that mean corporate charter chains like KIPP, Achievement First, and Success Academy? Probably. How about a statement opposing corporate replacements for neighborhood public schools? How about a statement insisting that charters accept English language learners and students with disabilities at the same rate as the neighborhood public school? How about a statement opposing draconian disciplinary policies and suspensions?

How about a clear statement that the Clinton administration will no longer permit school closings as academic punishment? How about a clear signal that the Clinton administration intends to protect and strengthen our nation’s essential traditional public schools, which serve all children. How about signaling a new direction for federal education policy, one that promises to support schools and educators, not to punish them.

Please read and share yours reactions. I will pass ideas along to platform committee members.

See the entire pdf here.

This story is shocking. Former officials in the Obama administration, once in charge of regulating predatory the for-profit higher education industry, now want in on the action themselves. Their financier is Obama’s best friend. The story was written by Michael Stratford and Kimberly Hefling. Please read this report as background for what follows.

Mercedes Schneider wrote about it here.

She writes:


Obama’s close friend, Marty Nesbitt, and others are seeking US Department of Education (USDOE) approval to purchase the fiscally-troubled for-profit, University of Phoenix. Nesbitt and former Deputy Secretary of Education, Tony Miller, run a Chicago-based private equity firm, Vistria Group.

Vistria Group is part of a small collective that wants to purchase University of Phoenix, and the for-profit school’s parent organization, Apollo Education, is apparently all in.

USDOE approval would keep the student loan and Pell grant bucks coming to University of Phoenix– which happens to be the subject of three state attorneys general as well as the Federal Trade Commission (FTC).

The price tag for Vistria et al. appears to be $1.1 billion. As it stands, University of Phoenix receives $2 billion annually in public money.

If University of Phoenix goes under, then all of those student loans are forgiven– which means taxpayers foot the bill. If Vistria et al. acquire University of Phoenix, then the goings-on at the school become private. No more requiring that that public be made aware of the salaries of the school’s executives, or that the public be made aware of litigation against the school, or that the public know about pending investigations.

The story was originally posted at PoliticoPro, which is an expensive subscription; fortunately, it is now available for free at politico.com. Here is an excerpt from the original story:

As the Obama administration cracks down on for-profit colleges, three former officials working on behalf of an investment firm run by President Barack Obama’s best friend have staged a behind-the-scenes campaign to get the Education Department to green-light a purchase of the biggest for-profit of them all — the University of Phoenix.

The investors include a private equity firm founded and run by longtime Obama friend Marty Nesbitt and former Deputy Education Secretary Tony Miller. The firm, Chicago-based Vistria Group, has mounted a charm offensive on Capitol Hill to talk up the proposed sale of the troubled for-profit education giant, which receives more than $2 billion a year in taxpayer money but is under investigation by three state attorneys general and the FTC.

What stands out about the proposed deal is that several key players are either close to top administration officials, including the president himself, or are former administration insiders — especially Miller, who was part of the effort to more tightly regulate for-profit colleges at the very agency now charged with approving the ownership change. For-profit college officials have likened those rules to a war on the industry, and blame the administration for contributing to their declining enrollments and share prices.

The proposed sale carries high stakes for taxpayers, students and investors: The University of Phoenix’s financial stability may depend on the $1.1 billion acquisition. If the company were to fail, more than 160,000 students could be displaced and the government would be on the hook for hundreds of millions in student loans.

But the investors’ effort to seek Education Department approval of the school’s ownership change also raises questions about potential conflicts of interest.

“There is at least a taste of unseemliness involved in this,” said Mark Schneider, a former top education official under President George W. Bush. “They regulate it. They drive the price down. …They are buying it for pennies on the dollar.”

Vistria Group said it isn’t seeking special treatment. “We expect the Department to evaluate this proposed transaction on the merits,” the company said in a statement.

Vistria is part of a consortium of investors involved in the proposed acquisition, which has already won over shareholders of the school’s parent company, Apollo Education Group. But now the investors need the Education Department and the school’s accreditors to sign off on the ownership change to keep the federal money flowing — most of it in the form of student loans and Pell Grants.

With those decisions looming, Miller and at least one other former Obama insider have met with staff to Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.) and Dick Durbin (D-Ill.), looking to reassure some of the loudest critics of for-profit colleges in the president’s own party, several Senate aides confirmed to POLITICO. Those lawmakers have pushed Obama’s Education Department to be even tougher on for-profit colleges.

Miller has also met with staff members working for other committee members, including Sens. Michael Bennet (D-Colo.), and Bob Casey (D-Pa.), as well as with Sen. Lamar Alexander, the Tennessee Republican who chairs the Senate education committee. Nesbitt was not part of those Capitol Hill meetings, according to the aides….

But the specter of former insiders pushing the sale of a company in an industry that has long been in the administration’s crosshairs is not lost on critics. For seven years, the Obama administration has waged a crackdown on poor quality and predatory practices at many for-profit colleges, with the president himself excoriating some schools for “making out like a bandit” with federal money, but saddling students with big debts and leaving them unprepared for good jobs. He did not name the schools.

“It’s ironic that a former senior official at the Department of Education — an agency that has intentionally targeted and sought to dismantle the for-profit college industry — would now take the reins at the country’s largest for-profit college,” said Rep. Virginia Foxx, a North Carolina Republican who leads the House Committee on Education and the Workforce’s higher education subcommittee….

The sale price, which shareholders approved last month after initially balking at a lower price, is considered a bargain by some industry observers. The day Obama was sworn into office on Jan. 20, 2009, the company’s stock closed at $86.54 per share. Today, it’s trading at around $9, although a recovering economy, unfavorable media coverage and the for-profit industry’s general slump have also contributed to that drop.

Some Senate Democrats said they are also uneasy with the investors’ plan to take the university private, which means it would no longer have to publicly disclose information such as executive compensation, lawsuits or when it’s a target of investigations. Those details are useful to prospective students, they say, at a time when the school faces inquiries from both state and federal authorities.

“Essentially, a company that receives more than $2 billion annually from federal taxpayers — nearly 80 percent of its revenue — is going dark, and it’s happening at a time when the University of Phoenix has come under increased scrutiny from state and federal regulators,” Durbin wrote in a March letter to the Education Department.

Republicans think that the Obama officials drove the price down by their regulatory actions, then moved in to buy it at a bargain price.

This transaction is unsavory. It should be stopped. The conflicts of interests and self-dealing are abhorrent.

This is one of the strangest stories of the week or year. Back in 2008, a group of parents at the Agora Cyber Charter school in Pennsylvania began questioning the financial affairs of the corporation that owned it. Agora was paying rent and management fees to another company, the Cynwyd Group, which June Brown, the founder of Agora, also owned.

In January 2009, the owners of Agora filed suit against the parents:

As parents tried to gather records and sort out the business relationships at Agora, they circulated emails expressing their concerns. They also complained to the state Education Department when the school did not provide information they requested.

In the suit filed in January 2009, Brown and Cynwyd Group charged that the parents had made statements that defamed and libeled Brown.

The complaint also alleged that the parents’ group had tried to interfere with Cynwyd’s contractual relationship with Agora “by spreading untruths about Dr. Brown and by implying that she had improperly used public funds.”

Brown and Cynwyd sought more than $150,000 in damages from the six parents for libel, slander, and civil conspiracy.

The parents denied the allegations and said they had merely sought information about the taxpayer-funded school their children attended.

Brown said the parents had defamed her and she had to defend her reputation. The parents had trouble paying for legal representation.

The suit dragged on, but in 2012, “federal grand jurors indicted Brown and charged her with defrauding Agora and her other charters of $6.7 million.”

The case against the parents remained active, to be addressed after the conclusion of the criminal trial. Brown’s criminal trial ended in a hung jury in 2014, and a retrial was canceled in 2015 after Brown’s lawyer said that she suffered from dementia. So, she escaped legal action, kept the money, but the parents were in limbo, still facing the charges of defamation that Brown had lodged against them.

Earlier this month, the charges were dismissed. The parents were relieved. One had used the family’s mortgage payment to pay a lawyer and lost her home fighting the lawsuit.

It does seem unjust that the parents were dragged through legal proceedings for more than seven years, accused of defaming Brown, even while she was under federal indictment for defrauding her charters of millions of dollars.

Thanks to politico.com, where I found a link to this fascinating report on the predatory for-profit higher education sector. The report is a bombshell. It was written by D.C. lawyer David Halperin. It is carefully researched and sourced. It is long, but has the interest level of a detective story. You will find villains in both political parties. You will find distinguished academics who sold their reputation to bolster a predatory for-profit institution. Behind most of the political squalor is one unifying theme: the power of greed.

It opens like this. I invite you to read the entire report to find out who is protecting the for-profit colleges that rip off American students:


Timothy J. Hatch and Ronald L. Olson are two of the most prominent and successful lawyers in Los Angeles. Hatch is a partner at the national litigation powerhouse firm Gibson Dunn. Olson, a name partner at Munger, Tolles & Olson, has represented some of America’s biggest corporations. He is a former chair of the American Bar Association’s Litigation Section, and today he serves on the boards of directors of Warren Buffett’s Berkshire Hathaway, the RAND Corporation, the Mayo Clinic, and the California Institute of Technology.

Both Hatch and Olson also have been for years key parts of the protective infrastructure that has shielded predatory for­profit colleges, institutions that have deceived and abused U.S. students and taxpayers. Hatch has represented the giant publicly­traded for­profit college businesses Education Management Corporation (EDMC), Kaplan, and ITT Tech against charges of fraud, and he has sued the U.S. Department of Education to halt regulations that would hold poorly­performing colleges accountable. Olson is on the board of directors of Graham Holdings Company, which owns Kaplan, and his law firm has represented Corinthian in major fraud litigation ­­ which is fitting, as the Graham company owned a significant stake in Corinthian until its 2015 collapse. In the fraud case where Olson’s firm represented Corinthian, the other party that whistleblowers were suing was Corinthian’s auditor, giant accounting firm Ernst & Young. Their lawyer in the case was Timothy Hatch.

Although the notorious Corinthian Colleges is gone (sort of), many bad actors remain in business. Seven of America’s ten biggest for­profit college companies, which collectively received about $8 billion dollars in taxpayer money last year, have in recent months and years been under investigation or sued by federal and state law enforcement agencies for deceptive business practices. Despite the mounting evidence that these seven companies ­­ Apollo/ University of Phoenix, EDMC, ITT Tech, Kaplan, Career Education Corporation, DeVry, and Bridgepoint Education ­­ have engaged in predatory behavior against their own students, they continue to market themselves as affordable places to build successful careers, and they continue to enroll new students and deposit their federal grants and loan checks. These companies also have continued to fight reform measures by government to hold bad schools accountable for abuses.

A key reason why such predatory for­-profit colleges have been able to continue receiving billions annually in taxpayer dollars while ruining the financial futures of students across the country is that national power players ­­ politicians, lawyers, academic leaders, celebrities ­­ have been willing to vouch for these companies, serving as their paid lobbyists, board members, investors, and endorsers. It’s not just Donald Trump who has made big money off a deceptive college operation.

Read on to learn who these power players are. You may be shocked. I was. After reading this, I felt that the whole political system is rigged to protect the predators. I went to wash my hands. Why is the “money all gone,” as reformers like to say when they explain why budget cuts are necessary? Because it is lining the pockets of the rich and connected.

Imagine if that $8 billion dollars were used to make community college free for all those who wanted higher education at a reputable university?

Hear are a few tidbits from this report:

● Department of Education data has shown that the University of Phoenix’s g raduation rate for first­time, full­time students is about 16 percent, and that graduation rate for the school’s online programs is about 4 percent.

● A 2012 comprehensive investigative report on for­profit colleges by then­ Senator Tom Harkin (D-Iowa) found that the University of Phoenix spent $892 on instruction in 2009, compared to $2,225 per student on marketing, and $2,535 per student on profit. “This,” the report found “is one of the lowest amounts spent on instruction per student of any company analyzed.”

● Around 25 percent of University of Phoenix students default on their loans within three years of leaving school.

Read and gasp.

Senator Sherrod Brown of Ohio is a Democrat, and he is known as a progressive. He has also been known in the past as a supporter of charter schools.

However, even Senator Brown had a wake-up call as charter scandals multiplied in his home state. He could not help but notice the multiple editorials appearing in newspapers across the state, as well as news stories in national media about the charter owners who were becoming multimillionaires by donating to Republican politicians and getting more funding and less scrutiny of their charter schools.

He wrote a letter to Secretary of Education John King expressing his concern with the U.S. Department of Education’s award of $71 million to Ohio to open more charter schools (a grant put on hold because of outrage from Ohioans), as well as the embarrassing performance of the state’s charter sector. If Senator Brown has had his eyes opened, at last, that is a big step forward.

The letter can be read here.

Juan Rangel, a political activist in Chicago, created the city’s largest charter chain, called UNO. Rangel was co-chairman of Rahm Emanuel’s mayoral campaign in 2011, when he first ran for mayor. UNO was an amazing cash cow. It collected $280 million over five years from the state. Governor Pat Quinn and House Speaker Mike Madigan took care of UNO, giving it a grant of $98 million to expand, a staggering amount for a single charter chain. Meanwhile, UNO fired its for-profit management firm and took charge of its operations, claiming 10% of all revenues for itself. None of UNO’s activities were monitored by anyone. Conflict of interest rules covered public schools, but not UNO.

Here is the ultimate nonpartisan article summing up the rise and fall of UNO and Juan Rangel. Here is my short summary of that brilliant article.

Once UNO won $98 million from the state, many friends and relatives got a piece of the action:

As the Sun-Times would reveal in February 2013, a long line of contractors, plumbers, electricians, security firms, and consultants tied to many of the VIPs on UNO’s organizational chart got a piece of the action. Rangel spelled out in tax documents and in later bond disclosures that the construction firm d’Escoto Inc.—owned by former UNO board member Federico d’Escoto, the brother of Miguel d’Escoto—was the owner’s representative on three projects funded by the grant. Another d’Escoto brother, Rodrigo, was paid $10 million for glass subcontracts for UNO’s two Soccer Academies and a third school in the Northwest Side neighborhood of Halewood.

The vendor lists were peppered with other familiar names: a $101,000 plumbing contract awarded to the sister of Victor Reyes, UNO’s lobbyist, who helped secure the state grant; a $1.7 million electrical contract given to a firm co-owned by one of Ed Burke’s precinct captains; tens of thousands in security contracts to Citywide Security, a firm that had given money to Danny Solis, and to Aguila Security, managed by the brother of Rep. Edward Acevedo, who voted for the $98 million for UNO.

As the scandals broke into public view, thanks to the enterprising reporting of the Chicago Sun-Times, Rangel resigned in December 2013.

Fred Klonsky writes about the consequences for Rangel. The SEC fined Rangel $10,000 while he admitted no wrong-doing. He is allowed to pay it off at $2,500 per quarter.

Klonsky writes in incredulity:

When he resigned from UNO he received a severance package of nearly a quarter million bucks.

$2500 a quarter?

That probably equals his lunch tab.

When Rangel ran UNO it was reported by the Sun-Times as having spent more than $60,000 for restaurants on his American Express “business platinum” card including thousand dollar tabs at Gene & Georgetti, the Chicago steak house.

This is one of the best articles you will ever read on the subject of for-profit schooling in poor countries. It is beautifully illustrated and contains interviews with key players in the for-profit education industry. The author is Graham Brown-Martin. The subject is public-private partnerships in Africa. The discussion centers on the efficacy and ethics of the movement to turn the responsibility for schooling over to for-profit Bridge International Academies in countries that have lagged far behind in providing universal public education. What you will learn is that the “market” is huge. The cost of the scripted schooling is $6 a month, which leaves out many children whose families cannot afford $6 a month.

Start with the cartoon at the opening of the link, which explains “the magic of the market.”

Last month, a grand jury in Florida indicted employees of Newpoint Education Partners and three other companies for grand theft, money laundering, and other crimes. The company, started by former employees of the White Hat management company in Ohio, lost the charters for several schools that it was running where the alleged crimes occurred.

Now, two more charter schools are cutting their ties with Newport, following an investigation by a local TV news station.

One week after an 8 on Your Side investigation uncovered $235,000 in bogus school loans, two charter schools funded with state tax dollars in Jacksonville have decided to sever ties with a for-profit management company we’ve been investigating for months because of the financial chaos it helped create in Pinellas charter schools.

The Jacksonville charter school loans by Newpoint Education Partners which are cited in a 2015 financial audit do not exist, something that caught even the treasurer of San Jose Preparatory High School and Academy by surprise after 8 on Your Side uncovered and reported it.

Are there any law enforcement officials in Jacksonville, or is it left to the media to investigate criminal activity?

Larry Cuban is a keen observer of the marketing of new technologies to schools. In this post, he looks at the common practice of claiming that the product being sold causes guaranteed success, I.e. a “proof point.” The salesmanship involved is akin to the advertisers’ claim that their product will cure all illnesses, calm your itch, make you beautiful, and fix your hearing.

Schools have long been targets of fast-talking salesmen, but now the snake oil is presented professionally as a miracle cure to raise test scores. In addition to the usual profit motive, there is today the entrepreneur’s devout faith in disruptive innovation. Heaven help the schools. When they come calling, slam the door and don’t let them put their foot in it.

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